Chris B

Irish Banks Continue Riding the Roller Coaster

If I was going to speculate on high-risk European banks, I'd probably buy National Bank of Greece (NBG) before AIB. The risk of government default is similar, but NBG has actual earnings at a single-digit PE, was not involved in a California-scale housing bubble as the Irish banks were, and has a better balance sheet. Future Irish writedowns are both unpredictable and inevitable and nationalization looms as an equity-destroying possibility.

Allied Irish: Too Good to Be True?

"the company made $5.98 in profit [per share] in fiscal 2007"

-and it is safe to say that every cent of that was lost two or three times in 2008!

"Furthermore, the company’s balance sheet shows a current tangible book value (excluding goodwill and other intangible assets) of about $25 per share!"

-and we must be careful not to confuse value with a delay in write-offs. Book value is usually price paid, not market value.

"Some estimates are telling of 50% loss in the value of housing in Ireland..." "But even in a worst case scenario, where AIB’s book of assets has to be written down 50%, the company’s book value per share would be more than double the current share price."

-The assets are mortgages, not the real estate itself, so the assets could depreciate much faster than the collateral. As any banker will tell you, the foreclosure and resale process is so expensive (over $50,000 in the US) that the eventual auction sale of the house only recovers a fraction of the amount loaned out. What are AIB's loans at nearly twice the current value of the real estate worth in a severe recession? Possibly much less than 50% of "book value."

Anglo Irish Bank Even Worse Off Than its Peers

Good analysis. Anglo is sitting there like a time bomb waiting to go off on the Irish / British economy. I wanted to get into AIB someday, but the fact that Anglo could crash at any moment gives me pause for now.

Ireland's Ailing Banking Sector

I am underwater on AIB. I bought it cheap and it got cheaper. Yet at a PE of something like 2, and at less than book value, I'll stay aboard. Low prices, after all, are not a good reason to sell anything.

A leading and profitable bank in one of the world's most educated and developed countries, with assets in Poland and the US that it could sell to raise emergency cash if ever needed, and with government backing of deposits that has caused a flood of deposits has got to be worth more than that.