| 4.6°C Dublin

Bank shares surge on sale of Anglo's €12bn deposit book

SHARES in Ireland's quoted banks surged as much as 10pc yesterday as the market gave a resounding thumbs-up to the sale of Anglo Irish Bank and Irish Nationwide's €12.2bn deposit book.

AIB emerged as the biggest winner in the deposit auction on Thursday night, winning €8.6bn from Anglo, while Irish Life & Permanent (IL&P) got €3.6bn from Nationwide.

Analysts yesterday said the transfers would significantly improve 'loan-to-deposit ratios' at both AIB and IL&P, helping the two institutions to hit new targets set in the bailout deal.

Davy is now pencilling in a loan-to-deposit ratio of 145pc for AIB -- meaning the bank has €145 loaned out for every €100 in deposits -- significantly better than the 159pc reported at the end of December.

Goodbody is more bullish, suggesting the deal will improve AIB's loan to deposit ratio by about "20 percentage points", edging the bank close to the 120pc demanded by the external authorities.

IL&P's loan-to-deposit ratio is now pitched at 205pc by Davy -- far better than the 240pc in the first half of last year -- while Goodbody believed the deal would improve IL&P's position by a "ballpark 40 points". Davy also suggested AIB could book an equity gain of €1.6bn from the deal, since there was a "mismatch" between the assets (NAMA bonds) and liabilities (deposits) AIB was taking on.

A spokesman for the bank, which is in a closed period ahead of its 2010 results announcement, declined to comment.

A separate report from bond specialists Glas Securities suggested Anglo Irish Bank could book a gain of as much as €1.4bn from the deal.

The gain could arise, Glas said, because the NAMA bonds AIB paid Anglo €12bn for had been valued at just €10.6bn in Anglo's accounts at the end of 2010.

Anglo told the stock market it would book a €200m loss on the deal, but it is understood that this hit will not prompt the bank to ask the State for more cash.

A spokeswoman for Irish Nationwide said the building society could not provide anyone to comment on the capital impact of the transfer.

IL&P's shares were the biggest winners yesterday, closing up almost 10pc, while AIB gained 4.4pc as double the usual volume of shares changed hands in the Enterprise Securities Market-listed bank.

Bank of Ireland also rose more than 7pc for the day, even though the bank failed to secure any deposits in the auction.

Irish Independent