Sunday 22 October 2017

IL&P soars as state ownership fears subside

Laura Noonan

Laura Noonan

THE market value of Irish Life & Permanent has almost doubled in the last three days as the spectre of state ownership faded from investors' sights.

The massive gains make IL&P the Irish stock market's best performer since the bank bailout was announced on Sunday night, though Bank of Ireland is also up 19pc for the week.

As the only institution with no state support, IL&P's share price was hit particularly hard last week amid rumours the bank bailout would involve state cash for all institutions.

The bancassurer was expected to need about €600m of extra funds, which would have led to massive dilution of shareholders since the company's market capitalisation was just €317m going into last week.

Further bad news was heaped on when the four-year plan detailed sweeping changes to pension tax relief which could hurt IL&P's mainstay life insurance business.

The market responded to the twin threats with a heavy sell-off of IL&P shares, driving the group's share price down to 51.4c on Friday night and bringing its market cap down to just €142m.

Capital

That trend was reversed this week after a Sunday night announcement that IL&P will actually just need €98m in additional capital, a sum that the group believes it can raise itself.

"This is clearly a successful outcome for the group," NCB analyst Ciaran Callaghan wrote in a note to clients on Monday, as IL&P's shares soared.

The company's stock ended Monday up almost 60pc and gained another 22pc yesterday, leaving its share price at €1.

Market sources point out that while anyone who bought into IL&P earlier in the week is enjoying massive returns, most investors are still nursing losses.

Even after the stellar two-day run, IL&P's share price is still below the €1.15 it traded at as recently as November 19, and well below its €1.50 level on November 1.

"The jury remains out as to IL&P's future," analysts at RBS said in a note to clients. "We believe investors will require more details about the substantial downsizing and restructuring of the Irish banking system before there is comfort."

Irish Independent

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