Saturday 20 January 2018

Bank of Ireland shares soar to three-year high after bond issue

Bank of Ireland College Green
Bank of Ireland College Green
The bank's shares have doubled in value over the past six months
Sarah McCabe

Sarah McCabe

BANK of Ireland's share price has risen to its highest level in nearly three years as one good news story after another boosts confidence in the country's biggest lender.

The bank's share price has advanced 12pc in the last two days alone, touching 29.4c, the highest since early 2011.

The shares have doubled in value over the past six months, meaning the bank's market capitalisation now stands at about €9.3bn. If the shares double again, Bank of Ireland will reach the same market capitalisation it enjoyed pre-recession.

Investor sentiment was boosted this week by a seemingly endless stream of good news stories. Shares in the lender jumped 8pc on Tuesday morning after the NTMA's successful sale of a highly oversubscribed 10-year bond, its first since the country exited the bailout programme.

Shares were up another 3.2pc by yesterday afternoon after the bank sold its own five-year bond, raising €750m. The price on that bond was lower than a three-year bond it sold in May.

On Monday, Barclays fixed-income analysts picked the stock as their top European banking pick for 2014.

Analysts are full of praise. "I'm surprised this share price rise has happened so quickly, but it makes sense when you look at the NTMA's bond sale -- it was 3.8 times oversubscribed. Compare that with the last government bond issue, in May, which was only 2.6pc oversubscribed," said Goodbody stockbrokers' Eamonn Hughes.

Mr Hughes said he expects these gains to continue.

"Property values are up, so asset quality is improving and margins are up, so yes, I think the share price will continue to rise" he said. "The bank was profitable in the last quarter of 2013 for the first time in several year.

"After years of falling returns, investors will be hoping for about a 5pc return on equity this year, 10pc in 2015 and returns in the high teens later in the decade."

The latest share price rise is particularly good news for the State, which has ploughed €4.7bn into the Richie Boucher-led bank since 2009 in return for a 15.9pc stake in the lender, held by the National Pension Reserve Fund (NPRF). This stake has been reduced to 13.95pc since then, including a small sale earlier this week of €45m worth of shares.

Given a share price of 30c, the State's holding in the lender is currently worth about €1.3bn. Another €5.8bn has already been returned to it since 2009 from Bank of Ireland, including the sale of €1.8bn worth of preference shares and the sale of contingent convertible bonds.

Bank of Ireland wasn't the only institution to benefit from the positive sentiment surrounding this week's sale of sovereign debt. Permanent TSB and AIB have also jumped, though analysts have been slow to read into that. "AIB and PTSB's share price at the moment is less about their fundamentals and more a mirror of what's happening at Bank of Ireland," said Mr Hughes. "Though we should see AIB return to profitability in the first half of the year."

Irish Independent

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