Bailout Increases Uncertainty for Irish Banks

We think shareholders can expect more dilutive capital injections, if not outright nationalisation, followed by asset sales at fire-sale prices

Erin Davis 23 November, 2010 | 10:44AM
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While the proposed European Union-International Monetary Fund rescue of Ireland, announced Sunday, may stabilise the outlook for Ireland and other troubled EU countries, it creates significant questions about the future of its banks, including the two we cover, Allied Irish (ALBK) and Bank of Ireland (BKIR). The bailout is aimed at providing a backstop for the banks, whose bad loan books are requiring increasing amounts of fresh capital and whose deposits are fleeing by the billions. Officials have not made detailed comments about what this will mean for the banks, but have said th

at the banks will become significantly smaller. We think shareholders can expect more dilutive capital injections, if not outright nationalisation, followed by asset sales at fire-sale prices. We are keeping both banks unrated.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AIB Group PLC422.50 GBX0.36

About Author

Erin Davis  is a senior banking analyst for Morningstar.

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