Bank share trading halted as markets in turmoil
Published 31/03/2011 | 05:00
THE Stock Exchange and the Central Bank last night stepped in to temporarily suspend trading in Bank of Ireland and AIB's shares today -- 12 hours after Irish Life & Permanent (IL&P) asked for trading in its stock to be halted.
The dramatic developments came as banks and investors alike awaited the results of today's banking stress tests, which could see the State take majority stakes in all of Ireland's quoted banks.
In a brief statement last night, the Central Bank said both it and the Stock Exchange had "considered the most effective way to support the integrity of market trading in financial sector shares".
The two remaining banks' shares were suspended "in order to avoid the possibility of a disorderly market due to the circulation of information or rumours during the day" the statement added, pointing out that the banks involved would not legally be allowed to comment on those rumours.
The news came after Bank of Ireland's shares tumbled 11pc yesterday, amid reports that a capital demand of up to €5bn could see the institution fall into majority state ownership.
Market sources said the share-price fall had not been sharper because the price was "already very weak".
"A lot of people would have gotten out already, many of those who haven't are waiting to see," said one trader.
AIB shares were up 2pc on the day, reflecting the fact that the bank is already 93pc state-owned and is seen as having little left to lose.
IL&P shares collapsed by 45pc on Tuesday amid reports that it was heading for majority state ownership after failing the stress tests by billions of euro.
In a brief statement issued yesterday morning, the plc said it had decided to suspend its shares "in light of significant movements in the share price" after "recent media comment".
"The PCAR and PLAR [stress test] exercises are not yet completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalised," the plc stressed.
Reports from Bloomberg last night suggested IL&P could need more than €3bn. The plc is understood to be resigned to selling its life insurance business and investment units to fund some of the requirement.
Analysts say these two assets alone could raise as much as €1.7bn, but market sources say any revenue raised "won't be enough" to meet the capital shortfall.
The Government is expected to ultimately end up owning more than 90pc of the group when trading in its shares resume tomorrow morning.
The turmoil also fed through to the bond markets, where the price of IL&P subordinated bonds more than halved over the past two days, falling from 41pc of face value to 20pc, as news emerged it could be the next financial institution taken into state ownership. The new price of IL&P subordinated bonds is the same level subordinated bondholders of Anglo Irish Bank received in a take-it-or leave it buyback deal after that bank was nationalised.
The IL&P bonds are among a host of active names in what bond traders say was an extremely busy day on Wednesday.