Irish Banks, No Efficient Market Theory Applies (IRE, AIB)

The Bank of Ireland (NYSE: IRE) and Allied Irish Banks plc (NYSE: AIB) are back out of favor.  After huge gains off their recent lows, the Irish banks are lower again this morning following the European Central Bank’s efforts on Friday where the central bank was reportedly buying short-term Irish government debt.

Last week was when Ireland received approval from the European Commission for additional capital of 10 billion Euros for the state-owned Anglo Irish Bank, and that is on top of the 14.3 billion that the government has already put into it.

The latest earnings reports at the Irish banks were poor, something which the market should have taken into consideration.  It seems that those stress tests that we all agreed were watered down had no real meat to them after all.

European banks have been weak in general, but for now the pain continues. The Bank of Ireland is indicated down over 4% around $3.90 per ADR while Allied Irish Banks plc is indicated down less than 2% around $2.14.  The 52-week low in AIB is down at $2.06, which means one more day of bad headlines and the bank is trading at fresh 52-week lows all over again.

Some day the markets may learn to adequately price in the headlines.  So much for the efficient market theory.

JON C. OGG