Allied Irish shares plunge as poor figures expected
Allied Irish shares may also have been hurt after Chief Financial Officer John O'Donnell confirmed on a conference call with analysts that the company won't pay a dividend for 2008. Photo: Leon Neal/AFP/Getty Images
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Wednesday November 05 2008
Allied Irish Banks Plc, Ireland's biggest lender by market value, tumbled as much as 17 percent in Dublin trading after saying full-year earnings will slide.
The shares lost as much as 74 cents, the biggest drop since Oct. 13, and traded 49 cents lower at 3.85 euros as of 8:49 a.m. in the Irish capital. Full-year earnings per share will decline to 120 cents from 205.9 cents in 2007, the bank said in a statement today. That compares with an earlier forecast of 185 cents a share to 190 cents a share and is below the 174-cent median estimate of 15 analysts surveyed by Bloomberg.
Irish borrowers are struggling to meet loan repayments after a decade-long property bubble burst and the country entered a recession. Allied Irish said its charge for impaired loans will be 0.75 percent of its total loan book, which compares with an earlier forecast of 0.35 percent.
''The statement is disappointing, but reflects a significantly changed environment for the Irish and U.K. property markets and the significant slowdown in economic activity,'' Kevin McConnell, head of research at Bloxham Stockbrokers, wrote in a note to clients.
Allied Irish shares may also have been hurt after Chief Financial Officer John O'Donnell confirmed on a conference call with analysts that the company won't pay a dividend for 2008.
The lender's rivals, some of which have already announced likely cuts to their dividends, also slumped. Bank of Ireland Plc, the country's second-biggest lender by market value, fell 8 percent, while Anglo Irish Bank Corp. Plc slipped 4.5 percent and Irish Life & Permanent Plc dropped 2 percent.
Debts
''There has been some negative effect on asset quality generally across our loan portfolios,'' Allied Irish said. ''The effect is most material in our Irish residential development book. Deterioration in that book is the principal driver of a revised group bad-debt charge expectation.''
The provision will rise to 2.5 percent on its Irish property and construction loan book next year. House prices fell 7 percent in the first nine months of 2008, as much as in the whole of 2007.
The bank is targeting a core Tier 1 capital ratio, a measure of financial strength, of about 6 percent at the end of the year and plans to raise that to 7 percent ''over time.'' The move won't dilute existing investors' holdings, O'Donnell said on the call.
The company has ''several'' options available to increase its capital ratio, including selling assets, it said. It owns 24 percent of M&T Bank Corp. and 70 percent of Polish lender Bank Zachodni WBK SA.
Turmoil in global credit markets will add about 200 million euros to funding costs this year, Allied Irish said. (Bloomberg)
- Ian Guider
