Irish banking shares

Current Affairs
1

Irish Life & Permanent dropped under €10 today, with BOI and Anglo Irish both around €9.50 and AIB under €14.50 off high of over €24 I think last February.

Time to throw some of the savings at this yet or is there worse to come?

I’m particularly tempted by AIB. I know a lot of it is international sentiment against financials and the Irish story, but I doubt they’ve any sub-prime exposure and they’ll still turn in a profit of €2 billion. I’d say they also have an extremely solid retail loan book, based on the anecdotal evidence of them offering me and Mrs Fats about hundred a fifty grand less than the best of the rest when we did the rounds. I’m convinced they’re a good medium to long term investment, the only question is to whether to wait to see if you can get them cheaper.

2

I don’t know all that much about these (and I’d bow to your superior knowledge on the subject) but the maths of these prices just doesn’t make sense to me.

These banks will still have huge profits (which will surely drive up share prices, even in the short-term because it can only be a good news day) and they’ll have cracking earnings per share.

Are the dividends going to get cut because of the fall in share prices? You’d think that the dividends will have to remain reasonably healthy to act as a buffer against the exodus of shareholders and so the dividend could nearly pay for the loss of interest in buying shares - even if the price doesn’t go up.

All the analysis from the US and elsewhere suggests not to buy financials but the actual results from the Irish banks tell you the exact opposite.

3

Personally at the moment I’d wouldn’t buy shares in banking companies, I still feel Ireland’s economy is very un-stable and banks are unwilling to dish out loans credit the way they used to only two years ago. Property prices are falling and no amount of talk from Tom Parlon would give me the convidence to invest in property, many property investors are being left with empty houses and having to pay for furnishings themselves just to sell the house, thus pushing the prices down even more, in theory a €300,000 house is only costing the buyer €250,000 if there’s €50K worth of furnishings thrown in. All this has to mean less bank customers and less profit over this year.

As well as that, the whole situation with the run-away solicitor Michael Lynn and the Irish banks not formally reporting the loss of €90M owed to them by the solicitor makes me wonder is there something the banks are covering up! I know if a customer owed my business few million I’d be reporting it wether my business was worth €100 or €100million, it wouldn’t matter, I’d want my money. The fact that the banks as money grabbing greed centres who charge riddiculous intrest don’t want to get their money back seems very fishy to me.

4

There’s an ECB Monthly Bulletin due tomorrow, I wonder will there be any hints on plans for rates.

5

[quote=“BenShermin”]Personally at the moment I’d wouldn’t buy shares in banking companies, I still feel Ireland’s economy is very un-stable and banks are unwilling to dish out loans credit the way they used to only two years ago. Property prices are falling and no amount of talk from Tom Parlon would give me the convidence to invest in property, many property investors are being left with empty houses and having to pay for furnishings themselves just to sell the house, thus pushing the prices down even more, in theory a 300,000 house is only costing the buyer 250,000 if there’s 50K worth of furnishings thrown in. All this has to mean less bank customers and less profit over this year.
QUOTE]

Consumer confidence is shot because of the sensational reporting and doomsday scenarios presented to us on a regular basis. Hence people are not spending their money, and when people stop spending the wheels stop turning.

Why would someone pay for furniture to sell a house? Or more to the point who would want some one elses’s furniture? Very anecdotal evidence it sounds like to me.

And a bank that makes 2 billion still makes 2 billion.

Stock markets can never be judged over an isolated period of 1 year, apparently this things go in cycles so now is proabably a good time to buy. But I don’t know enough about it to be honest, just fed up of this whopping generalisation of the economy.

6

To put this in context, I’ve worked in the banking sector for going on 7/8 months now and I don’t think I’ve ever seen a credit crisis or crunch quite like this one.

1 Like
7

[quote=“BenShermin”]Personally at the moment I’d wouldn’t buy shares in banking companies, I still feel Ireland’s economy is very un-stable and banks are unwilling to dish out loans credit the way they used to only two years ago. Property prices are falling and no amount of talk from Tom Parlon would give me the convidence to invest in property, many property investors are being left with empty houses and having to pay for furnishings themselves just to sell the house, thus pushing the prices down even more, in theory a 300,000 house is only costing the buyer 250,000 if there’s 50K worth of furnishings thrown in. All this has to mean less bank customers and less profit over this year.
QUOTE]

And another thing - I think it is quite a good time to be a property investor, as opposed to a property speculator. My aquiantances in the real estate industry tell me that many sellers are willing to accept much below the advertised price for their property as they need to sell. This leaves the power with the buyers, with them basically able to name their price. Combined with generally rising rents mean that as a long term investment property is still a reasonable punt.

