Irish Bank Pressures Mounting on Politics (AIB, IRE)

Irish banks are not newly in trouble, but fresh pressure is only going to further mount pressure on an already battered sector.  On Sunday, Ireland’s main opposition party reportedly said that it will not back next month’s budget on the table.  The move may further limit an unstable coalition’s odds of passing harsh austerity measures as the majority may not be able to carry the vote.  This is taking a toll on Allied Irish Banks plc (NYSE: AIB) and on Bank of Ireland (NYSE: IRE).

Allied Irish Banks plc (NYSE: AIB) and on Bank of Ireland (NYSE: IRE) were both trading lower in overseas trading.  The trend is continuing here.  Ireland was not so long ago considered one of the greatest opportunities in investing, land, and commerce opportunities.  It is becoming, and some would argue already is, the riskiest bet in Europe today.

Bank of Ireland shares are down about 14% at $2.22 in active pre-market trading volume of nearly 1 million shares after a $2.58 close on Friday.  Keep in mind that this is a fresh 52-week low if it holds as the 52-week trading range is $2.42 to $12.96.

Allied Irish Banks is actually down less by 8.4% at $0.76 versus an $0.83 close on Friday.  Its problems are worse currently as far as a U.S.-listing is concerned.  That sub-$1.00 level will now be the case for a fifth day, and ultimately its listing standards in the U.S. will come up for question.  This also marks a 52-week and multi-year low as the prior range is $0.80 to $6.31.

This is a classic example of a no-win situation.  When it comes to austerity measures, it is always a good idea in theory and very hard to enact in politics.  Who wants their pension, retirement, insurance, and/or wages cut?  Everyone, as long as it is someone else…  Ongoing debt concerns and taxation issues are also weighing, something which just is not going to go away suddenly.  Yet the flip-side is that without austerity measures there can be no certain future.

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JON C. OGG