Shares in AIB and Bank of Ireland have fallen by 19% and 14% respectively already this morning ahead of fears that the Irish Government will be forced to recapitalise both banks following the announcement of new capital rules and the announcement of the discount at which the state owned bad bank (NAMA) will buy distressed development loans from the banks.
Reports across several media outlets have speculated that the extent of discounts and of recapitalisation could far exceed initial estimates, but Misnister for Finance, Brian Lenihan, has refused to confirm any speculation ahead of official announcements in the first half of this week.
The extent of the recapitalisation is likely to significantly dilute existing shareholders’ stakes in the banks and a sell-off this morning has resulted.
The share price of Allied Irish Bank (AIB), Ireland‘s largest Bank dipped below €2 in early trading this morning with a slight rally later but a sharp drop again after lunch.
As I write, it has dropped again to just above the €2 mark:
AIB Price Nov 20 08
This follows hot on the heels of Bank of Ireland (BOI) falling below the landmark €1 mark on Monday of this week after their announcement that they were completely cancelling their dividend payment policy. This was followed by Anglo Irish bank falling below €1 yesterday.
AIB shares have fallen over 90% in value since the peak in early 2007. If they are to fall below the €1 it would mark almost complete wipeout for the Irish banking sector in just a few months.