BoI, AIB shares rebound after early falls

Shares in the State’s two main banks AIB and Bank of Ireland have rebounded from early falls on the Dublin market today.

At 11.45am AIB shares were up over 10 per cent with over 6 million shares traded having earlier fallen by over 16 per cent in the first hour of trade on Dublin's Iseq. Just before noon its stock was trading at 61 cent.

Bank of Ireland stock was1.3 per cent higher at 38 cent, recovering from falls of over 14 per cent in early trade. The overall market was over 1 per cent lower.

The share volatility follows sharp share price declines for both banks

yesterday and comes after the Government’s announcement of a recapitalisation plan last week, which will see €7 billion pumped into Bank of Ireland and AIB.

Contributing to yesterday’s decline in AIB's share price was a downward revision in the outlook for its subsidiary Bank Zachodni WBK from stable to negative by rating agency Fitch, which led to a 7.5 per cent fall in the Polish bank’s shares yesterday.

At yesterday's close, Allied Irish Banks' 70.5 per cent stake in BZ WBK was worth €787 million compared with the group's overall market cap of €486 million.

Investor confidence in Irish financials has also been unsettled by Bank of Ireland’s upwards revision last week of its estimates of impaired loans to €6 billion over the next three years last week.

The Irish financial sector is also digesting news of tens of millions worth of sterling and dollar loans to former Anglo Irish Bank chairman Seán FitzPatrick as part of his loan transfers between the two institutions to conceal up to €122 million in borrowings from Anglo Irish, reported in today’s Irish Times .

This report followed the downgrading of Irish Nationwide’s debt rating – an indication of its ability to repay its borrowings – by credit rating agency Moody’s.

Irish Nationwide’s rating is now just one level above speculative or “junk” status and Moody’s has a negative outlook for the lender, meaning it may downgrade its ratings again soon.

Aside from specific investor concerns about Irish banks, the sector came under pressure across Europe yesterday on fears that further capital will be required

Yesterday, Lloyds fell 8 per cent on speculation of the need for further capital injections post the losses at HBOS, although by 8.45am it was ahead just over 1 per cent in London.

In research note this morning Davy stockbrokers said the total liabilities of the Irish-owned banks were “€575 billion, or 309 per cent of GDP: the third-highest in the euro area”.

It said the figure of Irish bank liabilities of almost 900 per cent of GDP was “bogus” as it includes the subsidiaries of foreign-owned banks.

According to Davy the liabilities of all credit institutions resident in Ireland total €1,424 billion or 839 per cent of Irish GDP.