MORE THAN €1.8 billion was wiped from the value of Ireland's largest financial institutions yesterday as stocks suffered their worst losses for 15 years after Bank of Ireland said the economic downturn continues to erode its profits.
The combined value of Irish bank shares dropped 9.53 per cent to €17.42 billion, implying a loss of €42 billion since the market in Dublin reached its peak in February 2007.
Irish bank shares have been on a downward slide for most of this year, amid doubts over the sustainability of their profits and the credit crunch in global market which has cut the value of many international institutions. Although many Irish analysts say current share values do not fairly reflect the banks' prospects, they continue to lose value.
As Bank of Ireland became the first big Irish lender to pass on to its customers the interest rate increase introduced last week by the European Central Bank, Irish Life Permanent acknowledged that it was preparing to follow suit. Similar moves by other lenders are likely.
Minister for Finance Brian Lenihan said yesterday that any formal proposal from the bank sector for a scheme in which the State would support liquidity in the first-time mortgage market would be examined "on its merits" by his department.
"There is no such scheme under examination by the Government at the moment. The possibility of such a scheme has been ventilated in some banking circles, and I understand that they are preparing a proposal along those lines."
Irish Life Permanent dropped over 13 per cent to €4.65. Bank of Ireland closed down almost 11 per cent at €4.51. AIB was down almost 10 per cent at €8.10.
Anglo Irish Bank dropped 7 per cent to €5.09.
