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Shares in Irish banks rose in early trading after the Government yesterday revealed its plans to buy €54bn of bad loans from the banks under the National Asset Management Agency.

The Dáil will resume its debate on the legislation setting up the National Asset Management Agency at 10.30am.



Shares in AIB were up 29% in the first 20 minutes of trade in Dublin this morning, to stand at €3.40.

Bank of Ireland shares gained almost 17% to stand at €3.35 as investors reacted to the NAMA plan.

Shares in Bank of Ireland and AIB also made significant gains on US stock markets.

Government figures show the National Asset Management Agency plan will require significant capital injections for some financial institutions.

Many commentators had feared that NAMA could be soft on the banks.

However, the initial reaction from stockbrokers indicates the discounts on loans are more extreme than they would have expected.

Last night AIB said it would require an additional €2bn of capital.

It will try to raise that money by selling assets or raising it from investors, otherwise the capital will have come from the State.

AIB said its average discount on loans sold to NAMA would be less the 30%.

At midday, Bank of Ireland will release a statement on its position. However, its discount on loans is also expected to be less than 30%.

The discounts for Anglo Irish Bank and Irish Nationwide are calculated to be well in excess of 30%.

For Anglo that means more taxpayers’ money will be needed in the State owned bank.

Yesterday Minister for Finance Brian Lenihan said most of the loans will have been valued and transferred to NAMA by the middle of next year.

€54bn is to be paid for loans with a book value of €77bn – a discount of almost 30%.

Speaking on RTÉ’s Morning Ireland, Minister Lenihan said the return on property in Dublin was now at an all-time high because values had fallen so much.

He said this was clear evidence that Ireland was at the bottom of the cycle.

He admitted that the market was distressed, but defended paying €7bn more than the loans are worth, saying NAMA would not be selling these loans at market value.

He also rejected criticism of funds coming from the EU owned bank.

The Taoiseach has described the plan as a bold move, but Opposition parties described NAMA as an enormous gamble that will mortgage the future of taxpayers for decades.

see more: http://www.rte.ie/news/2009/0917/banks.html