The major problem in Ireland has been the ridiculous growth in property prices, this has spawned a generation of speculators who have bought houses with a view to selling them on completion. Hardly a healthy phenomenom. Many people have made a killing at this but clearly it was unsustainable. Hence the empty houses. Speculated bought with a view to twisting but buyers are getting wise to this and are more selective.

I couldn’t be bothered typing anymore, basically Ben you haven’t a clue about the property market.

8

ECB is between a rock and a hard place at the moment. Persistently above target inflation at the same time as slowing growth prospects. Most dangerously of all, increasing evidence of unions looking for large wage settlements to offset inflation, the dreaded second round effects. I’m sure some of the hawks would like to be able to consider raising but, independent or not, it’s probably not politically feasible. It would certainly send one hell of message about their inflation fighting credentials. I suspect the solution is to keep up the tough talk while holding steady on rates. The expectation of future rates rises and hence lower inflation will in theory obviate the need for higher wage settlements.

On the banks, I’d like to know how much of AIB’s profits are derived from residential mortgages. I’d guess it’s actually relatively small (under 20%?), and as I said, I’d be fairly confident that loan book is solid. I also wouldn’t be that worried about the prospect of defaulting in this sector. The banks lend based on your repayments being under 30-40% of your disposable income (depending on the bank) so most people should be able to keep making the repayments.

The thing that might worry me more actually is the banks’ commercial lending, especially to developers and those in the property game. If they’ve relaxed their lending standards here, and these guys can’t refinance due to the credit crunch, there could be a fairly hefty exposure, especially if it’s all secured on land in a downturning market. I’d say Anglo Irish in particular would be susceptible here, since they always seem to the ones financing your Liam Carolls etc.

9

Great time to buy Irish banking shares, the downward trend in share prices is driven mainly by overseas institutional investors who see what’s going on in the US with sub prime lending and are panicking assuming if the US banks are into it heavy then us crazy Paddies have staked our entire futures on it. Every time an article is written about the US stock market taking a hammering the commentators bring the Irish market into it and the potential negative effects for us, then all the ordinary joe soaps shit themselves, buy into what the “experts” are spewing at us and sell out of whatever stock they put half their SSIA into a year ago after reading an article by the exact same “experts”. Some people don’t realise that stock markets go up and down in cycles and if you’re looking at investing in shares you have to be prepared for a 3-5 year play if you want a decent return. Some idiots see a sharp drop in price and think they have to sell out to cut losses or they will lose everything. Banks will always make money, banks will always get government support and banks don’t default on their debt obligations. Give it a couple of years and we’ll all be raging we didn’t sell the shirt off our backs to invest in the banking sector as we watch the guy sitting next to us cash in.

10

A post from jugs complete with capital letters, full stops and some logic. Commendable.

Actually a good post too summing up the crazy attitude the middle class of this country have towards things. We tend to listen to people with vested interests telling us the way things are going to be. A stupid little country.

All bar this geezer I knew once who bought cheap exploration stock and made a massive paper profit. I hope the arse has fallen out of them but I doubt it, coz he’s a jammy if very stingy cooont.

11

The guy sitting next to me won’t be cashing in I can promise you that. He’s thick as shit.

Well done on the sensible post though Jugs.

And good point on Anglo Fats - out of all the banks I can see them being up to their necks in dodgy unsecured lending.

12

i wouldn’t be too worried about Anglo to be honest. Regarding their aggressive financing in the property sector, the guys they back heavily are the guys with deep pockets who can afford to sit on development land or un-sold apartments (Gasworks for example) for a few years until things pick up so the chances of them defaulting on repayments is minimal. In any case there will always be an appetite for refinancing (at a premium naturally) as banks won’t turn their backs on the people who have swelled their coffers so much over the past decade and who will do so again when the market picks up.

It also may surprise some that out of all the Irish banks Anglo has least exposure to the wholesale markets when it comes to funding. The % of its funding that is derived from deposits is greater than AIB & BOI which means in times of distress in the interbank market they will be last to be affected.

13

I see Jugs has been copying and pasting from some financial website.

I have never, ever heard or read him making any sense until now.

The ginger prick.

I think it goes without saying that the banks are a sound investment. The question is: when is the right time to jump in?

14

Grafton Group plc around the €6 mark

Defo worth a punt.

Some quality staff there.

