Saturday 10 December 2016

Irish banks could take 20 more years to pay debts

Published 03/04/2011 | 05:00

FINANCE: Michael Noonan. Photo: Tom Burke
FINANCE: Michael Noonan. Photo: Tom Burke

It could take another 20 years for the Irish banks to repay the bailouts received from the State, an international bank expert warns.

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"If you look at what happened with the Nordic banks, it could take another 20 years for the Irish banks to repay all of the State aid," said Hank Calenti, head of bank credit research with Societe Generale, who has also previously worked for the Federal Reserve Board in the US.

Like Ireland, the Nordic banking crisis included a property bubble bust and the near collapse of the Scandinavian banking system.

"The Nordic banking crisis happened in the early Nineties -- and 20 years later, there is still some material government investment in the banks," said Mr Calenti.

The Central Bank said last week that the Irish banks could need another €24bn over the next three years to stay afloat.

As the State has already poured €46bn into the banks, this would bring the total bill for rescuing the banks to €70bn. Justin Urquhart Stewart, director of Seven Investment Management, believes it could take another 10 years to restore confidence in the Irish banks.

At €13.3bn, AIB would get the lion's share of a €24bn bailout, followed by Bank of Ireland at €5.2bn, Irish Life & Permanent at €4bn, and EBS at €1.5bn.

Ireland looks set for a banking duopoly under shake-up plans announced by Finance Minister Michael Noonan last Thursday.

These include the merging of AIB and EBS and the sell-off of IL&P's life assurance arm.

Under Mr Noonan's plan, there would be two big banks in Ireland (AIB and Bank of Ireland) and one small bank (IL&P's Permanent TSB).

However, if IL&P has trouble selling off its life assurance arm, or if the sale does not raise as much money as necessary, analysts believe Bank of Ireland could take over Permanent TSB.

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