Bank of Ireland shares increase

Bank of Ireland shares have jumped on hopes the government will not have to take a majority stake in the firm.

Shares in the bank rose more than 33%, a day after the results of the stress test on the Irish banking system were announced.

The tests found the country’s banks will need an extra 24bn euros (£21.2bn) to survive the financial crisis.

Bank of Ireland said it would be able to meet its capital requirements and thus remain independent.

However, shares in Irish Life & Permanent fell 65% in early trading.

“It seems very likely that the government will end up owning a majority stake in Irish Life & Permanent,” said Emer Lang, banking analyst with the stockbrokers Davy’s in Dublin.

Capital requirements

Bank of Ireland has been ordered to raise 5.2bn euros ($7.4bn; £4.6bn) by early summer to meet capital requirements. The bank said it would do so.

“It has potential to raise some of that through further debt management,” said Ms Lang, adding that some of the rest might come from existing shareholders, thus minimising the government’s involvement.

The Irish Republic’s government currently owns a 36% stake in Bank of Ireland. Investors hope it will keep its stake below 50%.

“The Bank of Ireland has at least a fighting chance of maintaining its independence,” said Ms Lang.

“It has three months to keep itself out of the government’s hands.”

Irish Life & Permanent has to raise 4bn euros. Ms Lang said it should be able to raise 1.1bn from its life business and from debt management, but that it would struggle to raise the remaining 2.9bn.

Shares in Allied Irish Banks initially fell 15%, but soon bounced back and rose. The bank is already majority-owned by the government, and the state’s stake might be raised, said Ms Lang.