I'm eagerly waiting tomorrow's Irish stress test results, which might be a major turning point for risk takers, banks, speculators who might discover that there are inherent risks when you lend money, or buy shares. It might also be a turning point for the Euro, which is trading close to multi-year high against the USD for no reason except exuberances and irrationality of the markets.
In my opinion, tomorrow the Irish government will have to seize control of all the remaining banks which are still not nationalized, it will also — hopefully — force lenders to take losses on their bonds, and why not tell the IMF and EU that they won't their poisonous help, and will default on their own debt. That would be the best course of action for the Irish people. Not only for the current generation, but also for the next to come.
Basically, tomorrow could provide the catalyst that the 3 remaining bears on the planet have been waiting for.
Of course, the market could also rally 2% to celebrate the fact that banks are being nationalised or because the rescue package will be lower than estimated, say 26 billion instead of 27. That wouldn't surprise me at all!
Here are a few headlines from Bloomberg and the associates quotes follow:
- Irish Stress Tests May Leave Government in Control of All Country's Banks
- Irish Life Seeks Share Trading Suspension Before Stress Tests
- Irish Life Said to Weigh Sale of Life, Asset Management Units
- Ireland Seeks to Force Losses on Banks’ Senior Bondholders
- Ireland Wants Bondholders to Share Bank Burden, Minister Says
- Irish Banks May Need 27.5 Billion Euros More Aid, Analysts Say
March 30 (Bloomberg) The Irish government may be forced to take controlling stakes in Bank of Ireland Plc and Irish Life & Permanent Plc, the last of the country’s biggest lenders to escape state control, following tomorrow’s stress tests.Irish Life Seeks Share Trading Suspension Before Stress Tests
“They’ve clearly got most to lose,” said Oliver Gilvarry, head of research at Dublin-based Dolmen Securities, who has “sell” rating on both banks. “It’s difficult to see how either will end up less than 50 percent owned by taxpayers.”
The Irish Central Bank will at 4:30 p.m. tomorrow publish its third round of stress tests. The results will determine if the two can avoid joining four of the country’s biggest banks in majority state ownership after they all logged record losses as the country’s decade-long real estate bubble burst.
Ireland may require banks to raise an additional 27.5 billion euros ($39 billion) of capital, according to the median estimate of 10 analysts surveyed by Bloomberg News. The government has pledged to provide that money if banks fail to raise it themselves from a 35 billion-euro fund set up under the country’s international bailout in November. Shares of the two lenders have declined by more than 50 percent since that rescue.
Irish Life, whose shares fell 45 percent in Dublin trading yesterday to 40 euro cents, has sought a temporary suspension in trading in its stock until April 1, after the results of stress tests are revealed, it said in a statement today. The assessment is “not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalized,” it said.
Bank of Ireland’s shares fell as much as 2.4 euro cents, or 9.7 percent, in Dublin trading to 22.3 cents, marking its lowest level since March 17, 2009. They were down 8.9 percent at 22.5 cents at 8:39 a.m.
[...]
The government has already taken control of Anglo Irish Bank Corp., Allied Irish Banks Plc (ALBK), EBS Building Society and Irish Nationwide Building Society after injecting 46.3 billion euros into the industry over two years.
Niall O’Connor, a London-based analyst at Credit Suisse Group AG, expects the government to take a stake of about 60 percent in Bank of Ireland, the country’s biggest lender.
[...]
Even before the latest stress tests, the regulator ordered Bank of Ireland, already 36 percent state-owned, to raise about 1.4 billion euros, more than its market value of 1.3 billion euros today.
Irish Life, the only government-guaranteed lender to avoid a bailout so far, was ordered to raise 243 million euros in November. That’s now equivalent to twice its market value today.
The Dublin-based company may require more than 1 billion euros to allow its banking unit to operate without support from the company’s life and pension operations, Eamonn Hughes, an analyst with Dublin-based securities firm Goodbody Stockbrokers, said in a note to clients yesterday. The stress tests “may drive this base figure higher again,” he said.
Both Bank of Ireland and Irish Life, the country’s largest life assurance and pensions company, will “fight hard” to avoid falling under government control, said James Forbes, director of investment solutions at Dublin-based securities firm Bloxham, which manages about 1 billion euros of assets.
[...]
March 30 (Bloomberg) Irish Life & Permanent Plc, the nation’s only government-guaranteed lender to avoid a bailout so far, sought a temporary suspension in trading in its shares until April 1, after the results of stress tests of the country’s lenders are revealed.Irish Life Said to Weigh Sale of Life, Asset Management Units
Shares in the Dublin-based lender plunged by 34 euro cent, or 45 percent, to 41 cents yesterday on concern that the state may be forced to take a majority stake in the company after the publication of the test results tomorrow.
Irish Life “notes the recent media comment” on its expected capital requirement after the assessment, the company said in a statement today. The tests “are not completed and the quantum of capital that may be required by the group, and the source of that capital, is not yet finalized,” it said.
The stress tests mark a third attempt in a year by Ireland, which has injected 46.3 billion euros ($65.2 billion) into its unprofitable lenders over the past two years, to assuage investor concern that loans will continue to sour. The main focus of this year’s tests is on home loan portfolios, after lenders were forced to sell 72.3 billion euros of risky commercial real-estate loans to the state last year at an average discount of 58 percent.
