Thursday 22 February 2018

Bank of Ireland shares close up on first day of trading as valuation unchanged

Francesca McDonagh
Francesca McDonagh

Gretchen Friemann

Bank of Ireland's share price closed up 2c to €7.40 yesterday as investors digested the first day of trading under a new organisational structure designed to comply with tougher European banking regulations.

While the stock price looked starkly different to Friday's close of 24.60 cent, the bank said its valuation remains unaltered.

Phil O'Sullivan at Investec said the change effectively reduces the "number of shares on issue" and has "no impact on existing shareholders".

The reorganisation - which resulted in investors swapping every 30 old shares for one new share, known as a share consolidation - was part of a wider corporate overhaul spurred by regulatory changes.

Bank of Ireland's creation of a new holding company - its ticker has also changed to BIRG - leaves AIB as the only major Irish bank yet to implement incoming industry measures aimed at shielding savers from a future banking collapse.

As the Irish Independent reported in the run-up to AIB's recent IPO, the bank will tap bond markets for up to €5bn over the next few years to comply with new legislation.

Like Bank of Ireland, it will also have to form a holding company, and call an emergency general meeting before the end of the year - a process that will entail another prospectus along with a raft of advisory fees. Bank of Ireland paid its advisers €10.5m.

Yet despite its lower burden of non-performing loans, the bank's valuation suffered in the weeks preceding AIB's partial privatisation.

That has eased now, however, with the bank up 8.7pc since the IPO on June 23rd, outstripping the European bank index which has gained close to 6pc in the same period. Part of the uplift stems from an unwinding of the hedge fund trades that resulted in opportunists shorting Bank of Ireland as a hedge on their investment in AIB.

But the key weights on Bank of Ireland remain its IT investment and exposure to the UK.

Irish Independent

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