THE PROPORTION of Irish bank shares on loan, which could be used by short-selling investors for betting against the banks and on their shares falling further, rose last month, new figures show.
The percentage of Anglo Irish Bank's stock on loan remains the highest of the four publicly quoted Irish banks, according to data from Brussels-based securities settlements firm Euroclear.
Anglo's stock on loan increased at its highest level this year, rising more than two percentage points in June to 15.2 per cent from 12.95 per cent the previous month. This is the sixth month in a row the bank's stock on loan has risen.
The increasing amount of loaned stock at four Irish banks is an indicator that the level of short-selling against the Irish banks is likely to have risen last month at a time of heavy share price falls.
Bank shares have declined dramatically in the last six weeks. The ISEF index of Irish financial shares has fallen 45 per cent since the start of last month.
However, bank stocks fared better yesterday, closing higher after a very volatile day of trading. Irish Life Permanent was down 8.3 per cent at one point in trading before ending up 5.6 per cent at €4.30. Bank of Ireland rose 8.2 per cent to €4.89.
Anglo Irish Bank closed up 7.1 per cent at €4.37, after falling 3.6 per cent at one point. AIB closed 2.5 per cent higher at €7.28.
According to Euroclear's figures, Irish Life Permanent's stock on loan rose to 10.8 per cent in June from 8.2 per cent in May, while Bank of Ireland's loaned stock increased to 6.75 per cent from 5.97 per cent in May.
Loaned stock at AIB, which has the lowest amount of shares on loan, rose to 2.64 per cent in June from 2.06 per cent in May.
Euroclear has said its figures do not reflect the exact amount of stock being used by short-sellers, as loaned stock can be used for other transactions such as overnight trades or equity financing, where investors can make money by loaning stock held for long periods.
However, market sources said the figures reflected trends in the market, indicating the stocks that are susceptible to short-selling.
The actual percentage of Anglo's stock used for short-selling is thought to be in the mid- to high single digits. It is thought the loan stock figure for Anglo has been skewed by the interest held by Fermanagh billionaire Sean Quinn and his family in the bank through contracts for difference (CFD) derivative instruments.
Mr Quinn announced on Tuesday he and his family were unwinding their CFD positions in Anglo and converting them into the bank's shares, taking a stake of almost 15 per cent. This would make Mr Quinn and his family the largest shareholder in the bank.
The Financial Regulator is still carrying out its investigation to examine whether short-selling investors took unfair advantage last March by spreading false rumours about Anglo, while trading on the back of them. Anglo's share price fell 23 per cent in trading on March 17th before ending the day down 15 per cent.
