Why BOI&AIB are bid???

Ireland’s Bad Bank May Overvalue Loans It Buys, JPMorgan Says

By Ian Guider
June 17 (Bloomberg) – Ireland’s government may overvalue
loans it plans to buy from the country’s banks, reducing the
need for the state to inject more capital into the lenders,
according to analysts at JPMorgan Chase & Co.
The government is setting up a so-called bad bank, known as
the National Asset Management Agency, to buy as much as 90
billion euros ($124.8 billion) of real estate loans from the
lenders. It has yet to decide the discount at which it will buy
the loans to reflect the slump in land values.
“We do not expect the appraisal of the lending portfolios
transferred to NAMA to be purely based on the underlying value
of the assets,” London-based analysts Ignacio Cerezo and Andrea
Unzueta wrote in a note today. “The government’s haircut will
probably overvalue the portfolios bought by NAMA, with
shareholders strongly benefiting from that approach.”
The government, which has pumped 7 billion euros into its
two biggest lenders, Allied Irish banks Plc and Bank of Ireland
Plc, has said it will provide more funding if the transfer of
loans to NAMA erodes their capital. A discount of 20 percent to 25 percent on the loans sold to
NAMA would “imply no immediate government capital injection,”
the JPMorgan analysts estimate.

Of course the loans will be over priced, they will be priced well over the market rate, otherwise the banks would just sell them to the market. Banks can’t afford to sell them to the market at the real value so are waiting to sell to NAMA at the inflated value.

I thought the whole purpose of NAMA was to buy the assets at inflated rates.

And yet AIB is down 10% today…

Funny that. Both BoI and AIB have been slip-sliding away the last few days… who knows what?

edit: It may be that now that the figure has moved from 15% (as per Davy, I believe) to 20% haircut for NAMA that the flock is getting worried? I believe 20% would involve the government having to recapitalise to majority shareholding level for both banks?

That is more of a general market de-risking than anything stock specific I think.

It is, but we are not meant to say that the correct term of what we are paying is the “economic value”.

rearrange the following words into a well known phrase or saying
in
the
is
fix

Señor Foreign Bank thinks an Irish Bank may make a good conquest - but she is a little bit infected with the bad stuff.

A government health programme for slutty banks is just the thing to clear up that nasty case of insolvency.

The taxpayer gets to socialise the losses and then has to watch these private commercial enterprises do their corporate coupling up close and personal!

Tell me again why these rancid, diseased failures aren’t nationalised…

Why is the government determined to get a bad deal for the state?

I’d be interested to hear suggestions.

It’s a head scratcher. One possibility is that bonds are swapped for toxic assets, but the capital injection requires raising funds through a real bond auction (i.e. one where Irish banks don’t buy the bonds). If it’s the case that there isn’t any real purchasers of Irish debt, you could have a motive. Though are things really that bad?