The AIB thread


#2184

Was this type of thing not big news around 10 years or so ago?


#2185

A dozen years ago you could be forgiven for believing that banks were blue chip investments. Today it’s your own lookout if you choose to visit that particular casino.


#2186

It’s taken a very long time but at last someone in the Irish media is looking at the State’s loss on its bank shares.

Almost €6,000 Million wiped out in the past year. The NTMA told the government to sell a year ago but not one bank share has been sold by the State as their value dropped into the toilet.

That’s double the cost of rural broadband lost due to inaction .

https://www.irishtimes.com/business/financial-services/almost-6bn-wiped-off-state-s-bank-holdings-in-past-year-1.3988526


#2187

https://www.bloomberg.com/news/articles/2019-09-02/boris-johnson-s-brexit-plans-are-hammering-ireland-s-banks

AIB Group Plc. has slumped 36%, making it the worst performer in the Euro Stoxx Banks Index since the end of June,

How come the Irish media are not reporting this? They were slow to acknowledge the slump in Irish bank shares and none of them have analyzed the implications.

https://www.bloomberg.com/news/articles/2019-09-02/boris-johnson-s-brexit-plans-are-hammering-ireland-s-banks


#2188

Paul Somerville was on Marian this morning blaming the fall in Irish bank shares on speculators betting on hard Brexit.

I can believe a hard Brexit would be seriously damaging for Irish banks but I cannot imagine that speculators have driven Irish bank shares so far down on the risk of Brexit. If you want to bet on a no deal Brexit this year, the bookies will give you 4/1. How much further do speculators imagine Irish banks could sink, having already lost over half their value and now trading far below their Euroarea peers?

Sommerville claims the UK banks are not targeted by such speculators because their shares are priced in Sterling. Can anyone explain his logic? If the speculators are international, wouldn’t a post-Brexit fall in sterling only boost profits from short-selling?

He claims our bank shares will rise dramatically if a no deal Brexit is averted. Perhaps but not more than 20% is my guess- the problems of the Irish banks won’t go away with Brexit.

http://rte.ie/r.html?rii=9_21626916_70_29-09-2019


#2189

One aspect of this piece is the degree of exposure. UK banks with large domestic operations will be earning in sterling and their costs will be in sterling (including deposit interest), A fall in sterling will hurt their international costs but strengthen their international earnings in value relative to now. It may be complex to work out which UK banks to short while BOI have a known GB exposure and I’d imagine so do AIB. With Irish Banks, the costs will be mainly in Euro while the earnings will be mainly in Sterling.


#2190

I’d agree - the problems of the Irish Banks are far deeper than mere Brexit.


#2191

I believe the cost income ratio of BOI is 58%. AIB is c. 52%. That’s madness for a retail bank with a small corporate bank attached.

In Ireland (population 5m) there are 5 high street banks - AIB, BOI, Ulster, KBC, Irish Perm each with national coverage. Again - madness. There is simply not enough business in the country for 5 banks to share. Look at Australia and I think there are 3 banks (and that includes NZ).

Irish banks have been so poorly managed and over staffed for decades that no one actually knows what sort of sustainable business exists. There should be a range of smaller regional building societies throughout the Country and 2 national banks serving corporate customers.

Irish bank shares will remain at low levels until this is sorted.


#2192

That would be logical but this is Ireland. The people who buy these bank shares are by-and-large the very people who allow the banking “inefficiencies” to exist in the first place. It is all they know. Any prediction of Irish bank stock price is like trying to predict the movement of a flock of sheep in reaction to various stimuli.