Shares drop amid bank recapitalisation speculation
Analysts said banks would worry that they would have to raise more capital than earlier thought, following reports over the weekend said the valuation of the first tranche of loans to be transferred to NAMA by next week would cause a negative surprise.
In early morning trading, shares in AIB were down 7%, while Bank of Ireland shed 6.7% and the European banking sector was 1.7% weaker.
AIB closed down 4.4% to €1.50 and Bank of Ireland finished the day down 3% to €1.24. Irish Life and Permanent was unchanged at €3.
AIB and Bank of Ireland are expected to try to raise capital from private sources first, but the Government may have to help them. NCB expects AIB and BoI to require gross capital of €4.85bn and €2.5bn.
The Government’s statement on recapitalisation could coincide with earnings announcements from BoI and Anglo Irish Bank, both of which have pushed back their business years but have not set dates for their next report.
In a statement yesterday AIB said it boosted its capital by about €445 million after swapping securities with a face value of €2.21 billion for higher-yielding debt.
In Europe most shares declined, led by bank stocks, as an International Monetary Fund official said advanced economies face “acute” challenges in tackling public debt, overshadowing a rally in healthcare companies.
German ChancellorAngela Merkel told investors they shouldn’t expect this week’s European Union summit to agree on any aid package for Greece. EU leaders must not create “illusions” for markets by building expectations for Greek aid she said.
Her remarks came after Greek Prime Minister George Papandreou and European Commission President Jose Barroso said that the EU should spell out its rescue plan at the March 25-26 summit in Brussels.
Germany’s DAX and France’s CAC and gained 0.1%. Britain’s FTSE 100 lost 0.1%.
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