Tuesday 21 January 2020

BoI up 8pc as positive news buoys European bank shares

Laura Noonan

SHARES in Bank of Ireland gained another 8pc yesterday, leaving them up more than 27pc over the last nine days, as Europe's banking stocks continued to surge on positive industry news.

Market sources put the bulk of yesterday's rises down to a "softening" of the Basel III rules which will soon govern the amount of capital banks must hold.

Under the tweaks, policymakers have agreed to give "some prudent recognition" to banks' minority holdings and have also eased the rules on deferred tax assets.

European banking shares closed up 4.7pc, making them the best-performing industry group for the second day running. UBS and Deutsche Bank, which both issued expectation-beating results, closed up 11pc and 4.5pc respectively.

Other notable performers included France's Credit Agricole (up 10pc), Societe General (up 11pc), Lloyds (up 9pc), Bank of Scotland (up 8pc) and Barclays (up 8pc).


In Ireland, AIB closed up 2pc and Irish Life & Permanent closed up 4pc.

"The cost of funding is coming in quickly," said Merrion analyst Sebastian Orsi, pointing to the "sharp" narrowing of Irish government bond spreads and credit default swaps, which serve as indicators of borrowing costs.

Bank of Ireland has been a particular beneficiary, he added, because it has already completed its multi-billion recapitalisation and is seen as being "in the best shape of the Irish banks".

Improving funding markets was a key aim of the Europe-wide banking stress tests.

A Bank of America survey released yesterday showed the tests were seen positively by two-thirds of its clients.

In a note yesterday, however, NCB analyst Ciaran Callaghan said the stress tests results could be a "significant blow" to AIB's plans to raise capital.

Mr Callaghan said the stress tests' analysis shows AIB's core business is "close to breakeven if not loss-making". (Additional reporting from Bloomberg)

Irish Independent

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