Fitch downgrade hits financial stocks

MOST European stock markets enjoyed an upturn in fortunes yesterday including the ISEQ in Dublin — but the rallying Irish financial stocks reacted badly to Wednesday’s further downgrading from credit ratings agency, Fitch.

The company said this week that it has downgraded both AIB and Bank of Ireland’s credit ratings from ‘A’ to ‘A-’ and has lowered Ireland’s previous ‘AAA’ rating to ‘AA+’ with the likelihood that a further cut is on the way.

The ISEQ was up by 2.7%, gaining just over 62 points, at 2,372.89 points, yesterday. That daily increase was ahead of most of the major European markets, as the FTSE in London rose by 1.5% to 3,984 points and the CAC in Paris grew by 1.8% to 2,974 points, with only the DAX in Frankfurt growing at a stronger pace of 3.1% to 4,491 points.

Wednesday’s talk of the potential need for the Government to buy further into the main Irish banks — if not to take total control of them — poured more pressure on the financial stocks here, yesterday.

Bank of Ireland dipped by 6c, or 6.15%, to close the day at 84c per share, while AIB fell by 9c after a strong showing earlier in the week, to close at e1.12. Irish Life & Permanent (IL&P), bucked the trend, having been down on consecutive days earlier in the week. IL&P rose by nearly 7%, or 12c, yesterday to close at e1.92.

The Government said yesterday that legislation for the new National Asset Management Agency (NAMA) — being set up effectively as a toxic bank, to take bad debts off the books of the leading banks — should be passed in the next few weeks. A new report by economic consultant Peter Bacon said the NAMA was a better option than the nationalisation of the three big banks. However, Fitch has said further capital injections from the Government into the banks here could be necessary.

Also on the banking theme, AIB reiterated yesterday that Bank Zachodni WBK (BZWBK), the Polish bank in which it owns a controlling stake, remains a valued asset of the group. That came in response to quotes attributed to BZWBK chief executive Mateusz Morawiecki saying that upcoming first-quarter results for Poland’s largest bank “will be bad, maybe even very bad”.

It has long been speculated that AIB may look at selling either orboth of its big overseas interests (in Poland and the US bank M&T) in order to raise fresh financing.


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