Irish Life suspends shares in nationalization fear

AP News
Posted: Mar 30, 2011 7:03 AM
Irish Life suspends shares in nationalization fear

Irish Life & Permanent withdrew its shares from Irish and British stock exchanges Wednesday amid speculation that the bank faces imminent nationalization.

The move, announced a day after Irish Life & Permanent shares plunged 46 percent to less than euro0.41 ($0.58), followed media reports that Ireland's government will be required to inject vast sums into the company after new stress-test findings on four Irish banks are published Thursday.

In a statement, Irish Life & Permanent said the speculation of an imminent bailout and nationalization meant its shares must be withdrawn from trade until the Irish Central Bank unveils the stress-test findings.

The company said it expected dealing in its shares to resume Friday. It cautioned that the stress-test findings "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."

Irish Life & Permanent is Ireland's biggest provider of residential mortgages and private pensions. It is the only one of Ireland's six domestically owned banks that has avoided taking government bailouts since 2008, when Ireland's long-booming property market imploded under the weight of the global credit crisis. Unlike the other five banks, Irish Life avoided lending huge sums to property developers.

Its insurance arm, Irish Life, is profitable and strong, but its banking arm, Permanent TSB, is crippled by its overwhelming dependence on residential mortgage lending in Ireland. Most of those mortgage products offer returns lower than the bank's own bloated borrowing costs. Its volume of loans is double that of its deposits, the worst ratio of the six banks.

Irish broadcaster RTE reported that the stress test on Irish Life & Permanent would reveal a need for immediate capital of euro600 million to euro1.2 billion ($850 million to $1.7 billion). The Irish Times newspaper said Irish Life would need more than euro2 billion.

Following Tuesday's share plunge, the market values Irish Life & Permanent at just euro110 million.

Overall, analysts expect the bailout bill of Ireland's six banks to rise following Thursday's stress-test results and to top euro80 billion. Ireland last year estimated the losses would be capped at a maximum of euro54 billion.