Anglo sees quarter of its value wiped off

ANGLO IRISH Bank lost almost a quarter of its value yesterday, falling sharply for the second day this week.

The bank's share price dropped to 28 cent in trading before closing at 33 cent, its lowest price in more than 13 years and down 23.2 per cent on the previous day's close.

The stock has fallen this week following analysts' downgrades.

The bank was valued at €250 million yesterday, down from €8.1 billion at the start of this year.

About 12.7 million Anglo shares were traded in a busy day for the stock as the bank's senior management presented Anglo's annual results to September 30th to investors and analysts.

Anglo's shares have dropped 64 per cent since last week when the bank reported a 37 per cent fall in annual profits to €784 million and an almost ninefold rise in bad debts. The bank also revealed it had an additional €6.5 billion in loans - 8 per cent of the €73 billion loan book - to the development sector from six months earlier.

Analysts at Merrill Lynch said on Monday that they expected Anglo to raise money from shareholders in a €3.3 billion rights issue backed by the Government.

AIB remained flat in trading yesterday, while Bank of Ireland fell 3.8 per cent and Irish Life Permanent finished down 2 per cent.

Credit rating agency Standard Poor's (SP) downgraded its country risk assessment on the Irish banking industry, citing the rising economic risk and the consequent deterioration on the banks.

The agency said the State guarantee had addressed "short-term questions about bank liquidity" but "longer-term rating pressures are now coming to the fore" due to the weak property market and deteriorating economic outlook.

The Government is resisting pressure to extend the two-year guarantee to cover longer-term individual bond sales by the banks so they can raise loans to be repaid beyond the guarantee's expiry.

The State is pressing for agreement to be reached on recapitalisation and consolidation first.

SP said the economic slowdown and sharp correction in house prices was putting pressure on developers and construction companies and on small- and medium-sized companies.

"Our concerns about credit risk in the Irish system have heightened in the past six months. The property and construction sector has been a large contributor to Irish employment and economic growth in recent years, and related exposures sit heavily in the banks' loan books," said SP.

The agency reduced Ireland's banking industry country risk assessment from group one to two on a scale of 10, giving the State the same ranking as Germany, Italy, Spain and Norway.

Reliance on wholesale funding was "structurally higher" for Irish banks than in other EU countries, SP said, and adjusting to less available and higher-cost funding would be "painful for some of the smaller, independent players".

Bank of Ireland Asset Management, which is part of the institutional group seeking to invest in the recapitalisation of the bank, has reduced its stake in the bank from 3.02 per cent to 2.99 per cent, the firm said in a stock exchange statement on Monday.