abcde_98

Allied Irish: Too Good to Be True?

Well, i missed it, but Ireland just nationalized the weakest of the major banks
www.forbes.com/2009/01...

Apparently MotleyFool is high on this one, but how many of the MF "analysts" have worked for a financial services entity and dealt with regulatory issues?? i say that, because i have... and although that is of some value (yes, i like to maintain humility), we are in rather unprecedented times. And governments are getting very involved, which brings in national politics, reputation, financial soundness, reputation, "optics", credibility, etc etc etc. Gov'ts are a somewhat wildcard and to bet whether this or that government action takes place, well i'd rather bet on what i can control or assess/analyze.

Really, in the short run, i do not believe that AIB is a candidate for nationalization. Hopefully the gov't's nationalization puts the other operation into a "run-out" mode (aka, scale it down, don;t underwrite new customers, etc).

Irish zone of 4m people does not need three large banks. Yes, AIB has business elsewhere, but it would be good under this nationalization to remove one of large oligopolistic entities... yes, that makes it more monopolistic, but perhaps newer entrants/smaller enterprises fulfill consumer needs better than than larger incumbents.

I might now just go long.

Allied Irish: Too Good to Be True?

Only a few minutes here, more comments could follow (read Yahoo msg board also).

1. Historic norms... pretty much put those out the window, this is a substantial event that has not been seen in several decades/generations.

2. Conservative mgmt... to what extent did they enter into insurance-linked notes/securitizations? are these traditional/conservati... banking products/business?

3. M&T bank... what does it have on its books? it's price is starting to decline now (& AIB's started to increase)

4. Gov't ownership & dividends ...
(a) as the ECB interest rates, local country interest rates, start to drop, paying that fixed 8% becomes more onerous.
(b) how does a government with relatively lower GDP (and no separate currency so it cannot print new money) guarantee the banks who have rather greater assets? maybe ireland gets downgraded ?

5. Interest spreads.... as interest rates decline closer and closer to 0, the net spread (i.earnings rate - i.borrowing cost) shrinks.

6. Dell alone counts for a material % contribution to GDP and it's moving its manufacturing out of Ireland. Waterford crystal in bankruptcy. Other we haven't heard about?? Immigrant workers (eg. the Polish, construction/infrastru... workers) returning to their home countries means less persons consuming in the economy, from groceries to renting flats, etc.

7. Does AIB have operations in other European countries which have their own currency? Most of those country's currencies have tanked.

Some comments, more later, time permitting