IL&P shares dive on credit warning

[HouseBuyer]

Irish Life and Permanent has said the current crisis in credit markets will affect its earnings next year. Its shares tumbled in Dublin after the announcement.

In a trading update, it says that if current high interest rates in the money markets persist through the first half of 2008, this could hit earnings by a ‘high single-digit percentage’. IL&P says group operating earnings for 2008 will be flat or slightly ahead of the expected 2007 outcome if rates settle down after the first quarter.

The bank also says the slowdown in Irish residential mortgage lending in 2007 is expected to continue in 2008.

It says that with tighter credit conditions the pace of loan growth in the bank is expected to moderate next year and **higher funding costs **arising from the continuing global credit crunch will impact its earnings. It adds that the extent will depend on when, and at what level, credit spreads eventually normalise.

IL&P says that overall operating profits are expected to grow by more than 20% this year. Life new business earnings for 2007 are expected to show growth in the high teens. Overall life operating profits is expected to grow by 25% for the year.

It says that credit quality remains excellent across all loan books. However it adds that in the last quarter, along with many other Irish banks, Permanent TSB was affected by the actions of a ‘rogue solicitor’.

‘A full provision of €11m is included in respect of the loans advanced although we will be vigourously pursuing recovery in this case,’ the statement says.

IL&P says that bank operating profit, before the €11m charge, is expected to show mid-teens growth for the year.

The lender says that the upheaval in equity and debt markets in the second half of the year, plus the strength of the euro, has been the main contributor to short time investment fluctuations on its life embedded value. The bank says that as at the end of last week, this was estimated at about €60m in the red compared to €21 in the black at the end of the half year.

It says its liquidity portfolio of €4.2 billion is invested mainly in sovereign bonds (60%), high grade financial FRNs (30%) and prime (non-US) RMBS. It says it has no sub-prime exposure.

IL&P says that the diversification and duration profile of its funding sources place it in a strong position in the current credit environment. Currently some 68% of the bank’s funding base is sourced from customer accounts and term debt.

‘While the current environment is proving challenging for the banking sector generally, the low risk nature of the group’s activities, the strength and depth of the franchises we have developed in our key businesses and the underlying resilience of the Irish economy give us great confidence for the future,’ the trading statement concludes.

Shares in IL&P slumped over 9% to stand at €12.14 in Dublin this afternoon - down €1.21.

Good thing this is only a blip

[daltonr]

However it adds that in the last quarter, along with many other Irish banks, Permanent TSB was affected by the actions of a ‘rogue solicitor’.

I hope the rogue solicitor had the presence of mind to take all the money he borrowed and short the banks he borrowed from.

But I doubt he did.

-Rd

[robert]

There’s an interesting question (or maybe not)

Would that technically be insider trading?

[chalice]

@HouseBuyer

Good thing this is only a blip

Yeah, sure I read that Irish Nationwide are going to postpone any sale until the credit crunch is over - like as it its a bad downpour of rain soon to end

Ah, sure the banks will start lending again in the summer when the Irish construction boom takes off again as if nothing had happenedd!

[Green_Bear]

The bank increased its rates by between 0.1 per cent and 0.25 per cent earlier this month in response to higher funding costs that have arisen following the surge in the rates banks charge for lending to each other. Banks have seen the rate at which they borrow in the wholesale market spiral from 0.2 per cent over the ECB rate to 1 per cent over the base rate in recent weeks.
Permanent TSB was the second lender, after Ulster Bank, to pass on the increased cost of borrowing to customers, while other banks are expected to follow suit between now and January. >>>>

**Credit crunch forces IL&P to consider rates **
sbpost.ie/post/pages/p/story … qqqx=1.asp

[FB2]

Folks, I have a question about Irish Nationwide. If I open an account (15K+) with them would I be eligible for a share in the company when it is sold. I hear the share holders of note could be due about 10K each. Does anyone know when the record of note is taken from, is the date set or is it a date a certain lenght of time before the sale date.
Also on the money show yesterday morning they mentioned that if you had at least €125 in EBS and if they sold in the future that you would be eligible for a share in the sale. Anyone know why €125 is chosen as it seems very low compared to Nationwide (I’m aware that EBS have no intention to demutualise).

Anyone know anything on this topic.
Cheers.

[whizzbang]

@FB2

Folks, I have a question about Irish Nationwide. If I open an account (15K+) with them would I be eligible for a share in the company when it is sold. I hear the share holders of note could be due about 10K each. Does anyone know when the record of note is taken from, is the date set or is it a date a certain lenght of time before the sale date.
Also on the money show yesterday morning they mentioned that if you had at least €125 in EBS and if they sold in the future that you would be eligible for a share in the sale. Anyone know why €125 is chosen as it seems very low compared to Nationwide (I’m aware that EBS have no intention to demutualise).

Anyone know anything on this topic.
Cheers.

You need at least 20k in Irish Nationwide before you get a “Share Account”. Even then you need to have had it for 2 years before they announce a sale/demutualisation for you to get any money. Hence I’m hoping they don’t sell for another while

[FB2]

Cheers Whizbang,
Best of luck with the venture. Sounds like a good place to rest your deposit.

FB

[Who_ll_take_the_rap]

@FB2

Cheers Whizbang,
Best of luck with the venture. Sounds like a good place to rest your deposit.

FB

My first thoughts were “These people are natural Lottery Gamblers”.

Then, the uncontrolled brain starts thinking. Warning: what follows could be waters inhabited by Liberal Thinking Person Eating Sharks! The Irish Nationwide could shortly be the only bank left standing in Ireland. They after all, are known as the Builder’s Bank. Who has all the money generated by the Celtic Tiger? I take it that they will support their own! Yea! Like the Bankers trust for one another. I think that I will stop there!

[conor_mc]

@Who'll take the rap?

@FB2

Cheers Whizbang,
Best of luck with the venture. Sounds like a good place to rest your deposit.

FB

My first thoughts were “These people are natural Lottery Gamblers”.

Then, the uncontrolled brain starts thinking. Warning: what follows could be waters inhabited by Liberal Thinking Person Eating Sharks! The Irish Nationwide could shortly be the only bank left standing in Ireland. They after all, are known as the Builder’s Bank. Who has all the money generated by the Celtic Tiger? I take it that they will support their own! Yea! Like the Bankers trust for one another. I think that I will stop there!

The 20k deposit is 90% insured- where’s the massive gamble?

You’re going a bit overboard on the conspiracy theories WTTR, there is no banking trust when the shit hits the fan - it’s every bank for themselves in that situation, unless bank A can drag bank B down with it. Look at the US - the super-SIV which was supposed to save the day was a damp squib, with the result that Citi have had to take $49b back onto their balance sheet.

Re INBS, the 10k payout was predicated on a sale price of €1-1.5 billion - I can’t see that happening now.