BoI shares soar by 15pc in investor rush
Published 04/02/2012 | 05:00
SHARES in Bank of Ireland soared another 15pc yesterday -- putting them up more than 80pc for the year to date -- as institutional investors piled into the PLC.
The surge means the strategic investors who paid €1.1bn for a 30pc stake in the bank last July are up more than €500m since they got into the bank at just 10c a share.
The Government has been the other major beneficiary of the bull market, as the value of its 15pc stake soared from €450m in July to about €680m at last night's closing price.
Critically, the soaring prices have been achieved on high volumes of trade, with more than 220 million shares changing hands in Dublin yesterday, a figure about 10 times what changes hands on quieter days.
Market sources last night said the buying was being driven by institutions in Ireland and abroad, including many who had become "underweight" in financial stocks over the crisis and were now beefing up again.
Some said the buying had become "self-fulfilling", with recent share price gains attracting fresh investment into the stock which, in turn, drives further share price gains.
Davy financial analyst Emer Lang, who has an 'outperform' recommendation on BoI, said the share price march reflected the fact that BoI was in a "decent position" and had "done a lot of deleveraging and recapitalisation".
The potential for further gains of the same magnitude is doubtful.
Analysts expect the bank to have a net asset value -- or total value of assets less liabilities -- of about 22c by the end of 2013. But the bank is expected to trade at a discount to this, given the potential for further losses that would erode that asset value.
NCB bank analyst Karl Goggin said the stock could "struggle to continue" to make such rapid gains, particularly since the share price was now approaching a level where it might make sense for former bondholders to sell out.
Bondholders took part in a debt for equity swap last summer, which gave them shares worth a percentage of the redemption value of their bonds.