AIB Corporate Finance Weekly Bankwatch 16.08.10

             

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Irish Banking News
  • The European Commission last week approved plans for up to €10bn of State Aid for Anglo Irish Bank.
  • Bloomberg reported last week that the European Central Bank had bought Irish government debt in an effort to halt a slide in its price. The ECB does not disclose details of its interventions but Bloomberg News cited market traders who claimed to have witnessed the deals. There was a sharp up tick in the price of Irish government debt last week following the news that the cost of the Anglo bailout had risen further to over €24bn. While uncertainty remains over the final cost of the Anglo bailout, it seems likely that the premium paid to hold Irish government debt will remain very high.
  • KBC Bank has added 0.2 % to its standard variable rate, bringing the rate to 3.85%. KBC's decision is effective from the 1st September and follows rate rises from Permanent TSB, ESB, Bank of Ireland and AIB over previous weeks.
  • Northern Ireland based Northern Bank, has reported a loss of £16.7m for the first six months of the year. Chief executive Gerry Mallon said that the Northern Ireland economy remains very fragile but that he was pleased with the banks performance which he described as “resilient”. Mr Mallon said the bank remained strong and healthy and well positioned for future growth. Northern Bank is owned by Denmark's Danske Bank.
  • Bank of Ireland reported interim results for the first half of 2010 last week. The bank unveiled a loss of just over €1.2bn, which was double the deficit recorded for the same period in 2009. The bank reported impairments on customer loans of €893m and wrote off a further €932m on loans being transferred to NAMA. Chief executive Richie Boucher said trading conditions in Ireland and the UK remained challenging, with Bank of Ireland Life, the only division to return a profit in the period. The banks retail business reported a loss of €548m. However, Mr Boucher noted that BOI would not increase mortgage rates this year, other than in line with any ECB rate hikes.
  • National Irish Bank has reported pre-tax losses of €341m for the first six months of the year, following an impairment charge of €367m during the period. Chief Executive Andrew Healy commented that these are “tough times to be operating a bank in Ireland”, but noted that it retained the “unflinching support” of parent Danske Bank. NIB is currently undergoing a restructure to close half of its branch network.

UK Banking News
  • The Bank of England has revised downwards its growth forecasts for the UK economy for the next few years. The bank expects growth of 2.7% in 2011, down from the May forecast of 3.4%. Inflation is expected to remain well above the bank's 2% medium term target throughout 2011, but will fall by mid 2012.
  • The Sunday Tribune ran a report which suggested that Lloyds Banking Group may consider closing its business banking unit in Ireland. Bank of Scotland Ireland has been operating in the Irish market for 10 years, but has reported significant losses since the economic downturn. The bank recently announced it has set aside €1.8bn to cover losses in the first half of this year - a 50% increase over the same period last year. The report did not cite any sources. Lloyds has already closed its Halifax retail network here in Ireland.