IT’S ALMOST 12 months since the near meltdown of the Irish banking system, with the first birthday of the two-year Government blanket bank guarantee falling on Wednesday.

While bank stocks – with the exception of the nationalised Anglo Irish Bank and its worthless share certificates – have rallied this year, shares in the big two, Bank of Ireland and Allied Irish Banks, remain about 25 per cent and 46 per cent respectively below what they were at the weekend before the guarantee was introduced.

Irish Life & Permanent (IL&P) has performed better. Its share price is hovering around the pre-guarantee level of €5.75.

The bancassurer faces different challenges to the other main lenders. It avoided development lending and will not be participating in Nama, which means it will not have to take any large hit to its capital reserves from transferring loans to the Government’s bad loans agency or need a State handout.

Funding remains the problem and this is eating into profits. As David Guinane, chief executive of Permanent TSB, told an Oireachtas committee on Wednesday, the net interest margin – the difference between the interest charged on loans and the interest paid on deposits/funding – has been squeezed to 0.87 per cent from 1.2 per cent two years ago.

The half-point increase in the bank’s standard variable rate last July will generate €24 million in a full year, but the profit margin remains under pressure. That won’t bother consumers, of course, who remain angry with the banks and haven’t forgotten IL&P’s role in the Anglo Irish Bank saga.

None of this seems to have spooked the market. IL&P’s plans to offload Permanent TSB, freeing up value in the life business, make the company a more attractive punt than the two main banks. For now, at least.