Business Irish

Friday 22 November 2019

The Analysts Verdict

So what do the analysts think?

Stephen Lyons, Davy Stockbrokers

" . . . Overall I wouldn't be concerned about the AQR assessment for the banks given they have (a) already undergone a similar exercise in the autumn (b) the autumn exercise looks prudent based on the economy's recovery since June 13 (the date off which the autumn exercise was based) and some of the banks' disclosures at the year-end results (cure rates on defaulted mortgages to less than 5pc) and (c) the Central Bank has already pushed more stringent adoption of provisioning and reporting standards.

"So arguably what you'll see coming out of the EU exercise is a catch-up by other European banks . . . More importantly for the Irish banks, we are yet to see the details for the next stage of the ECB's comprehensive assessment. This will be the actual stress test, a three-year loss assessment based off their 2013 position (corrected for the AQR)."

Ciaran Callaghan of Merrion Stockbrokers

"I expect the stress tests to be manageable for AIB and BoI and am not expecting any major surprises. The banks have undergone several stress tests and much balance sheet scrutiny in recent years (PCAR, EBA, BSA) and therefore should be well prepared for the exercise.

"I estimate that AIB and BoI have capital buffers of about €2.4bn and €4bn respectively to help them navigate the base-line stress test scenario (above the 8pc ct1 level) which should be adequate."

Finance Minister Michael Noonan

"What's being proposed in the rule book is very similar to what we had in the first stress test.

"Under stress conditions they make assumptions about how files in the bank would perform, for example, if property prices dropped 20pc. That was one of the assumptions that we had in the last stress tests.

"But you couldn't reasonably make that assumption about Ireland now when property prices are going up. You couldn't make strong assumptions about an increase in impaired mortgages when the amount of impaired mortgages are going down.

"So I think we're in a good position. It's the view of the banks themselves and it's the view of the Central Bank that no extra capital will be required.''

Irish Independent

Also in Business