MARKET REPORT:MARKET REACTION to the Government's second recapitalisation proposal – which will result in €7 billion being injected into Bank of Ireland and AIB – was subdued, with both stocks falling by over 14 per cent yesterday.

Distinguishing between market reaction to recapitalisation and Bank of Ireland’s revision of its estimates of impaired loans to €6 billion over the next thee years was tricky, but brokers said investors appeared to believe there was still too much uncertainty around Irish banking stocks.

One analyst described the reaction as muted and said the market did not feel that the story was over.

He noted that the deal requires the two banks to raise around €1.5 billion by the end of the year to buy out the warrants and said this suggested a dilutive rights issue which may deter investors.

AIB closed down 14 per cent at €0.925, while Bank of Ireland was 16 per cent lower at 51 cent. At these prices, AIB has a market capitalisation of €816 million while Bank of Ireland’s is €512 million.

Shares in Irish Life Permanent (ILP) also had a torrid day, sliding 15 per cent on financial sector weakness and negative sentiment following the emergence of its exceptional deposit support to Anglo Irish Bank. Shares in ILP closed at €1.65.

Greencore ended 0.7 per cent lower at 74 cent after it reported adjusted earnings per share of 24.1 cent, some 1.2 per cent ahead of its 2007 results. The stock has fallen by more than 20 per cent this year.

Ryanair, which announced job cuts from its Dublin operations, declined 2.4 per cent to close at €3.13, while construction stock CRH fell 1.4 per cent to €18.59.

Among the gainers, pharmaceutical stock Elan was one of the best, adding 27 cent or over 4.5 per cent to end at €6.09. CC also finished higher at 91.5 cent, while Kerry added 11 cent to €14.58.

Settlement date: February 17th