Sunday 26 February 2017

Irish bank shares drop to lowest in over a year

Bloody day across world markets amid fears of delay to stabilisation fund

Laura Noonan

Laura Noonan

David Viniar, executive vice-president and chief financial officer of Goldman Sachs, right, speaks during a Financial Crisis Inquiry
Commission hearing on the role of derivatives in the financial crisis with David Lehman, managing director of Goldman Sachs, and AIG
executives.
David Viniar, executive vice-president and chief financial officer of Goldman Sachs, right, speaks during a Financial Crisis Inquiry Commission hearing on the role of derivatives in the financial crisis with David Lehman, managing director of Goldman Sachs, and AIG executives.

SHARES in Ireland's banks plunged to their lowest level in more than a year yesterday as negative economic data and fears of delays to Europe's €440bn stabilisation fund sent stock markets into a tailspin.

AIB closed the session at 80c, its lowest level since April 2009, after shedding more than 8.5pc on the day.

Irish Life & Permanent also ended heavily in the red, closing down almost 8pc as its shares hit a 15-month low of €1.40.

Bank of Ireland polled marginally better, losing just 6.5pc in the day, but still closed at its lowest level since May 2009, with shares changing hands for just 63c a piece.

The hefty losses amongst Irish financials came amid a bloody day across global stock markets after reports showed a slowdown in manufacturing growth in China and the US, while US jobless numbers rose unexpectedly.

European stocks were particularly hard hit, after it emerged that the eurozone's €440bn stabilisation fund could be delayed by up to two weeks because of opposition from Slovakia's incoming government.

The €440bn fund was designed to help countries who were having problems borrowing on the international money markets, with Greece, Spain, Portugal and Ireland expected to be the main beneficiaries.

The new Slovak government campaigned on a platform of no eurozone bailouts in the run-up to the elections last month, and are now opposing the measures, triggering fears of delays.

The collapse in share price amongst Irish financials came despite signs that banks in Europe's most troubled countries are easing their dependence on cheap ECB money.

Europe's banks borrowed just €111.2bn of six-day funds from the European Central Bank (ECB) yesterday, a level described as "modest" by banking commentators.

Banks borrow from the ECB when they are unable to borrow from each other, and so these figures are seen as a litmus test of the European funding markets.

"There's a bit of relief in the market that some of the worries about funding concerns in Europe may be overdone," said Nick Stamenkovic, strategist at Ria Capital Markets.

The news reflects particularly well on banks in Ireland, Greece, Portugal and Spain, since institutions in the four countries are understood to account for about two-thirds of the ECB loan issues.

Irish Independent

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