BANK OF IRELAND SEEING PRESSURE ON ITS NET INTEREST MARGINS - Bank of Ireland published a trading update ahead of its annual general court - its term for annual general meeting - at UCD later this morning. As one might expect, the statement is far up from upbeat, although the bank says it sees no reason at this stage to raise its impairment charge for the next three years from the predicted €6 billion.
The head of research at Dolmen Stockbrokers, Oliver Gilvarry, says that Bank of Ireland has admitted that its deposit books - on a constant currency basis - have declined slightly and it is starting to see increased competition for deposits. This has negatively impacted its net interest margin. He says problems arise for banks when their net interest margin falls as it affects profitability. The further it falls, the more negative the impact on the bank's bottom line. The analyst says the key thing for Irish banks is to keep their pre-provision profits as high as possible so as to absorb the losses coming through from the bad loans and the cut they will have to take when they transfer that debt to NAMA.
Mr Gilvarry says the news that Bank of Ireland has managed to raise €3 billion in term funding is positive - this is wholesale funding for periods greater than one year. The bank has also lengthened the profile of its wholesale funding with over 30% of its overall wholesale funding having maturities of over one year at the end of June. This compares to 27% at the end of March.
ROGUE OIL TRADER PUSHED PRICES UP OVER $2 - In London this morning, the story is emerging of unauthorised trading in the early hours of Tuesday morning which sent the international price of oil more than $2 a barrel higher and left an oil brokerage nursing a $10m loss.
Justin Urquhart Stewart, of Seven Investment Management in London, says that during the wee hours of Monday night, a London-based trader was able to carry out some huge trades, which were equivalent to about double the daily production of the oil from Saudi Arabia. The positions had to be squared off almost immediately with the result being some severe losses for the company concerned - PVM Oil Futures. He says that normally traders can not go beyond a certain level at a certain time. He says that how the big trades went through and how they went through at some 'odd' times will have to be thoroughly examined.
MORNING BRIEFS - Building materials group Grafton says it continues to experience the most challenging trading conditions in decades. In a trading update today, the group says its profitability has been impacted severely by the ongoing lack of credit and depressed markets, which have resulted in sharp falls in investment and spending on housing and DIY.
*** On the currency markets, the euro is worth $1.4014 and 85.35 pence sterling.