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Irish Banks may have €6 billion of bad debts in residential property development.
Irish banks could have combined bad debts of over €6 billion in 2009 and 2010 according to Dresdner Kleinwort, and Bank of Ireland will have little option but to issue a scrip dividend instead of a cash payment to shareholders next year to shore their capital reserves as bad-debt losses soar.
Dresdner Kleinwort downgraded Bank of Ireland to sell from reduce and Allied Irish Banks to sell from hold yesterday. "Greatly increased concerns over residential developer exposure have led us to raise out provisions forecasts and reduce our earnings estimates by 25% to 50%," the broker said.
They added that both Bank of Ireland and Allied Irish Banks now look short on capital for 2009. However, Anglo Irish Bank still looks to have excess capital, the broker said, and remains its preferred play. Bank of Ireland shares fell 3.1%, Allied Irish Banks shares fell 1.2% and Anglo Irish Bank shares declined 2.3%.
Much the same process of price falls and transaction volume falls has been taking place in Ireland as the UK. The Bank of Ireland Chief Economist Dan McLaughlin commenting on the commercial property market, said "where the market is re-pricing capital values in response to increased economic uncertainty and the credit crunch, we now expect a 16% decline in total returns in 2008, taking yields above 5%.
McLaughlin continued,"Sentiment and expectations can change, but the current economic backdrop is clearly negative, given weak consumer confidence, a rise in unemployment and persistently high inflation, which is eroding real incomes. On a more positive note, inflation may have peaked, given the recent fall in oil prices and the market is now pricing a rate cut by the ECB in the first half of 2009, which would be positive for the market."
Dresdner Kleinwort downgraded Bank of Ireland to sell from reduce and Allied Irish Banks to sell from hold yesterday. "Greatly increased concerns over residential developer exposure have led us to raise out provisions forecasts and reduce our earnings estimates by 25% to 50%," the broker said.
They added that both Bank of Ireland and Allied Irish Banks now look short on capital for 2009. However, Anglo Irish Bank still looks to have excess capital, the broker said, and remains its preferred play. Bank of Ireland shares fell 3.1%, Allied Irish Banks shares fell 1.2% and Anglo Irish Bank shares declined 2.3%.
Much the same process of price falls and transaction volume falls has been taking place in Ireland as the UK. The Bank of Ireland Chief Economist Dan McLaughlin commenting on the commercial property market, said "where the market is re-pricing capital values in response to increased economic uncertainty and the credit crunch, we now expect a 16% decline in total returns in 2008, taking yields above 5%.
McLaughlin continued,"Sentiment and expectations can change, but the current economic backdrop is clearly negative, given weak consumer confidence, a rise in unemployment and persistently high inflation, which is eroding real incomes. On a more positive note, inflation may have peaked, given the recent fall in oil prices and the market is now pricing a rate cut by the ECB in the first half of 2009, which would be positive for the market."
Fri, 12th Sep 2008