BoI shares take their deepest dive in 20 years
Shareholders listen intently at the Bank of Ireland Annual Court in the RDS, Ballsbridge, Dublin, yesterday as bank chairman Richard Burrows addresses downbeat investors at the meeting
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Wednesday July 09 2008
The freefall in Irish banking stocks picked up pace yesterday as investors ignored reassurances from Bank of Ireland that the institution will not have to resort to additional funding to beef up its balance sheet as the global liquidity crisis continues to adversely impact its earnings.
Shares in Bank of Ireland plunged as much as 14pc -- the biggest drop in 20 years -- as chief executive Brian Goggin attempted to persuade shareholders that the group's loan book quality remains robust and that it can ride out the worst domestic economic crisis in two decades, even as a recession looms.
Bank of Ireland chairman Richard Burrows described the group's share performance in recent months as "abysmal".
And Bank of Ireland customers also got a shock yesterday as the institution lobbed on a 35 basis point, or 0.35pc, interest hike onto its standard variable rate mortgages, effective today.
The European Central Bank raised rates by 25 basis points last week. Consumer overdraft rates are being raised 40 basis points to 15.6pc APR, including the overdraft facility fee. Bank of Ireland's shares closed down almost 10.9pc in Dublin yesterday at €4.51.
Shares
Shares in Irish financials were also dragged down as embattled British lender Bradford & Bingley was forced to accept a deal that will see a consortium of its high street competitors including Lloyds TSB acquire up to 25pc of the institution.
The deal came as Bradford & Bingley sought to shore up its balance sheet via a share placing.
The underwriters of the scheme, UBS and Citigroup, haven't been able to sell £400m (€503m) worth of the stock under the scheme. Bradford & Bingley's stock slumped as much as 25pc before closing down 19pc.
Bank of Ireland stressed yesterday that it is actively managing its own funding position and said that it had raised €3bn from wholesale markets since the end of March.
In the last financial quarter, management said that while the group's residential mortgage portfolio is "proving resilient" in a weakened housing market, there has been some credit grade slippage in the period, particularly in its business customer portfolio.
Mortgages
At the end of March this year, €392m worth of residential mortgage repayments owed to the group were past due by more than 90 days.
That's up 35pc from €289m at the same date in 2007.
Analyst Scott Rankin at Davy Stockbrokers said that revenue growth at Bank of Ireland is "trending worse" than in the broker's own model. He added that he will be cutting his earnings forecasts for the bank by "at least" 5pc for 2009 and 2010.
Bank of Ireland generated a net profit of €1.69bn in the year to the end of March, a 3pc rise on the previous fiscal year.
Mr Goggin declined to give additional earnings guidance yesterday. "It's very difficult to give guidance in this period of uncertainty," he said.
Claims
The bank also denied claims in the British press that it had ceased lending to clients in the UK commercial property market.
Asked if the Irish banks had helped to fuel excessive lending that had created the current unstable environment in Ireland, Mr Goggin said he "completely and utterly" rejected the notion.
"Banks are an easy touch. They make a very significant contribution to the economy," he said.
- John Mulligan
