Its simply a reaction to what is happening with regard to Bradford & Bingley, Fortis, Hypo Real Estate, Wachovia and all the others. Its absolute carnage or a scale that has never been seen before. One thing for sure is that I don't care what the regulator or government says. Our banking system is at just as much risk as any other Country's. You don't see a 40% share price drop for no reason. And they can't blame short sellers this time. If this keeps going for the rest of the week I am willing to bet that we will be seeing our first Irish casulty.AIB -19%
BOI - 18%
Anglo - 37%
Irlife &P -32%
I kid you not
What on earth is happening.
Disclosure: I have shares in AIB directly and through the ISEQ ETF in all the other banks indirectly.17. A person who produces or disseminates recommendations shall -
(a) take reasonable care to ensure that the recommendations are fairly presented, and
(b) disclose any interests in or conflicts of interest concerning the financial instruments and issuer to which the recommendation relates.
Disclosure: I have shares in AIB directly and through the ISEQ ETF in all the other banks indirectly.
Disclosure: I own no banking stocks.Last week, Irish Life and Permanent was valued at the net value of the Life Insurance company on its own. In other words, you were getting to own permanent tsb for free. This makes no sense to me.
Disclosure: I have no holdings in any of the Irish BanksIt's clear that the profitability of Irish banks is going to be severely affected by the economic crisis. In particular, the banks will have bad debts arising from their property loans.
But the prices seem to assume things to be far worse than they actually are. It assumes that banks will lose a huge part of their assets due to bad debts and that they won't make profits again for many years. For that reason, I believe that bank shares are good value. Mind you, I did believe that six months ago and have lost around 50% of the money I invested then.
AIB, for example, derives its profits from Ireland, Poland, the UK and America. That is reasonably diversified.
Last week, Irish Life and Permanent was valued at the net value of the Life Insurance company on its own. In other words, you were getting to own permanent tsb for free. This makes no sense to me.
Of course, investing in shares is risky. There might be an announcement tomorrow that one of our big banks is in difficulty and that the government is not going to rescue it. The other banks may lose heavily because they have lent to that bank. But at these prices, the potential reward well outweighs the risk.
I have not heard it reported that Irish Life has bought toxic securities. Can you provide any reference to back this up? I doubt if there is any substance in this comment.Life insurance companies were buyers of toxic securities and funds stocked with toxic securities which are impossible to value, so the book value of such companies is meaningless in the conventional sense.