Unluck of the Irish Banks

A few years ago The Republic of Ireland had one of the fastest growing economies in Europe. Then growth slowed and in the past two years or so the Irish economy stagnated and growth came to a standstill.

Irish stocks have been hit pretty hard as well in 2008 – especially the banks. As of market close today, the Bank of Ireland (IRE) is down an incredible 92.11%, Allied Irish Banks (AIB) is down 89.79% and Anglo Irish Bank (AGIBY) is trading at a $0.20 (yes thats right its just 20 cents) a share from much higher levels in the beginning of the year.

On Dec 22, the Government of Ireland announced capital infusions into the three banks amounting to 5.5 Billon Euros. As per the plan, the government will invest:

2.0 Bil. Euros each in IRE and AIB


take a 75% stake in Anglo Irish Bank – effectively nationalizing it.

The above data clearly shows that the supposedly safe Ireland banks were not immune to the global slowdown. A while ago Irish banks and banks from other European countries boasted that they had no or little exposure to the sub-prime crisis in the USA. That did prevent them from falling since their domestic markets cratered. Residential, Commercial Property loans went bad just like in the US.

The closed-end fund “The New Ireland Fund” (IRL) is also down over 75% this year.

So investors interesting in gaining some exposure may want to wait for a while before investing in Irish stocks. In addition to the world economy getting back on its feet, one has to monitor the domestic economy especially he housing sector.


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