Bank of Ireland may need further €2bn

BANK of Ireland may need to raise €2 billion of new capital after transferring loans to NAMA, according to analysts at international investment research firm CreditSights.

This news comes as the Irish market finished the week down marginally at 3,455 points and the main two banking stocks on the ISEQ lost some of their post-NAMA bounce from Wednesday and Thursday.

AIB fell just over 2% — or by 7c — yesterday to close the week at €3.30, while Bank of Ireland’s share price finished the week at a price of €3.25; 13c (3.85%) lower than Thursday’s close.

NAMA will buy loans with a combined book value of €40bn from Bank of Ireland and AIB as the Government seeks to purge them of souring assets.

AIB has already said it expects to raise about €2bn of new capital to cover losses incurred in the sale of the loans at a discount that’s expected to be about 30%.

Both banks’ losses on their non-NAMA loans, including personal and other corporate borrowings that remain on their balance sheets, “will probably continue to rise,” London-based analyst Simon Adamson wrote in a note titled Irish Banks: NAMA Near, Here We Go Again.

Bank of Ireland, which will transfer about €16bn of loans to NAMA, said it could raise capital internally or “through access to capital markets”. The price NAMA pays for the loans it buys will determine the amount of new capital the lenders need.

The next “hurdle” for the Irish banking system is likely to be gaining state-aid approval from the European Commission. Because this is likely to involve restrictions such as deferral of coupons on hybrid securities, Bank of Ireland and AIB may decide to tender for the notes, Mr Adamson wrote.

Changes to the Government guarantee plan mean that new issues of so-called lower Tier 2 notes will no longer be covered by the guarantee, meaning the banks are likely to offer either cash or exchange the hybrids for senior debt, according to Mr Adamson.

Meanwhile, Irish banks’ credit ratings are unlikely to be changed after the planned government purchase of their property loans, Moody’s Investors Service said.

The sale of the loans to NAMA will have a “significant negative impact on the capital base” of the five banks selling loans to it, Moody’s said.

“The establishment of NAMA is unlikely in itself to lead to any changes in the rating of the banks as the approximate 30% discount on the book value of the loans is in line with our stress tests and has already been incorporated into the ratings,” Moody’s added.

The Government said it will provide the banks with additional capital if they are unable to raise it from investors.

Elsewhere, yesterday, Fitch Ratings downgraded the long-term issuer default ratings of EBS Building Society to its support rating floor at BBB- from BBB.

Elsewhere yesterday, Fitch Ratings downgraded the long-term issuer default ratings of EBS Building Society to its support rating floor at BBB- from BBB.

In ISEQ trading, drinks group C&C was up 14c at €3.30 while building materials giant CRH gained 5%, or 95c, to €20.70.

Elan, however shed nearly 8% to drop to €4.85.


With documentary film ‘Fantastic Fungi’ set to take the world by storm, Joe McNamee looks at the fabulous world of mushroomsDocumentary explores the magic of mushrooms

I lead a very busy life — I’m a mature student in college — and I separated from my partner but the separation was my decision. I hate myself when it beckons as it ultimately makes me fatter, it has the reverse effectDear Louise: I had my bulimia under control. But the demon has returned

This year has been particularly difficult and stressful, and I think that’s an even more important reason to make time for your health.Derval O'Rourke: Resistance is far from futile and necessary

Best-selling author Faith Hogan is keeping the faith during the lockdown, thanks to her Moy Valley haven in Ballina, Co Mayo.Shape I'm in: Keeping the Faith during lockdown

More From The Irish Examiner