15

[quote=“Appendage;27490][QUOTE=BenShermin”]Personally at the moment I’d wouldn’t buy shares in banking companies, I still feel Ireland’s economy is very un-stable and banks are unwilling to dish out loans credit the way they used to only two years ago. Property prices are falling and no amount of talk from Tom Parlon would give me the convidence to invest in property, many property investors are being left with empty houses and having to pay for furnishings themselves just to sell the house, thus pushing the prices down even more, in theory a 300,000 house is only costing the buyer 250,000 if there’s 50K worth of furnishings thrown in. All this has to mean less bank customers and less profit over this year.
QUOTE]

And another thing - I think it is quite a good time to be a property investor, as opposed to a property speculator. My aquiantances in the real estate industry tell me that many sellers are willing to accept much below the advertised price for their property as they need to sell. This leaves the power with the buyers, with them basically able to name their price. Combined with generally rising rents mean that as a long term investment property is still a reasonable punt.

The major problem in Ireland has been the ridiculous growth in property prices, this has spawned a generation of speculators who have bought houses with a view to selling them on completion. Hardly a healthy phenomenom. Many people have made a killing at this but clearly it was unsustainable. Hence the empty houses. Speculated bought with a view to twisting but buyers are getting wise to this and are more selective.

I couldn’t be bothered typing anymore, basically Ben you haven’t a clue about the property market.[/quote]

I’m sorry but when the fcuk did I say I was an expert in the property market! I basically said that I have no convidence in the property market and that some developers/property investors are throwing in extras to sell houses (i.e. Adamstown). I was just stating the truth! How can anybody argue over MY convidence in the property market, I’m not going to buy a 300k house if I feel there’s a chance it will drop in price.

For the record I agree with you on sensational reporting, I hate the likes of David McWilliams and Matt Cooper when he starts talking economics, because they and other economists are very much responsible for consumer convidence and they are destroying it with their bleak outlook. However if their outlook comes true, then the banks are fecked! Yes none of this board believe the crap they come out with, but the majority of idiot Joe Soaps believe it and they after all are the holders of banks profits. It’s alright for everybody on TFK to say “Dave McWilliams, your talking balls”, at the end of the day the majority of Joe Soaps are buying into it, fact!

In relation to property investors, I never said that it wasn’t a good time for buying houses and then renting them out, I only stated that investors are finding it hard to sell, recent falls in house prices in certain areas back that point up. Obviously if more people are renting then selling, that means less mortgages thus less mortgage intrest for banks then in previous years.

Funny enough, I agree with most of your points appendage!

I’ve never lost money on the ISEQ Elan and First Active have been my best investments to date. At this moment in time though my savings are in an internet deposit account earning a crappy intrest rate, I have no convidence in the Irish market at the moment. I am watching Aer Lingus and Independent News closely though.

16

I’m sorry ben.

Been in a bit of a farmer-like mood lately, and unlike him I’m not big enough to get over my foul humours easily.

17

Ben what are you on about?

How the fuck is David McWilliams responsible for the state of the economy you madhead? What exactly is this ‘‘bleak outlook’’ you’re on about that you seem to disagree with??

Considering you just said you yourself have no confidence in the housing market? Are you one of the majority of Joe Soaps buying into it?

I don’t know why you seem to think its an economist’s duty to uphold confidence in an economy thats over reliant on an overinflated property market.

18

That does surprise me. I read that they appeased the markets on these fears before Christmas when there were all those rumours about them, but at the same time I would have presumed that they still relied the heaviest on the capital markets. Is this due to the high levels of Anglo’s deposits or the high level of AIB/BOI’s lending? Presumably AIB/BOI have a large multiple of Anglo’s depositors (thought they had something like 80% of the current account market between them), so Anglo must have some whopping deposits. How did they entice these?

19

High level of Anglo deposits. They’re all corporate deposits as opposed to AIB/BOI being mostly retail so instead of Tom & Mary leaving 3/4k with AIB, you have Fats Ltd leaving 200k with Anglo. A lot of it comes from the US & UK where they’ve undergone some aggressive marketing to gain a foothold and also a lot is tied in to their aggressive lending practices here as in the big property heads would be offered fairly competitve rates on deposits when Anglo are giving them 100% finance on developing 2 million shitty apartments in north Dublin. I suppose it can act as a kind of insurance aswell so it Liam Carroll’s business goes belly up, Anglo have a couple of million of his cash on deposit.

20

Interesting piece in today’s Post about other possible consequences of the low share prices;

http://www.thepost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=29725-qqqx=1.asp