Banking shares rise on positive outlook by traders

IRISH BANKS rose in trading yesterday on the back of a more positive disposition to the financial sector among traders in the London market.

AIB was the biggest gainer of the day, surging 20 per cent to €1.19, although trading volumes, at 8 million, were nothing like the massive ones recorded last week.

On Monday a Polish newspaper quoted the chief executive of Bank Zachodni, which is 70 per cent owned by AIB, as saying the Polish bank was looking at acquisitions. Rzeczpospolita said AIB was “actively looking around” in Poland and might finance a purchase using its 70 per cent stake but keeping a controlling interest in any merged entity.

Bank of Ireland rose almost 9 per cent to 62 cent on volume of 7 million, while Irish Life Permanent added 6.8 per cent to €1.74.

The banks’ share prices were buoyed by an announcement from Barclays that it would not need funding from the British government because its revenue increased last year.

Barclays surged 73 per cent in trading on Monday after saying it exceeded UK regulators’ capital requirements by £17 billion. It held on to those gains yesterday.

Royal Bank of Scotland, which is seeking 750 redundancies at the Ulster Bank group, jumped 8.3 per cent in trading on the London market.

European stock markets rose slightly yesterday afternoon despite worse-than-expected data on consumer confidence in the US.

Meanwhile the World Trade Organisation (WTO) has warned member governments that financial bailout packages confined to domestic banks may discriminate unfairly against foreign competitors, squeezing their access to credit markets and deposits.

The WTO says rescue packages involving state aid or subsidies may have “negative spillover effects on other markets or introduce distortions to competition between financial institutions”.

Where foreign banks compete in the same markets as domestic institutions, excluding them from bailouts could distort competition and trade.

“Financial institutions not benefiting from equivalent measures may be disadvantaged in obtaining funds from overseas and/or see their deposit base eroded.”

It also expressed concern over the large number of separate stimulus packages announced by the US, the European Union, Japan, China and others.

Co-ordination between countries would lessen the temptation for governments to take steps to stop demand leaking abroad through spending on imports.

A more immediate worry is the rising cost of trade finance, which underpins 90 per cent of all world trade. "Difficulties in opening letters of credit are reported in an increasing number of countries," the WTO says. – (Additional reporting: Financial Timesservice)