THE LEVEL of demand for Bank of Ireland stock from institutional investors bodes well for Ireland Inc, according to analysts.

The €500 million private placement by Bank of Ireland has been significantly oversubscribed, with orders for between three and four times the number of shares on offer received from a mixture of Irish and international institutional investors.

The shares will be placed with investors at a price of €1.53, a 15 per cent discount on last Friday’s closing price of €1.80.

“To a certain extent it is a vote on the Irish economy, as much as Bank of Ireland’s prospects,” said Kevin McConnell, head of equity research at Bloxham stockbrokers.

Banks are inextricably linked with the prospects of the economy, he said, so the stabilisation in the “domestic picture” over the last few months “partly facilitated” the private placement deal.

Institutional investors would be very unlikely to invest in Bank of Ireland unless they believed the economy had reached a point of stabilisation and recovery, he added.

According to Mr McConnell, about half of the funds the bank will raise through the various proposals unveiled yesterday will come from the private market, which is “extremely positive”, as it indicates the bank is moving away from Government dependency.

“It is a visible sign that we’re seeing demand for bank paper beyond the Government,” he said.

According to Ciarán Callaghan, banking analyst with NCB stockbrokers, it would have been very difficult for an Irish institution to carry out fundraising of this nature six months ago.

“Six months or a year ago, very few international investors were interested in the Irish Stock Exchange, never mind Irish banking stocks. The were considered way too risky,” he said.

“Now they’re coming back onto the . . . register for investors and they are interested in the Irish situation, which is definitely a positive,” he said.

Institutional investors are looking at the Irish situation and, while it is still in the “depths of recession”, they are now seeing some light at the end of the tunnel, he added.

“If they get this recapitalisation under their belt, which they will, it bodes well for the Irish financial sector and the Irish economy as well.”

Commentators also predicted that the level of investor interest in Bank of Ireland’s proposals would have a positive knock-on effect for AIB when it follows suit, although this may not happen for some time.

A stockbroker reported that Bank of Ireland’s capital-raising plans were positively received, particularly among US investors. After faltering in early trade, the bank’s share price jumped by more than 6 per cent, or 11 cent, to close last night at €1.91 – its highest price in over five months.

The details of the bank’s proposals were released just after 7am yesterday, and it took some time for investors to absorb the details, a broker explained.

However, once it became apparent that the private placing had been very well subscribed, and that shares sold in that placing cannot be traded until May 22nd (and so cannot be sold immediately), the stock began to move upwards.

Minister for Finance Brian Lenihan said yesterday that the level of private sector investment was “tangible evidence of the growing international and domestic confidence both in Bank of Ireland and our economy”.

A spokeswoman for the bank said the oversubscription of the private placement was a very strong endorsement of the “recovery play” both in the bank and in Ireland.