The withdrawal of banking facilities by Danske Bank is bad news for Irish consumers, but a number of international investors will take it as a sign that the pillar banks will inevitably return to profit.
Merrion Capital banking analyst, Ciaran Callaghan, said the “bull” train of thought is that the fewer players in the market the better it is for the two pillar banks, AIB and Bank of Ireland.
“You are left with the pillar banks, the bull argument is that they are reasserting their dominance in the market,” he said.
The bullish sentiment will be good news for Bank of Ireland which has been allowed by European regulatory bodies to count €1.8bn of state-owned preference shares as core Tier 1 capital.
“This regulatory clarification allows the bank to move forward and place the Government preference shares with debt investors,” said Mr Callaghan.
“It also avoids the scenario of existing shareholders being diluted and potentially allows the State to monetise its residual Bank of Ireland investment over coming weeks.”
Mr Callaghan said the number of banks that have left Ireland is a clear indicator that they do not believe the country is going to make a swift recovery. “Banks globally are looking at their business models. they clearly don’t take a strong view of the Irish economy if they are leaving,” he said.
A number of institutions have already handed back their banking licences, with ACC bank earlier in the week being the most recent.
KBC Bank is bucking the trend, but Mr Callaghan pointed out that KBC had received a huge amount of state support already.
He said the big question remaining was Ulster Bank. “There is a big review going on in RBS and the big question is will Ulster Bank be considered core or non-core,” he said.
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