QUESTION OF FAITH NOW FOR THE BANKS - NAMA is to pay €54 billion for €77 billion of property and land development loans at the five covered banks and building societies - Bank of Ireland, AIB, Irish Nationwide Building Society, the EBS and Anglo Irish Bank. Reaction to NAMA is mixed, but overnight in New York bank shares reacted well. NAMA will issue around €54 billion worth of bonds. Of this about 5%, or €2.7 billion, is likely to be in the form of subordinated debt where the ultimate payment will depend on the performance of NAMA assets. A note from Davy Stockbrokers says a critical point is that the Minister plans to give the banks a window in which to raise capital from the markets or through business disposals. AIB and Bank of Ireland are transferring to NAMA €24 billion and €16 billion respectively. AIB says it needs to raise €2 billion on its own. Davy says Bank of Ireland's capital raising could be little to nothing, but that it still expects it to launch a rights issue, largely to re-finance the government preference shares.
Justin Urquhart Stewart, of Seven Investment Management in London, says the fact that AIB shares in the US soared by 26% last night shows that a little bit of confidence is creeping back in. However, he adds that for any bank to try and raise money in this sort of climate will have to come up with some significant discount to encourage people to put money in. He says that AIB will have to offer very cheap shares, while also telling people that the bank has a way out and has the Government behind it as a guarantor.
He says the way forward will be a question of faith, adding that it is not just about the future of individual banks, but confidence in the Irish economy
Aine Myler, the president of the IAVI, says the long-term average of property yields here is 5.56%. She says that includes a number of years where interest rates were at double digits and went as high as 17-20% in the early 90s. She says that at a time of historically low interest rates, the fact that yields are running above 7% or 8% for classes of commercial property suggests that there is insufficient funds for companies to take advantage of much lower property prices. She says the property market needs NAMA to happen and it needs to happen very quickly. Ms Myler says that the property market never performs the way people expect it to, but adds that Mr Lenihan's assertion that prices will rise by 10% in the next ten years is a reasonable estimation.
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MORNING BRIEFS - Social networking site Facebook attracted a 100 million new users in the last three months, bringing its total number of regular users to 300 million. The company says its growth has surpassed everybody's expectations, and that in coming weeks the number of Irish users will hit a million.
*** Twitter, whose visitor numbers reached 44.5 million during the summer, is closing a round of funding that will value the company, known for its 140 character blogs, at $1 billion. The company will raise around $50m. Visitor numbers are up 15-fold-year-on-year.
*** The new Dan Brown novel 'The Lost Symbol' broke one-day sales records, with readers snapping up over a million hardbacks across the US, Canada and the UK after its release.
*** On the currency markets, the euro is trading at $1.4728 cents and 89.26 pence sterling.
