Irish bank shares remained high this afternoon after a deal on a rescue plan for the country was agreed at the weekend.
The banks will get as much as €35 billion of aid while senior bondholders will escape the cost of the bailout led by the European Union and International Monetary Fund.
Following a review of the capital requirements of Irish banks, the Central Bank said it was settings a new Core Tier 1 capital ratio of 12 per cent.
Banks are to get an immediate €8 billion to bolster capital and will raise a further €2 billion by shedding assets, the Central Bank said in a statement yesterday. Lenders will be able to draw on a further €25 billion depending on how they fare in a round of stress tests in the first half of next year.
"The risk of immediate shareholder-dilutive wipe-out has been averted," Ciaran Callaghan, an analyst at Dublin-based NCB Stockbrokers, wrote in a note today.
Irish Life and Permanent today said the new capital ratios imposed by the Central Bank would see its banking division Permanent TSB required to raise an additional €100 million. IL&P said it would raise this extra sum from its own resources.
Shares in IL&P closed up 59 per cent at 81.9 cent on the Dublin market.
Bank of Ireland, which needs an additional €2.2 billion of capital to be generated by February 28th, saw its shares gain 16.3 per cent to 30.7 cent. The bank said it would raise the capital through a combination of internal capital management initiatives, support from existing shareholders and other capital markets sources. If the bank cannot raise the required capital, the Government will step in.
Shares in AIB, meanwhile, were up 3.8 per cent to trade at 35.5 cent. The bank must find an additional €5.3 billion, bringing to almost €9.8 billion the bank still has to raise.
Irish bonds fell today, with the yield on the 10-year bond closing at 9.273 per cent, up 0.077 per cent on its opening level.
The cost of insuring debt sold by Europe's peripheral nations declined today, according to CMA prices for credit-default swaps.
Contracts on Irish bonds fell 23.5 basis points to 575, while swaps on Greece declined 38 basis points to 934.5. Spain fell 5.25 basis points to 317.5, Portugal dropped 5.5 basis points to 496.5 and Italy was three basis points lower at 212.5.
The euro also gained strength this morning, rebounding from more than a two-month low against the dollar.
The 16-nation currency gained against eight of its 16 major counterparts after European finance ministers scaled back proposals to saddle bondholders with losses in future budget crises, seeking to reverse the market selloff menacing the region.
"The bailout for Ireland is providing some respite for the euro as it restores some calm and soothes some fear," said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank in London. "It's a step in the right direction but it's not a turning point. I doubt if the worst is over for the euro."
The euro appreciated 0.3 per cent to $1.3287 as of 8.25am in London, reversing an earlier 0.5 per cent decline to $1.3182, its weakest level since September 21st. The common currency was at 111.45 yen, from 111.37 yen.
The dollar traded at 83.95 yen, from 84.10 yen on November 26th, when it reached 84.19 yen, the strongest since September 28th.
Additional reporting: Bloomberg
