Irish bank shares rocket after government guarantee
Anglo Irish Bank jumped as much as 49 percent
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Anglo Irish Bank Corp. Plc led a surge in Irish financial stocks after the government guaranteed the deposits and borrowings of six lenders.
The ISEF Index of financial shares surged 25 percent to 4051.88 at 8:10 a.m. in Dublin as Anglo Irish Bank jumped as much as 49 percent. The Irish government said today it will guarantee all deposits, covered bonds, senior debt and dated subordinated debt of four publicly traded banks and two building societies.
''This is a massive step by the government to alleviate financial stress in the domestic system,'' Eamonn Hughes, head of research with Goodbody Stockbrokers, wrote in a note today. ''This presumably puts the Irish banks in better shape to seek funding compared with other non-guaranteed banks in international capital markets''.
Ireland's guarantee follows action by governments across the world to prevent more bank failures amid the freeze in credit markets. Belgium, the Netherlands and Luxembourg have pumped 11.2 billion euros ($16.3 billion) to rescue Fortis, while Citigroup Inc. will pay about $2.16 billion for the banking operations of Wachovia Corp. after shares of the North Carolina lender collapsed.
Allied Irish Banks Plc rose 18 percent to 5.92 euros, Bank of Ireland Plc jumped 22 percent to 4.00 euros and Irish Life & percent gained 42 percent.
The Finance Ministry said the guarantee will last until Sept. 28 2010 and is being provided at a charge to the banks. It is also subject to ''specific terms and conditions so that the taxpayers' interest can be protected.
''The Government's objective in taking this decisive action is to maintain financial stability for the benefit of depositors and businesses and is in the best interests of the Irish economy,'' the Finance Ministry statement said. (Bloomberg)
- Ian Guider and Dara Doyle
