LOAN TRANSFERS to the National Asset Management Agency (Nama) could be delayed until next year, Minister for Finance Brian Lenihan said yesterday, confirming investors’ fears after a massive fall in the bank share prices.
In what was the worst day for Irish bank stocks since the collapse of Lehman Brothers, Bank of Ireland’s share price plunged 25 per cent. AIB fell as much as 26 per cent in trading, before ending yesterday’s session down 12 per cent on the previous day.
The Nama delay and fall in share prices will make it more difficult for the two banks to raise their own capital from stock market investors, which they had been planning to do before the end of the year.
Both banks had hoped to raise private funds on the market to reduce the State’s indirect 25 per cent shareholding by the December 31st deadline stated in the terms of the bailout they received earlier this year.
However, it now seems increasingly unlikely that the banks will be able to raise capital through market sources, heightening the possibility that the Government will own 25 per cent of each bank when the transfers of bank debt to Nama begin.
The banks’ share prices are now lower than they were when the Nama Bill was published, when the plan to cleanse the banks of €77 billion in risky commercial property loans restored investor confidence.
Mr Lenihan told the Dáil Finance Committee yesterday that the protracted debate on the Nama Bill could delay the transfer of loans to the agency.
Speaking on the committee stage debate of the Bill, he said the business plan for Nama had envisaged that a sizeable amount of the work would start by Christmas.
“That time limit could easily slip into January at the rate we are proceeding,” said the Minister.
Last night Green Party chairman Senator Dan Boyle said delays to the enactment of Nama could result in further state intervention in the banking sector.
Mr Boyle said: “The probability or likelihood of increased capitalisation of the banks is the only option that’s left after Nama; it has to be considered a very real possibility.”
Mr Boyle also said that the Government had little reason to fear the spectre of EU sanctions over state aid for banks, as Nama has already received approval from the European Commission.
“The Nama project had to go to the approval of the European Central Bank in any case, and the experience of other European countries in terms of bank recapitalisation has probably shown more of their state assets given directly to more of their financial institutions with less controls than Nama,” he said.
Investors with shares in the Irish banks rushed to sell their holdings yesterday, with the performance of the banks dragging down the value of other Irish stocks.
Investors decided it was “get out of Ireland day”, according to one Dublin-based share dealer.
Overall, the Iseq index closed down 6.5 per cent, worse than the performances of other European stock markets on a weak day.
“We haven’t had a day as bad as this since the Lehman Brothers collapse last year,” one dealer said.
A number of traders said it was difficult to say exactly what triggered the sharp decline, but that news Nama may not commence its work for a number of months may well have spooked the market.
It has been a momentous week for the European banking sector, with a European Commission ruling earlier this week forcing Dutch bank ING to split in two.
Yesterday, the commission approved a radical restructuring of Northern Rock, in effect allowing the British government to split the nationalised lender into a “good bank” and a “bad bank”.
Fine Gael finance spokesman Richard Bruton said the new model for Northern Rock mirrored his party’s proposals to sort out the Irish banking system.
