Position of Irish banks improves

DESPITE mixed fortunes for the share prices of the Irish banks yesterday, two of the three players were down on a generally good day for the ISEQ.

From the stock market lows of March 9, Bank of Ireland is up 790% with AIB now up 410% from its lows. Irish Life & Permanent (IL&P) is up 375% during the same period.

The British bank index, by comparison has risen by 88%, while the US banks have risen by an average of 96%.

“Coming from the most devastated sector, the scale of the rebound is incredible and the benefits to the funding picture are increasing,” Bloxham Stockbrokers said in a detailed note on the Irish banks yesterday.

It added: “The increase in the market capitalisation of Bank of Ireland since its low price of 12c, is now €1.65 billion.

“For AIB, its market cap has increased by €1.38bn, while IL&P has seen its market cap increase by €745 million.

“In total, the equity value of the Irish banks has increased by €3.2bn since the lows of early March – a staggering increase in valuation.

“While the increase in market caps does not directly relieve funding requirements, it does reduce the dilutionary impact of future funds if gains are held,” it added.

Bloxham said that the outperformance of the Irish banking stocks over their foreign peers, “reflects the decreasing threat of nationalisation”.

Bloxham’s report follows one by Merrion Stockbrokers, which said that Bank of Ireland’s improving capital position and the improvement in capital markets have further reduced the risk of that specific bank having to be nationalised.

“The recent improvement in market risk appetite – combined with Bank of Ireland’s better than expected capital position and rising share price – increases its potential to access non-Government capital,” Merrion analyst, Sebastian Orsi said on Wednesday.

On a good day for the ISEQ, yesterday – the combined Dublin market was up by 29.53 points (1.04%) to just under 2,881 points – both Bank of Ireland and IL&P lost value; the latter down by 1.76% (6c) to €3.34 and the former down 2.49% (4c) at €1.76. It was left to AIB to buck the trend; rising by 1.06% on the day, to gain 2c and close at a price of €1.90 per share.

Good performances from non-banking stocks yesterday were seen in the likes of Paddy Power – which gained 34c to close at €17.34 – FBD Insurance; which was up by nearly 5% (37c) at €7.90; Ryanair – up by 7c at €3.77; and pharmaceutical group, Elan which rose by 9.41% – or 48c – to close at €4.30 on the back of speculation that pharma giant Pfizer could be considering a takeover bid.