Cantillon: Giddy heights of banks’ pre-crash shares

Ever wonder where Irish bank share prices would need to go for the respective institutions to get back to their pre-crash valuation peaks of 2007?

One long-suffering shareholder did just such an analysis recently and shared the results with Cantillon.

Take Bank of Ireland as a starting point. Of the three banks in which the State now has a shareholding –AIB and Permanent TSB being the others – it's in the best shape relatively speaking.

Bank of Ireland’s market capitalisation in February 2007 was €18.2 billion. There were 979 million shares in issue, giving it a share price of €18.80. Today, there are roughly 30 billion Bank of Ireland shares in issue. So its shares would have to trade at 61 cent each for it to return to its 2007 glory.

The shares were changing hands at about 19 cent yesterday giving it a market value of €5.7 billion.

Around the same time, PTSB (or Irish Life & Permanent as it was then) was valued at €6.2 billion. There were 275 million shares in issue giving it a share price of €22.80. Today, it has 36.5 billion shares in issue so the stock would have to hit 17 cent before the company was back to its pre-crash valuation.

PTSB’s shares traded yesterday at 3.5 cent on the secondary ESM market in Dublin, giving it a market cap of €1.28 billion.

Bizarrely, AIB’s value is higher now than before the crash. In February 2007, it was valued at €21 billion. This was a time when there were 876 million shares in issue and the stock was trading at a frothy €24. Today, there are 517 billion shares in issue, which means the stock needs to trade at 4 cent apiece for it to reach its pre-crash valuation.

AIB’s shares are actually trading at 6.7 cent, giving it a €34 billion market cap. Before anyone gets carried away, this is no more than a notional valuation of AIB, based on recapitalisations by the State over the past few years.

Shareholders from 2007 will remain well out of pocket on AIB, something that will no doubt be a key theme when chairman David Hodgkinson convenes its annual meeting next month.