SHARES IN the three publicly quoted banks rose after the High Court approved the sale of €12 billion in deposits out of Anglo Irish Bank and Irish Nationwide Building Society to AIB and Irish Life and Permanent (ILP).
Shares in ILP increased 9.6 per cent, to 96 cent after its bid for €3.6 billion in deposits at Irish Nationwide was accepted.
AIB’s shares on the Enterprise Securities Market, the junior Dublin market where it was listed after being almost fully nationalised last December, rose 4.4 per cent or 1.1 cent to 26 cent. The bank will receive €8.6 billion in deposits from nationalised Anglo.
Bank of Ireland, which is not involved in the transfer deal, was also buoyed by the approval with shares up 7.3 per cent to 37 cent.
Senior bonds with a face value of €12.2 billion issued by the National Asset Management Agency to Anglo will also be sold to AIB. AIB is in return transferring €3.5 billion to make up the difference between the deposits (liabilities) and assets transferred.
Anglo said the bank will pay €1.6 billion in excess of the book value of the Irish and UK deposits. This is based on the difference between how Anglo and AIB value the Nama bonds.
AIB applies a value of 98.5 per cent to the bonds, the value assigned by the ECB. Anglo, however, values the bonds at 85 per cent based on how much the market would pay for them.
A spokesman for the National Treasury Management Agency, which managed the auction, said that the structure of deal will mean some gain for AIB but no profit for the bank on the bonds.
Anglo said that it would sell its Isle of Man subsidiary to AIB at net asset value and expected the pretax net effect of the sale to be a loss of about €200 million.
ILP will receive about €3.7 billion in Nama and other bonds from Irish Nationwide.
The transfers will improve the funding and liquidity of AIB and ILP. Analyst Stephen Lyons at stockbroking firm Davy estimated that AIB’s loans-to-deposits ratio would fall from 164 per cent (€1.64 on loan for every €1 on deposit) to 145 per cent. ILP’s ratio would drop from 254 per cent to 205 per cent.
“The boost to the banks’ liquid asset portfolios is timely, especially as tightening of ECB collateral rules and negative ratings action have affected collateral eligibility,” said Mr Lyons in a research note.
Questions remain over how Anglo and Irish Nationwide will now fund themselves, he said.
