The equity market sell-off continues. Greek 10-year bonds now yileding 6.72%.

As for the banks....well as you rightly point out their fundamentals are shot but to be honest with you I do not know what drives their share prices on any given day. Last weekend I expected a big sell-off on Monday after at least one Sunday paper suggested that the NAMA loan transfer discount would be greater than 30% - come Monday nothing happened.

I often wonder about the composition of the current shareholder base in these banks. The short-selling ban is still in place so hedge funds can only really look at these shares as short-term punting stocks (though Harris Assoc. owns 10% of BOI I think). I don't get the impression that there are many non-domestic institutions involved which pretty much leaves Irish institutions, retail punters and other types of fast money traders as the price makers in these two (and soon the state too I guess). With turnover of less than €5m per day each, I don't think that there is much serious money involved in these names now so relatively small trades can cause large price movements.

...so the answer is I do not know!

Would the lifting of the short selling ban see the banks - AIB and BOI - in serious trouble?

Welcome back fitzy, long time...

You tell us?! Do you have goss?

I can't see that they have any means to raise capital through equity. I don't see that it would make a difference other than to the dilution the state will enforce. At this stage, it is so near total as to be ridiculous. Would it spur the shareholders into finally changing management? I really doubt it...

Heard toinght from a source in AIB that there will be a redundancy/exit package for staff in March

Just seen a loan review from AIB for a fully performing investment property loan. Margin increased from sub 1% to 5.3%. Gone from interest only to capital repayment over 20 years. Only thing missing from the "offer" was a photo montage of the middle digit in the vertical position!

Technical breach of the covenants?

No, just loan expiry date. Expected rollover as usual.

http://www.independent.ie/business/irish/aib-bond-at-premium-as-greek-volatility-impacts-2038439.html


What is the mid swap rate?

Rollover "as usual"?

Don't they intend to pay back the money that they borrowed some day?

Whatever about the interest rate, how can they expect to stay interest only? They'll never own that investment property that way.

Unless they never intended owning the "asset" in the first place. Wait for the inevitable appercation and then sell it on to a greater fool. That was the plan.

Pity that it was everyone else's plan too.

Merrions blurb on it

AIB sold €1.5B of government guaranteed 3 year bonds yesterday. The bonds were
priced to yield 130 bps over mid-swaps. With the cost of the guarantee we
estimate an all in funding cost of c. 4.25%. The Irish banks have been
successfully raising government guaranteed (gg) term debt so far this year.

Perhaps it would. As far as I know Ireland is the only country where an outright short-selling ban is still in effect, though with potentially large rights issues looming I understand why the ban has not been lifted.

+1 The banks' general response to capital repayments was that they did not want them as they would have to "re-lend" the money to a new third party with all the ensuing hassle and costs and that the new loan might not be as good as the existing one. Therefore, "just pay the interest and leave the capital value alone ..... or would you like to revalue the property and obtain an equity release?"

There you go! How to sow the seeds of self destruction!

It is amusing how things play out in a way, with little twists and turns ... well, it is to me at least.

Entertaining times currently at the banks as they try to realise assets in the limited window of opportunity prior to the loan going to NAMA under the legislation.

The NAMA valuers have taken a very conservative view in their valuations as they are in a "no win" situation if they value them bullishly leaving an opportunity for NAMA to claim off their insurance indemnities a couple of years hence.

So the banks reaction:
Where loans can realise in excess of their NAMA valuation and can achieve full repayment (this is particularly so in the UK), they are being called if at all possible and the asset sold, even to the extent of putting in a receiver if resistance is met.
Other loans that have an "underwater" value are being offered to the borrower at the value rather than to NAMA as there is a comeback with NAMA and none with the existing borrower. "Your €20 million loan has been valued at €3 million. If you get the €3 million to us before it goes into NAMA, you can have the asset!"

The only problem is that no bank wants to lend the €3 million.

Cash is now king.

Now THAT is v interesting if correct - but how come Lenihan et al didnt trumpet this loudy as a sure fire way of knowing NAMA woulnt pay too much? dont remember seeing anything in the papers about a comeback vs the valuers...?

I thought that this may be the best place for this latest snippet about that subsidery of AIB, Goodbodys stockbrokers but feel free to move it. Ireland is a great place to have your investments 'looked after'.

http://www.independent.ie/business/irish/goodbody-takes-a-bath-in-aib-2052049.html