Banks: The Minister for Finance's decision to abolish the €100 million a year bank levy introduced in 2002 is good news for Irish financial institutions and will boost profits. The Government has collected €300 million through the levy which was due to end at the end of this year.
Shares in the Irish banks are expected to appreciate on the back of this news as analysts raise their profit forecasts. Bank shares edged higher towards the close of the Dublin stock market yesterday as the ending of the levy became evident.
Brokers have been upgrading their earnings forecasts for the four listed Irish banking groups, AIB, Bank of Ireland, Anglo Irish Bank and Irish Life and Permanent, on the expectation that the levy would be abolished.
Irish Life & Permanent is to be the principal beneficiary from the move, according to NCB, which expects the levy's removal to boost previous profit projections by 3.5 per cent, to 137.5 cent per share.
The broker expects AIB, which pays the most significant sum annually under the levy (€ 30 million) to report earnings per share of 158.5 cent next year, 3.3 per cent ahead of previous guidance.
Bank of Ireland will see a 1.9 per cent benefit from the levy's removal to report profits of 140.9 cent per share in the 12 months to the end of March 2007.
Anglo Irish Bank, which pays just € 5 million a year towards the levy, can expect to see a 0.8 per cent increase in earnings per share from previous guidance to 80.2 cent, NCB says.
Meanwhile, Mr Cowen said he was encouraged by the initial reaction of the banking community to his invitation to participate in a social finance initiative to enhance the availability of loan finance for social and development projects in local communities. In his speech the Minister said he was looking to the banks contributing both seed funding and their expertise to support the practical delivery of this initiative. "I intend to keep the door open also for other sectors and indeed private individuals to participate," he said.
Mr Cowen said the banks have indicated that they were willing to discuss how this initiative can be successfully advanced. He added that he will be asking other interested parties also to assist in developing an effective model.
In another measure of benefit to the financial services sector, the Minister abolished the 0.5 per cent companies capital duty with effect from yesterday at a cost of €16 million a year. Mr Cowen also promised measures in the finance bill to help the leasing sector which will allow them offset losses against a wider range of ancillary activities.
