Irish banking shares in complete meltdown

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Murt10

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AIB -19%
BOI - 18%
Anglo - 37%
Irlife &P -32%

I kid you not


What on earth is happening.


Murt
 

Brendan Burgess

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We don't allow discussion of share prices on Askaboutmoney.

But as today's movements are exceptional we will allow this discussion.

All comments will be screened.





Brendan
 

shanegl

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3 European banks had to be rescued over the last few days.

One factor that can't be blamed this time is short-selling.
 

Sunny

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AIB -19%
BOI - 18%
Anglo - 37%
Irlife &P -32%

I kid you not


What on earth is happening.


Murt
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.
 

Howitzer

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There's speculation trading in banking shares on the ISEQ might be suspended by the Financial Regulator.

http://www.fxcentre.com/news.asp?2296504

Very hard to comment on the ins and outs of why that might be without discussing the mertits and demerits of the individual companies, and their subsequent value re their share price, but suffice it to say that actions such as that are usually an indication that the system doesn't know what's going on either.
 

dereko1969

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i found this to be a very interesting article on the worst day yet in europe
http://www.bbc.co.uk/blogs/thereporters/robertpeston/
in it he mentions the issue of insuring sovereign debt on the credit default swap market and that the UK and USA are less credit-worthy than many European countries but he didn't mention Ireland and when I tried to google it I couldn't find much, so I'm not sure where Ireland fits in at the moment.
However an interesting article I found during that search is here
http://www.moneyweek.com/personal-finance/credit-default-swaps-how-to-spot-the-riskiest-banks.aspx
irish banks feature heavily here and it should be noted that the Icelandic bank Glitnir that was nationalised today features at number 3 - a point to note is that this article was written in March this year!
 
Z

z106

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The ISEQ is down 13%.

Before this the biggest one day decline was 8.8% for black monday back in 1987.

Is this the biggest one day decline ever?
 

Raskolnikov

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I'm afraid the chickens are coming home to roost.

The worldwide banking community has looked at Irish banks and their massive exposure to property and not liked what they've seen. All our banks have lent huge amounts of money to developers to buy land. Due to reckless lending, we were at the mercy of the international credit crunch. Banks suddenly stopped lending, buyers weren't able to get the mortgages to buy property. Builders were then unable to shift their properties, let alone build new ones. This has meant that inventory has surged and prices have fallen.

So far, the banks have been willing to accomodate developers. They know full well that if they force the hand of the developers, then they may trigger a collapse.

I have maintained that there would be a property crash for a few years now. However, I always thought that it would be homeowners that would trigger the crash. I thought that the developers would be far too cagey to have allowed themselves to get so exposed. It now looks like this is the opposite case. Homeowners will trudge through the misery of negative equity and we'll see the developers folding and declaring bankruptcy.
 

Brendan Burgess

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Discussing share valuation is a very sensitive issue. Could people please disclose upfront in any post whether or not they own shares in banks. Any posts which don't have such a comment will be deleted.

I am trying to get clarification from the Financial Regulator as to whether the Markets Abuse Directive applies to Askaboutmoney.

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.

This reminds me of the situation during the dot.com boom. It was simply impossible to get people to look at the fundamentals. People were paying multiples of revenue for companies which were not making any profits and which had no real plans to make profits. It was impossible to speak to these people. Optimism ran mad. A company would issue a share split proposal and the shares would rise in value. A share split should not have any impact on value at all.

It'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.

Brendan
 
Z

z103

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just on cnn.com;
U.S. lawmakers reject $700 billion plan to bail out the financial system, Dow Jones down 600 points.
 

Brendan Burgess

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Folks

This is really time consuming. I will say this yet again:

Discussing share valuation is a very sensitive issue. Could people please disclose upfront in any post whether or not they own shares in banks. Any posts which don't have such a comment will be deleted.

for example

Disclosure: I have shares in AIB directly and through the ISEQ ETF in all the other banks indirectly.
 

Jethro Tull

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First of all I do not own shares in any bank

I personally think there is a serious chance of a failure/government intervention/nationalisation by the end of the week if the Fed bailout isn't passed (and as things stand the nays have it)

Therefore I'd struggle to buy any Irish banking share
 
D

Dom.K.Morgan

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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 own no banking stocks.

Unlikley. 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.
 

Thomas22

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It'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.

Brendan
Disclosure: I have no holdings in any of the Irish Banks

The only flaw in this analysis is it ignores the possibility that the Irish banks will have bad debts greater than their current capital.

While some may consider this a remote possibility I would think it is almost a certainty.
The Irish banks have lent massive amounts to developers in the last few years to purchase undeveloped land banks. BOI said recently in a market update that this has already fallen by 40%.

If one of the major developers goes bust it is game over for the Irish banks. They simply do not have the capital to cover these potential loses.

Personally I don't believe they have the capital to survive the likely loses on these loans.
 

ecstatic

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I do not own shares in any bank.

AIB is very well diversified and i must say a pain to get a mortgage through as in high strict standards for loans.

Fortis had problems today also and they are also very strict with loans. I have applied through both banks for loans before.

Options can be used as shorts on Irish banking stocks just not naked shorts. Also the ISEQ index is 45% constructed of Banks so another manner in which to short the stock.

If i was to venture in id ensure i picked the best of breed whichever bank looks the best long on it and whichever looks the worst short it. Dont try to be a hero out there on the market.

We are no doubt in a small crisis historically the last 7 in the UK lasted an average of three years each. This is best case scenario here.

Worst case scenario we have had our 7 years of boom and now we have our 7 years bear cycle!
 

Brendan Burgess

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Disclosure - share in AIB and in the ISEQ ETF which has all the other shares.

With the nationalisation of three banks in Europe today, the market is pricing that one or more of the Irish banks will be nationalised.

Going back to Irish Life and Permanent , the market capitalisation of the company is actually 50% of the embedded value. The embedded value is the cash in the banks + the discounted profits on policies already issued.

Dom says

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.
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.

Brendan
 

theoneill

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I suppose faced with such staggering losses the only thing to do is to sit tight. I remember a word of advice my father gave me regarding the stock market. “It’s knowing when to sell that’s the key”
I have shares with two financial institutions and I know that part of my portfolio involves Irish and international banks. They have taken a hammering but all I can do is wait and bide my time. Hopefully with a bit of luck my little investments will come out of this relatively unscathed though I will have had to leave them in the market for far longer than I would have liked.
Given enough time things will right themselves we just have to ride it out and with these losses many will have little choice.
Anyway when I was reading some of the papers today I just smiled to myself, I suppose we are living through a protracted bit of financial history unfolding. It’s got everything; money, greed, wars, banks falling, banks being rescued, a US election featuring the possible first female vice president or the first coloured president you couldn’t make this up. Your grandchildren will be reading about this in their history & economic books.

Disclosure: I have shares in Irish Life and other Irish financial institutions
 

roro123

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108
Q1.Is the Irish Government capable of bailing out any Irish bank if the need arose? - This question is not about any bank in particular as I am aware of the rules of the board , but more about whether anyone would discuss if the Government is in a position to bail out an Irish Bank if ever the need arose?

Q2. If the Irish Government was not in a postion to, then who would bail out an Irish Bank if ever the need arose.

Sorry I forgot to mention
Disclosure- I have a tiny holding in BOI

Also is there any board similar to Investor Village/Motley Fool where stocks are discussed specifically for the ISEQ?
 
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