Warning banks may face rights issues

THE Irish banks, whose share prices are off 60% from last year’s highs, may yet be forced to resort to rights issues to shore up their funding positions, a leading analyst warned.

The continuing credit crunch and the deteriorating outlook for the Irish economy could undermine the banks ability to raise further funding.

Despite the pressure on banks elsewhere, Irish institutions have not yet been forced to issue shares to shore up their funding positions because they avoided sub-prime lending and still have low bad debts, compared to international banks.

But it is no longer certain Irish banks will be able to avoid going to the market, according to Scott Rankin of Davy Stockbrokers in an note on future funding requirements.

As fears for the future funding of the sector increased, the bank’s were again subject to strong selling yesterday, following Tuesday’s rout when a total of €2.4bn was wiped off Irish share values.

While the market closed up by 0.36% yesterday, banks and construction companies had a mixed day as worries about the economy and funding left the prices struggling.

AIB lost over 3% on the day to €10.40, while bank of Ireland, which lost over 6% the day previous, gained a modest 0.24% to end the day at €6.57.

In construction, CRH bounced by over 4% to close at €18.90, while rising oil prices left Ryanair facing stiff head winds that knocked 3.77% off its value at €3.08.

Elsewhere in Europe, after modest gains, France’s CAC was down 0.4%, and Germany’s DAX slipped 0.1%, pushing European stocks to a three- month low. The FTSE 100 closed down 0.5%

In the US, The Dow Jones Stoxx 600 Index lost 0.4% by mid-afternoon.


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