IRISH LIFE Permanent (ILP) - whose share price has dropped more than 29 per cent in the past 10 days - has said a forecast of recession from the Economic Social Research Institute has fuelled the flames of exceptional volatility on the Irish stock market .
On a day when Irish financial stocks reached new lows and other companies with exposure to the declining property market took yet another hammering, ILP saw its share price drop more than 13 per cent in early trade before regaining some ground to close 5.83 per cent weaker, at €6.22½.
ILP's spokesman attributed pressure on the share to a downgrade on Monday in its long-term counter-party rating from Standard Poors, but insisted there was little that was new in a report from the rating agency in which it affirmed its short-term counter-party rating. "Clearly the markets are exceptionally jittery at present. The level of nervousness has increased significantly since the ESRI published its report last week," the spokesman said.
"I would imagine that the early volatility in our share price today was linked to the report of Standard Poors yesterday. But the reality is that there was little new in that report and the ratings they confirmed for us there are still among the highest in Irish financial stocks."
There was no respite for the other Irish banks, as renewed pressure on major international financials drove European markets to levels not seen since 2005.
Bank of Ireland finished 2.23 per cent weaker at €5.40 but dipped at one point to €5.25, a new low for the bank and well in excess of €10 below the 12-month high seen a year ago. AIB reached a new low also, changing hands below €9.27 before recovering some ground to finish the day 3.05 per cent weaker at €9.50. AIB shares were worth €21.22 last September. Anglo Irish Bank, which closed 2.19 per cent weaker at €5.82, changed hands at €5.57 yesterday, another new low for the institution.
Davy bank analyst Scott Rankin said a sell-off on Monday, when financials lost 5.26 per cent, brought to mind the Gubu expression - grotesque, unbelievable, bizarre, unprecedented - given the amount of doom and gloom in the market and the fact that valuations are at 20-year lows. "One would think we will wake up some day and be back in 1985," he wrote in Davy's morning note. At Monday's closing price, he said, investors were putting a discount on ILP's life business and imputing a "negative valuation" for the bank.
In the bank sector at large, price-equity ratios in the 3s and 4s suggested that the market assumed earnings will drop dramatically, he said. Stating that current prices are very much informed by short-selling, he said financials now trade between 60 and 73 per cent below their 2007 highs. "Once stocks go through net book value, people are scratching their heads wondering where the floor is."
Goodbody analyst Eamonn Hughes said Standard Poors moves on ratings and outlook in general "are probably what would have been anticipated given the recent deterioration in the macro environment".
The pain yesterday spread beyond the financial sector, with CRH losing 7.43 per cent to €17.31 after the Swiss banking giant Credit Suisse cut its price target on the stock and advised clients not to invest in European building materials companies for at least the next year.
House-builder McInerney Holdings closed down 10.91 per cent at 49 cent but spent much of the day at 45 cent and changed hands at that level in after-hours trading. Building products company Kingspan lost 3 per cent to close at €5.98 and Grafton Group, the builders' merchant, lost more than 4 per cent to close at €3.54.
