Bloomberg News

Irish Banks Gain as Parliament Debates Guarantee Deal

October 01, 2008

Irish financials gained for a second day, led by Irish Life and Permanent Plc, as the parliament in Dublin continued to debate a plan to guarantee the deposits and borrowing of six lenders.

The ISEF Index (ISEF) of financial stocks rose 6.3 percent to 4382.82 in Dublin as Anglo Irish, the third-biggest lender, gained 8 percent.

The Irish parliament will vote today on a package that covers the liabilities of Allied Irish Banks Plc (ALBK), Bank of Ireland Plc, Anglo Irish Bank Corp. Plc, Irish Life, Irish Nationwide Building Society and the Educational Building Society. The measures were announced by Finance Minister Brian Lenihan yesterday to help the banks secure cheaper funding amid the freeze in credit markets.

``It is certain to significantly relieve the immediate crisis whereby Irish banks have been seeing the cost and availability of funding getting progressively more restrictive,'' Bernard McAlinden, head of equity research at NCB Stockbrokers in Dublin, wrote in a research note today.

Irish Life added 19 percent to 5.51 euros. Allied Irish, the country's lender biggest by market value, gained 1.7 percent to 6 euros, Bank of Ireland rose 8.8 percent to 4.30 euros and Anglo Irish advanced 9 percent to 4.30 euros.

Merrion Stockbrokers today raised its recommendation on three of the banks covered by the guarantee. Merrion raised Allied Irish to `Buy' from `Reduce', Irish Life to `Buy' from `Hold' and Bank of Ireland to `Hold' from `Reduce'.

``Clearly, the net impact will be an improved cost of funding for the banks, and more importantly, availability of funding in the near term,'' Merrion analyst Sebastian Orsi wrote in a research note today.

``We can borrow more cheaply now because we have the benefit of an Irish government guarantee,'' Denis Casey, chief executive of Irish Life & Permanent, told state broadcaster RTE today.

To contact the reporter on this story: Ian Guider in Dublin at iguider@bloomberg.net.

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net.


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