JC Flowers Looks at Irish Banks

The Irish government is in talks with private investors from outside the country about a plan to inject fresh capital into the nation’s major banks.

A report in the Irish Times suggested that JC Flowers might be one of the financial groups interested in backing one or more of the lenders, with Anglo Irish Bank singled out as the most likely target. The news sent Anglo Irish Bank’s shares up €0.26, or 31.7%, to €1.08, reversing yesterday’s 25% fall.

Yesterday Taoiseach Brian Cowen said his government was considering various ways of bolsetering the capital ratios of Irish lenders, including a possible recapitalisation of the sector.

In October he controversially said the government would guarantee all deposits in six notable Irish financial institutions for two years, sparking controversy across Europe becuase of this unilateral approach.

However, over the past fortnight shares in the Irish banks have fallen sharply on fears a government sponsored recapitalisation programme might still be necessary. Anglo Irish Bank for instance has seen its share price drop by two thirds in that period.

Yesterday Cowen told the Dail: “Business plans and capital ratios are being investigated and the whole question of liquidity is being looked at in the Irish banking system at the behest of the financial regulator and the central bank.”

He added: “That work is very much advanced at this stage, and reports to the minister (of finance Brian Lenihan) will be imminent. I think it is important that we act on the up to date information.

“The government stands ready to make decisions which are in the interests of the Irish economy and Irish business and to look at all options”.

Accountant PricewaterhouseCoopers has also filed an audit report with the Irish financial regulator on the loan books of the Irish institutions covered by the Irish deposit guarantee scheme.

Flowers might also invest in the Bank of Ireland. European and Middle Eastern investors are also thought to be keen to invest in the sector. Sandler O’Neill, a US investment bank, is acting on behalf of one proposed investor. One local stockbroker suggested the banks might have to raise up to €13bn.

Source: Thomson Merger News