Opening Up Irish Bank & Country Books (IRE, AIB, IRL)

The end of this week and next week will be an interesting period for the Irish banks and for the country of Ireland.  Officials from the European Union, the European Central Bank, and even the International Monetary Fund are expected to show up in Ireland on Thursday to look on-site as to just how dire the situation is inside Ireland’s banks and to look at the country’s finances.  The problem today is that Ireland keeps insisting that it does not want a bailout.  Its claims to have ample capital funding to run through mid-2011.  At issue is that there is no breathing room and any further credit spread widening will make the situation only that much worse.  Furthermore, there is probably still much to find out about all of the loans and finances on the books of the major banks.

We are so far seeing a mixed reaction in the Irish bank trading in ADRs today.  The Bank of Ireland (NYSE: IRE) is down 3.9% at $2.22 and Allied Irish Banks plc (NYSE: AIB) is up 4.5% at $1.15.  Perhaps the thought is that things might be worse at the less-bad bank and less-bad at the lowest bank of the two.  The quote in local terms in Ireland shows Allied Irish Banks up closer to 2% and the Bank of Ireland shows that it is up 1.5%.  A fund for U.S. investors is The New Ireland Fund, Inc. (NYSE: IRL) and its gain of 35 to $6.52 is taking it off of yesterday’s lows.  Its 52-week range is $5.55 to $7.91 and it trades only about 25,000 shares a day.

This is likely yet one more aim to prevent the focus on the PIIGS spreading like wildfire to Greece, Portugal, and Spain.  There is a real risk here that is impossible to ignore even if this formal inspection is the right thing to do.  The problem is no different than the joke about grandma and grandpa walking bare through the house at Christmas; the family is suddenly not too happy about where they came from.

Ireland is in the midst of major austerity cuts and officials from Ireland and the E.U are trying to stabilize the Irish banks.  The goal, outside of saving everyone and putting huge pressure on the E.U. and particularly the PIIGS, is to restore Eurozone confidence.  While The United Kingdom is not a part of the Euro, the Brits have offered help as well.  Ireland has maintained that it does not want a bailout.  The country seems leery of the IMF aid because the constraints that can be attached.

Peeling onions usually leads to crying.  There is a good chance that we’ll get to know very soon just how strong the onions are in Ireland.  Unfortunately, potato analogies are too hard to come by.

JON C. OGG