AIB anomaly makes rescued bank Europe's fifth-largest
Published 04/08/2011 | 05:00
Allied Irish Banks PLC, the country's second-largest bank by assets, has a market value bigger than UBS and Barclays PLC, even after its third bailout by the government.
The taxpayer last week bought €5bn of shares in the bank for one cent each, giving it a 99.8pc stake.
That left investors with a stake valued at €100m. Allied Irish has since traded at between 9 and 12 cents, for a market value of as much as €61.6bn, three times the peak of February 2007.
"The implied valuation of Allied Irish at about €50bn makes little sense and seems to be an anomaly," said Stephen Lyons, an analyst with Dublin-based securities firm Davy.
"The increase in the government's stake has not been fully digested."
That anomaly makes the unprofitable lender Europe's fifth-largest by market value, behind HSBC Holdings PLC, Banco Santander, OAO Sberbank and BNP Paribas.
The government has injected €19.9bn into the lender over the past two-and-a-half years.
Irish banks are grappling with mounting bad-loan losses, following the collapse of a domestic real-estate bubble in 2007.
Investors would find it easier to "correct the share price to a more reflective level" of its value if a ban on short selling Irish banking stocks, which was introduced in 2008, wasn't still in place, Mr Lyons said.
"Share prices are determined at a level where there are willing buyers and willing sellers," said Ailish Byrne, a spokeswoman for the Irish Stock Exchange.
Allied Irish spokesman Ronan Sheridan declined to comment, while Finance Ministry officials weren't immediately available for comment. (Bloomberg)