IL&P shares fall as Regulator investigates deposit with Anglo

 

Shares in Irish Life and Permanent (ILP), the State’s biggest mortgage lender fell by almost 6 per cent today, hitting two-week lows, after saying it had provided exceptional” deposit support to Anglo Irish Bank last September.

Irish Life lost as much as 19 per cent in early trade and at 3.20pm was trading at 5.7 per cent lower at €2.03 in Dublin.

The support is understood to equate to the placing of between €6 to €7 billion on deposit with Anglo Irish Bank before the end of that bank’s financial year. The deposits were withdrawn around ten days later.

The Cabinet is this afternoon discussing its plan to inject up to €7 billion in capital into Allied Irish Banks and Bank of Ireland with the proposal expected to be revealed this evening.

The Government is seeking agreement with the banks on reductions to executive pay and bonuses and increasing credit to businesses. A one-year moratorium on legal action over arrears has reportedly been agreed.

Shares in both banks were lower this afternoon. AIB shares were down over 6.5 per cent at €1.09 and Bank of Ireland off 10 per cent lower at 62 cent.  Both confirmed today that they did not provide similar supports to Anglo with EBS also saying it had no such arrangement.

Anna Lalor, analyst with Goodbody Stockbrokers in Dublin said in a research note that news of the arrangement between ILP and Anglo Irish was “likely to keep international investors unnerved about unfolding developments in Ireland”.

Anglo Irish Bank was nationalised in January after revelations that former chairman Sean FitzPatrick did not reveal loans totalling €87 million to shareholders or auditors.

ILP confirmed last night that it placed deposits with Anglo Irish during September 2008 and, in particular, on September 30th, following the Government guarantee scheme. This meant any deposits made by ILP were guaranteed by the Government.

The Financial Regulator is investigating the placing of a €4 billion deposit with Anglo Irish after that bank suffered withdrawals of €4 billion before the State’s bank guarantee was announced on September 30th.

ILP said the transactions were “fully and appropriately accounted for” in its books and records. It declined to confirm the amounts involved.

Brian Lucey, associate professor of finance at Trinity College Dublin, said the drip-feed of bad news from Anglo Irish meant investors would continue to avoid Irish banking stocks.

“This is reinforcing the image that is out there that Ireland is the Wild West," Mr Lucey told Reuters. "Can we believe anything on any of the balance sheets of any of the banks?"

Taoiseach, Brian Cowen told the Dail today he did not know about the €7 billion lodgement with Anglo Irish on the day the Government announced its bank guarantee scheme last September.

“Of course I had no knowledge of any untoward goings on between Irish Life & Permanent and the Anglo Irish Bank. The decisions made on September 30th were in the interests of maintaining stability in the banking system and the economy, based on advice from the Governor of the Central Bank, the regulatory authorities and the Department of Finance, and from no other source.”

He said neither the Government nor all members of the board at Anglo Irish were aware of the arrangements.

In a note to investors this morning Goodbody stockbrokers said according to Anglo’s year-end accounts deposits from banks were up strongly from €11.6 billion in March to €20.5 billion in September and suggests this is where the IL&P funds would have been booked

“If this is the case, it would certainly make last night’s pronouncements less material in our view given the market’s primary focus is traditionally on customer deposits trends.”

Despite this the revelations are “likely to keep international investors unnerved about unfolding developments in Ireland, particularly at Anglo Irish, with knock-on effects on sentiment for all banks - particularly IL&P”.

It emerged yesterday that the regulator and the Government-appointed directors at Anglo Irish have started an investigation into a deposit placed by ILP on September 30th, the day Anglo’s financial year ended.

It is understood that deposits placed by ILP with Anglo during September totalled between €6 to €7 billion, although €4 billion was lodged with Anglo Irish on September 30th, hours after the State’s bank guarantee was announced.

“This is reinforcing the image that is out there that Ireland is the wild west," Mr Lucey told Reuters. "Can we believe anything on any of the balance sheets of any of the banks?"

Taoiseach, Brian Cowen told the Dail today he did not know about the €7 billion lodgement with Anglo Irish on the day the Government announced its bank guarantee scheme last September.

“Of course I had no knowledge of any untoward goings on between Irish Life & Permanent and the Anglo Irish Bank. The decisions made on September 30th were in the interests of maintaining stability in the banking system and the economy, based on advice from the Governor of the Central Bank, the regulatory authorities and the Department of Finance, and from no other source.”

He said neither the Government nor all members of the board at Anglo Irish were aware of the arrangements.

In a note to investors this morning Goodbody stockbrokers said according to Anglo’s year-end accounts deposits from banks were up strongly from €11.6 billion in March to €20.5 billion in September and suggests this is where the IL&P funds would have been booked

“If this is the case, it would certainly make last night’s pronouncements less material in our view given the market’s primary focus is traditionally on customer deposits trends.”

Despite this the revelations are “likely to keep international investors unnerved about unfolding developments in Ireland, particularly at Anglo Irish, with knock-on effects on sentiment for all banks - particularly IL&P” and the State which now owns Anglo Irish.

It emerged yesterday that the regulator and the Government-appointed directors at Anglo Irish have started an investigation into a deposit placed by ILP on September 30th, the day Anglo’s financial year ended.

It is understood that deposits placed by ILP with Anglo during September totalled between €6 to €7 billion, although €4 billion was lodged with Anglo Irish on September 30th, hours after the State’s bank guarantee was announced.

Additional reporting Reuters