Irish bank shares were lower at midday on media reports that the Government may cut initial payments to lenders as part of its plan to buy €90 billion of loans from them.
Under the National Asset Management Agency (Nama), which will buy the loans to cleanse balance sheets, banks would receive about 80 per cent of the loan value immediately, the Sunday Timessaid yesterday, without citing anyone.
This had followed a similar report in The Irish Timeson Saturday saying that staggered payments were under consideration as a means of avoiding over payment for loans in the event that the market recovery is lower than expected.
The remaining 20 per cent would be paid if the property that was bought with the loan achieved its forecast value on resale by the agency, it said.
“In its crudest sense, anything that protects the taxpayer will be coming at the expense of the equity or subordinated bondholders,” Eamonn Hughes, an analyst at Goodbody Stockbrokers, said in a note today.
“Such a move would obviously provide a little less liquidity into the banking system initially.”
After falling 18 per cent in early trade, AIB shares were 5 per cent lower at €2.66 at 11.55am while Bank of Ireland shares were down over 9 per cent at €2.45, having earlier dropped by 17 per cent.
Irish Life and Permanent shares were off 2.7 per cent at €4.47.
Separately, the Sunday Business Postreported that Finance for Minister Brian Lenihan is prepared to take majority stakes in the country's banks as part of the creation of the agency.
Mr Lenihan will address an Oireachtas Committee today as he tries to boost support for the bad bank plan.
Fine Gael, the largest opposition party, plans to vote against the agency in the parliament, while the Green Party, the junior party in the coalition government, is scheduled to hold a convention on the agency to address its members’concerns.
“There is likely to be much horse-trading in the coming weeks ahead of the NAMA debate and the minister is just highlighting a range of possibilities,” Mr Hughes said.
“But it strikes us that the political risk ahead of NAMA is mounting as we approach the crucial debates.”
Additional reporting Bloomberg