March 30 (Bloomberg) Irish Life & Permanent Plc, the nation’s only government-guaranteed financial company to avoid a bailout so far, is weighing the sale of its profitable life assurance and investment management units, according to three people familiar with the situation.Ireland Seeks to Force Losses on Banks’ Senior Bondholders
The government in Dublin is pushing for the sale of the two businesses to limit the amount of money it will need to inject into Irish Life’s unprofitable banking arm, said the people, who declined to be identified because a decision has not yet been made. The two units are worth a combined 1.75 billion euros ($2.46 billion), according to Eamonn Hughes, an analyst at Goodbody Stockbrokers in Dublin.
[...]
Shares in Irish Life, which traces its roots back to 1884, when a precursor to its banking arm was formed, have more than halved in value since Ireland applied for an international bailout for its banks and agreed to carry out the stress tests.
The tests examine how banks would manage bad loans and losses from forced asset sales. The results will be published by the central bank at 4:30 p.m. tomorrow.
Irish Life may require more than 1 billion euros to allow its banking unit to operate without support from the company’s life and pension operations, Hughes said in a note to clients yesterday. The stress tests “may drive this base figure higher again,” he said.
March 28 (Bloomberg) -- Ireland said it wants to impose losses on banks’ senior bondholders, increasing the pressure on European policy makers to cut the costs of its bailout and provide longer-term financing for the country’s lenders.Ireland Wants Bondholders to Share Bank Burden, Minister Says
[...]
“It’s perhaps a negotiation tactic to try to get a better deal out of Europe,” said Alan McQuaid, economist at Bloxham Stockbrokers. “They aren’t going to trade the corporation tax level, so they don’t have much else to negotiate with.”
[...]
Irish Prime Minister Enda Kenny said on March 25 that talks with the ECB on fixing the banks will resume after the stress tests are published, with the government pushing the ECB to create medium-term funding for Irish banks.
The ECB is considering Kenny’s request, the Irish Times reported on March 26, without citing anyone.
“Such a commitment will remove investors’ perception of a withdrawal of ECB support so that alternative private sector finance is more likely to be found,” Conall MacCoille, an analyst at Davy, the Dublin-based securities firm, wrote in a note today.
Irish-based lenders’ reliance on short-term ECB cash soared 38 percent to 116.9 billion euros in the year through February, while their dependence on the Irish central bank jumped almost fivefold to 70.1 billion euros.
[...]
The state has already injected about 46 billion euros into the financial system after it extended a guarantee in 2008 to cover almost all the liabilities of six of the country’s lenders. The government is winding down both Anglo Irish and Irish Nationwide. It has designated the remaining four -- Bank of Ireland, Allied Irish, Irish Life & Permanent Plc and EBS Building Society -- as viable banks and is stress-testing them.
[...]
“There are many people in Europe who want Ireland to give a guarantee to all of its bank creditors including senior bondholders and everybody else,” Coveney said. “The reality is if that guarantee undermines the very creditworthiness of the Irish state, then our government can’t sign up that.”
March 28 (Bloomberg) -- Ireland wants to share bank losses with senior bondholders as part of a “final solution” for the country’s debt-laden financial system, Agriculture Minister Simon Coveney said.Irish Banks May Need 27.5 Billion Euros More Aid, Analysts Say
March 25 (Bloomberg) -- Ireland’s government may have to inject an additional 27.5 billion euros ($39 billion) into the country’s banks after a third round of stress tests next week, according to a survey of analysts and economists.
That will exhaust about 80 percent of the 35 billion-euro fund set up last year in Ireland’s international bailout to shore up the country’s lenders, according to the median estimate of 10 analysts and economists surveyed by Bloomberg News.
Ireland, which has injected 46.3 billion euros into its banks over the past two years, will on March 31 publish the results of the tests, which examine how banks would manage bad loans and losses from forced asset sales. Matthew Elderfield, the country’s top financial regulator, pledged this week the assessment would be more “conservative” and transparent than the last two rounds. Irish banks still are still dependent on emergency central bank funding after their loan losses exceeded the estimates of previous stress tests.
“The numbers from the stress tests, if anything, are going to be too pessimistic, simply because they have to be in order to have any chance of the market believing them,” said Eoin Fahy, chief economist at Kleinwort Benson Investors Dublin Ltd., which has about 4 billion euros of assets under management. He estimates banks will need 22.5 billion euros.
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The Irish government set aside 35 billion euros of the 85 billion-euro international rescue package it received in November to prop up the country’s banks, which are grappling with soaring bad-loan losses following the implosion of a domestic real-estate bubble.
The stress-test figures “need to be credible and an initial recapitalization of up to 20 billion euros allows for a pretty pessimistic loan-loss scenario,” said Michael Cummins, a director at Glas Securities, a Dublin-based fixed-income firm. His estimate excludes losses from forced-asset sales, because he expects the Irish and European Union authorities will find a way to avoid fire sales.
“You are getting into dangerous territory if the total figure is much higher than that,” Cummins said. “The sovereign could be hit by further downgrades.”
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