IRISH LIFE Permanent's share price plunged almost 30 per cent on the Iseq index yesterday after investors' nerves about its exposure to Icelandic bank debt continued and sentiment in the global banking sector remained bleak.
On another torrid day for world stock markets, Irish Life Permanent failed to recover any of the losses it incurred in trading last week, when concerns flooded the market about its exposure to debt issued by Icelandic banks that are now being nationalised.
After falling more than 30 per cent on Friday, it plummeted 29.4 per cent in yesterday's bank holiday session to close down 63 per cent at €1.52, having traded down 40 per cent earlier in the day. Its statement on Friday that its exposure was "very manageable" failed to alleviate fears, as it was unable to specify the value of its exposure.
Anglo Irish Bank was the other major faller of the day, slipping 23 per cent to €1.41, a loss of 43 cent on the day.
Irish financial stocks are now trading at levels not seen since the early 1990s, Dublin dealers noted yesterday. The overall Iseq index of Irish shares closed down just over 3 per cent on a busier-than-usual bank holiday session, although trading volumes outside the financial stocks were thin.
The banks' heavy dominance of the index meant the Irish market's performance lagged that of more broadly constituted indices such as the FTSE 100, which declined 0.8 per cent, although other European markets fared worse.
It was another volatile day for the markets, as overnight falls in Asian markets set a gloomy tone and a mixed trading session on Wall Street sparked rollercoaster share price moves in Europe.
Investors worldwide fled risky equities as fears mounted that a snowballing financial crisis would be followed by global recession.
"We're at volatility levels last seen in the 1930s," said Peter Dixon, an economist at Commerzbank.
Aviva, which owns the insurance company Hibernian in Ireland, fell sharply in early London trading amid speculation about its capital position. Royal Bank of Scotland, which is expected to issue fresh writedowns worth billions this week, also slipped.
Back on the Irish market, Bank of Ireland followed a similar move by AIB on Friday in releasing a statement to the stock market saying it had executed the guarantee acceptance deeds under the Government's guarantee scheme.
Meanwhile, banking sector analysts at Davy Research downgraded its earnings per share (eps) forecasts for the banks covered by the guarantee scheme by as much as 21 per cent for 2009 and by up to 14 per cent for 2010.
"We are also cutting all dividends to zero on the assumption that the Government will prefer to see banks improve solvency rather than remunerate shareholders," said Davy analysts Scott Rankin and Niamh Hore.
They also predicted that if the Government chooses to inject capital into the bank, it will seek some mergers in the sector first.
"Quite how this might be brought about is a moot point and would represent a stumbling block to any future Government intervention," the report concludes.
