IRISH BANKING INDUSTRY MOVING TO NEXT STAGE - The country's two pillar banks, AIB and Bank of Ireland, made market announcements yesterday on the future shape of their ownership. Figures from Bank of Ireland show that an overwhelming number of its subordinated, or junior, bondholders have so far opted to take shares in the bank rather than cash. This means the bank has avoided outright nationalisation. But AIB said the taxpayer's stake in the bank is likely to increase 'substantially beyond' its current 93%.
Oliver Gilvarry, head of research at Dolmen Stockbrokers, says so many Bank of Ireland bondholders went for the equity option as the bank were offering as little as 10% of the original value of the debt in cash, but 20% or 40% if they took shares in the bank. Accrued interest was also given for the shares option. He says that Bank of Ireland - compared to the other Irish banks - has fared better and the bondholders action means that the state will have to inject €2 billion less into the bank. He says the AIB news that the taxpayer's stake in the bank is likely to increase to almost 100% was not surprising, but at least signals that the bank's recapitalisation will be complete.
The Irish Banking Federation's chief executive Pat Farrell says Nick Clegg's idea of giving shares in bailed out banks to taxpayers is a a complex deal but welcomes the theme behind it. He says it is key that the core UK banks will be given full commercial freedom. Mr Farrell says the Irish banking sector is moving to the next stage and the Irish banks will benchmark well against the stress tests of European banks. He also welcomes the news that the cost of recapitalising the banks is less than the Government had budgeted for. Mr Farrell says a proper functioning banking system is the only way to get the economy back on track.
MORNING BRIEFS - European Union leaders have formally appointed Italy's Mario Draghi to be the next president of the European Central Bank, draft conclusions from the EU summit showed this morning. The decision clears the way for Draghi, 63, to take over from Jean-Claude Trichet when the Frenchman steps down at the end of October after eight years in the job.
*** Google is facing an anti-competitive investigation by Federal investigators in the US. Apparently Google's competitors have complained that Google uses its dominant position to direct users to other Google services like mapping, shopping and travel websites. Google's search engine is used in two out of every three searches in the US. The Federal Trade commission is set to launch a formal enquiry while the Financial Times reports the attorneys general in California, New York and Ohio have launched their own investigations. Amongst Google's critics are Expedia, Travelocity, trip advisor and Microsoft. The European Commission is already embarked on a similar investigation.
***The price of oil has taken a tumble after a surprise decision by industrialised nations to release 60 million barrels of oil from their reserves by the end of July. The move comes just just a few weeks after OPEC failed to raise output at a cartel meeting that collapsed in division in Vienna. The move will boost supplies which are being stymied because of the war in Libya while Saudi Arabia makes good on a solo pledge to boost output. The added oil will boost world supply by 2.5%.
*** On the currency markets this morning, the euro is worth $1.4260 and 89.0505 pence sterling.