# How much did the shareholders and bondholders in Irish banks lose?



## Brendan Burgess (28 Feb 2011)

According to this analysis by Donal O'Mahony of Davy Stockbrokers...



> Destruction of  shareholder value (and loss of  capital reserves) across the banking  system amounts to circa €55  billion, while a near €10 billion haircut  has already been applied to  subordinated bondholdings following  numerous liability management  exercises.



Anyone got more detailed analysis of this?


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## Chris (2 Mar 2011)

Here is some data on Anglo.
Apparently peak share price was 24/05/2007:

That means a market cap of just over €13bn which eventually was wiped out:
http://www.ise.ie/app/equityDetails.asp?equity=28082&start_day=24&start_month=5&start_year=2007

This would be a very simplistic view and only covers the _perceived _value that was lost. It does not account for how much people actually lost by taking account for what they paid in the first place; some shareholders may have sold before the total collapse, thus limiting their losses; and it also doesn't take account for any money made on shorting the stock.


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## Brendan Burgess (2 Mar 2011)

Hi Chris

I think a better measure would be what were the shareholders funds of Anglo rather than the market cap. 

Although as a former shareholder in AIB, my loss is the decline in share price from what I bought at to what I sold at. 

I don't think €13 billion is a fair estimate. If for example, everyone bought their Anglo shares when the market cap was €6 billion, then I would think that they have lost €6 billion. 

Not an easy one to measure.


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## Chris (2 Mar 2011)

Hi Brendan,
I assume you use "shareholders funds of Anglo" the way I use shareholders' equity. I would agree that this would be a better measure, as essentially a shareholder buys a portion of the equity attributable to shareholders with the hope of future earnings through dividends and/or increased equity. 
In the case of Anglo this peaked around Q1 2007 at €3.6bn: [broken link removed]

Any other attempt at trying to find out how much _actual _investment was lost would be a pretty futile exercise, as the amount of data would be too large to gather and analyse correctly enough.


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## Brendan Burgess (2 Mar 2011)

So I wonder where Donal O'Mahony got his €55 billion figure from?


> Destruction of  shareholder value (and loss of  capital reserves) across the banking  system amounts to circa €55  billion,


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## Chris (3 Mar 2011)

Very good question. Is there any contact information with the article?


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## Brendan Burgess (3 Mar 2011)

I emailed the author and got this response. Unfortunately, Davys blocks askaboutmoney so he can't read the thread! 


> The E55bn destruction of shareholder  value equates both to the aggregate collapse in system market capitalization  from peak readings and the actual loss in capital reserves (ex business  disposals and debt liability management uplifts) across the various financial  institutions.





> herewith our analyst’s breakdown of capital losses 2009/10 (broad ests)
> 
> 
> AIB | E11bn
> ...


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## Chris (3 Mar 2011)

I had some email contact with Donal O'Mahony where I tried to get some clarification on the info already posted by Brendan.
Here is a quote from the last email:


> the destruction of shareholder value per loss of market capitalisation (from peak) is an altogether different calculation, although coming up with an equivalent number (circa E55bn). The numbers I gave you below represent the actual aggregate loss of capital reserves on bank balance sheets, excluding the impact of asset disposals and liability management exercises over the 2008/10 period.


What they used was the balance sheet assets at their peak and on the latest reports and discounted for assets sold.

Based on this I did a quick bit of research into financial reports from AIB and BoI. The calculations may a bit simplistic, but it should give an idea as to how the numbers were calculated.

*BoI:*
peak balance sheet in September 2007: [broken link removed]
€186 bn

June 2010: [broken link removed]
€169 bn

That's a €17 bn difference; if I am not mistaken I read somewhere that BoI has sold assets to the tune of €10 bn, which would bring the number in line with the above figure.


*AIB:*
peak balance sheet at end of 2008: [broken link removed]
€182 bn

June 2010: http://backup.aibgroup.com/errorpageimages/HalfYearly2010.pdf
€169 bn

That's a €13 bn difference; I'm not sure what the total asset sale is with AIB


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## Duke of Marmalade (5 Mar 2011)

I find this thread very confusing. 

No way did shareholders lose 30bn in Anglo no matter what metric is used. And no way did "members" lose 6bn in INBS. The bulk of these losses are taxpayers'.

I think comparing sizes of balance sheets is a futile exercise. A bank could halve its balance sheet whilst at the same time doubling its shareholders funds, if for example it sold off its mortgage book at a profit and paid back depositors. Aggregate balance sheets are swamped by the ebbs and flows of funding and credit creation, can't see how it can help identify shareholder effects.

To me the correct figure in this context is the loss of shareholder equity as reported in the companies' financial statements. 

The 55bn has been cited from time to time as the shareholder losses but I have always taken this to mean loss from peak market value. DOM recognises that this is the wrong metric but argues that the correct one, as I outlined above, is coincidentally similar. But the fact that he needs a 30bn loss in Anglo to make up his figures suggests that maybe he is squirming a bit here. The correct figure for Anglo is, I think, 4bn. Similarly "members" only lost about 1bn in INBS. This would mean that aggregate shareholder/member losses are about 23bn, using the table produced by Brendan.

Don't get me wrong, generally I support the DOM line.


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