A plan by Bank of Ireland to buy back bonds saw its share price jump nearly 30 per cent today.
Despite announcing a collapse in pretax profits to €7 million and the lifting of its expected three-year bad debt charge to €6 billion, the bank's shares were trading at €1.37 earlier, the highest level for the stock since December 1st, 2008, giving the company a market capital of €1.34 billion.
The buyback programme also overshadowed an announcement that chairman Richard Burrows would step down at the annual meeting in July.
"It's a no-brainer trade for any of the guys. Rather than having to buy back the bonds at par in a few years it makes huge sense for them to buy them back at 50 cents and below so we think Allied will be next," said one Dublin-based trader.
Bank of Ireland said it will purchase securities with a maximum face value of €1.4 billion and is the latest lender to take advantage of deeply discounted secondary market prices to improve its capital position. Royal Bank of Scotland made a similar move last month.
Scott Rankin, an analyst with Davy Stockbrokers, said they were assuming around €700 million would be added to Bank of Ireland's core Tier 1 capital from the purchase.
"It boosts it quite nicely," he said. "There are some good spots and some bad spots in the results but on balance I think the market will be reasonably happy with the numbers given how bad the environment is."