IL&P shares plunge amid Govt takeover speculation

Shares in Irish Life and Permanent plunged today amid speculation that the Government may be forced to take a large stake in the lender as a result of the severity of this week's bank stress tests.

Shares in the bank fell as much as 50% on the Irish market today.

Other financial stocks also suffered, though to a lesser degree.

The bank is still refusing to comment on speculation that it could be in partial state ownership, at least, by the end of this week.

IL&P is the only bank that is still in private ownership because of its investment and pensions arm which has been profitable, and the fact that Permanent TSB decided not to lend to developers.

Brendan Keenan from the Independent Group of Newspapers said Irish Life and Permanent could be a victim of the much talked-about second wave of default.

"There are of course big problems in the mortgage market," he said.

"The stress tests are designed to test what would happen if that second wave of losses occurs if property prices keep falling.

"It is expected that when you put that scenario onto Permanent TSB's books that they will indeed show large potential losses which will require Government capital."