EU bailout to boost IL&P's shares
IRISH Life & Permanent boss Kevin Murphy said yesterday he was "optimistic" that European efforts to stabilise the Irish banking system would drive a recovery in the bancassurer's "totally undervalued" share price.
The commentary came as IL&P told the market 2010's full-year earnings would be "significantly better" than last year's, driven by a 70pc surge in profits at the core life insurance business.
Despite announcing expectation-beating first-half results in early September and guiding towards recovery, IL&P's share price has been in freefall for the past few weeks, plunging from €1.60 on October 13 to about 82c yesterday.
"We believe the share price totally undervalues what's happening in the company," Mr Murphy told analysts yesterday.
"We are optimistic that the current (European) initiative to bring certainty to the Irish debt-raising situation will ultimately be positive for the share price because clearly the share price is suffering because of that uncertainty."
Yesterday's statement revealed that IL&P suffered a €600m fall in its corporate deposits in the third quarter. The remaining book of €4.8bn has been "stable since the end of September", IL&P said.
At the end of the third quarter, those ECB drawings amounted to €11.7bn, up from €8bn at the end of June. IL&P said it would be forced to ask for another €1bn in ECB money when a bond matures in February, unless it can find a buyer for a batch of securitised mortgages.
IL&P is in talks with "two or three interested parties" on the deal.
"If there's a transaction it will be done by the end of the year," IL&P finance boss David McCarthy told analysts, adding that between €1bn and €2bn could be raised.
IL&P stressed that while it hadlost some corporate deposits, it was making good ground on retail deposits, which were expected to rise by €700 to €800m over the second half of the year, largely due to the success of the Interest First account. On the trading front, IL&P said it was seeing "strong institutional inflows" at its investment management division.
New business sales have been less resilient, with IL&P reporting that sales of regular premium policies are down by "almost a quarter", as disposable incomes shrink and corporate pension contributions contract in line with falling salaries and smaller workforces.
On the banking side, IL&P said early arrears on its mortgage book had "levelled off", while the Permanent TSB's core net interest margin was expected to be "ahead of target" in light of the higher reliance on cheap ECB funding.
The interim management statement was well received by analysts, with Goodbody's Eamonn Hughes describing it as "better than we suspected".