Irish banks vs UK banks!

Daragh101

At the moment which banks do yee think are better off and more likely to recover quicker!?

pocketdooz

Daragh101 wrote: »

At the moment which banks do yee think are better off and more likely to recover quicker!?

What do you mean?

That's a bit vague.

Daragh101

pocketdooz wrote: »

What do you mean?

That's a bit vague.

Well are the irish banks in better shape than the UK ones or visa versa!!
Which is a better investment etc!

pirelli

Daragh101 wrote: »

Well are the irish banks in better shape than the UK ones or visa versa!!
Which is a better investment etc!

Banks are some what individual.
Some German and French banks possibly might be better than the majority of British Banks simply because of their positive GDP although Barclays bank is in great shape and there are always bargains.


Societe Generale ADR

Reuters rated it as a strong buy, I have no info on this if anyone has please post it. It might be the pick of the bunch

Credit Suisse Group AG

Valuation
We are maintaining our $48 fair value estimate for Credit Suisse. We assume assets will shrink 5% in 2009 and increase an average of 5% annually between 2010 and 2013. We anticipate that charge-offs will jump to 0.5% of loans in 2009 and average 0.2% between 2010 and 2013, up from an all-time low of 0.1% of loans in 2007. We expect net interest margins to average 0.75% though 2013, in line with the historical average. We predict that noninterest income will increase substantially in 2009 as trading losses slow, but will not return to 2006-07 levels within our forecast period. We expect the bank's efficiency ratio (noninterest cost to net revenue) to settle in around 68% by 2013, somewhat worse than 2006-07 levels, as the bank's cost-cutting measures are balanced by more difficult market conditions. We use these projections to estimate a fair value of CHF 56 per common share. We assume a fixed exchange rate of CHF 1 per $0.87 as of April 27, 2009.

Bulls Say ( positive opinions/outlooks )
Credit Suisse has proved itself to be one of Europe's strongest banks through the credit crisis and its strong reputation is helping it to grow its valuable private bank.
The combination of Credit Suisse's emphasis on its steady businesses and controlling risk will result in more stable profits and higher margins, causing shareholder returns to normalize rapidly.
Credit Suisse has a lucrative alternative asset-management business and has teamed up with outside entities to deliver great returns for clients.
Credit Suisse has one of the top private banking franchises in the world. Operating profitability is exceptional, with normalized margins around 40%. Profits shrank in 2008 because of the financial crisis, but the bank continued to attract new assets.

Bears Say ( negative opinions/outlooks )
Credit Suisse's private banking franchise is threatened by Switzerland's recent moves to relax banking secrecy laws.
The bank's value proposition has been permanently damaged by the credit crisis. Its sale of equity to Qatar diluted existing shareholders, and new, higher regulatory capital requirements will reduce its future profitability.
More than 50% of Credit Suisse's normalized revenues are generated by investment banking. As a result, the bank's income can be highly volatile.
Net interest margins remain pressured because of the high cost of deposits and lack of pricing power.
Losses on European assets may hit Credit Suisse hard as the recession deepens across the continent.



Deutsche Bank AG

Valuation
We are raising our fair value to $69 per ADR from $60. Of the increase, $4 is due to the higher share price since our last update, making a potential capital-raising less painful, $4 is due to the increased strength of the euro, and $1 is due to higher expectations. After falling precipitously in 2008, noninterest income returns to 2003 levels by 2012 in our forecast, as trading income remains far below 2004-06 levels. We project little improvement to
.Deutsche Bank's long-run 70% efficiency ratio (noninterest expense/net revenue). We project that the bank will be meagerly profitable in 2009 and that return on equity will average 12% annually between 2009 and 2013, compared with 18% in 2007. We assume a 31% tax rate and charge Deutsche Bank a 12.5% cost of equity. We include a 25% chance that Deutsche Bank will raise EUR 5.6 billion at EUR 24 per share, a 40% discount to today's EUR 40 trading price. In this scenario, we also assume that Deutsche Bank will maintain a lower level of leverage in the future, which will decrease return on equity by about 1 percentage point. Using these assumptions, we estimate a weighted fair value estimate of EUR 51 per common share, which is equivalent to one ADR. We assume a fixed exchange rate of $1.37 per euro as of May 12.

Bulls Say
Deutsche Bank is coming through the credit crisis in better shape than many of its competitors and is poised to gain share when markets recover.
CEO Josef Ackermann has sold one noncore business after another in his ambitious plan to turn Deutsche Bank into a world-class investment bank.
The bank has proved adept before at controlling costs while increasing revenue. Between 2001 and 2007, employees fell from 86,500 to 78,300, while profits grew nearly 17-fold. This experience will help the firm reposition its business in a post-credit-crisis world


Bears Say
Deutsche Bank's ongoing losses, combined with its acquisition of a large stake in the troubled Postbank, may force it to turn to the government for more capital and dilute existing shareholders significantly.
Private-sector banks in Germany are under attack for trying to improve productivity and cutting jobs. If Deutsche Bank should have to turn to the government for assistance, government interference is likely to hobble its profitability.
Deutsche Bank's turnaround, which began in 2002, has shallow roots. It prospered during the go-go days of 2005-07 but was deeply damaged by the credit crisis. Many of its earlier improvements may prove illusory as the bank emerges in a more sober environment.



Royal bank of scotland:

Valuation
We are reinstating a rating for RBS with a fair value of $17. We assume that total assets will shrink significantly in 2009 and 2010 as the bank shrinks its trading book and sheds assets but will grow an average of 4% annually thereafter. We expect net interest margins to dip to 0.9% in 2009 as deposit pricing increases and to gradually recover to 1% though 2013. We expect charge-offs to increase to 1.33% of loans in 2009, compared to 0.33% in 2008, and to remain over 0.5% during our forecast period--somewhat above historical levels. We project that noninterest income will return to 2007 levels by around 2012. We expect the bank to approximately break even in 2009 and 2010 and for return on equity to remain below 10% during our forecast period, as the bank struggles to absorb credit losses and rebuild its tattered business. Using these projections, we estimate a fair value of GBX 100 per common share and weight this scenario at 60%. We also incorporate a 40% chance that greater losses will further destroy shareholder value, likely through full nationalization, which we value at 0. Each ADR is worth 20 shares. We use an exchange ratio of GBP 1 to $1 as of May 11, 2009.



As of 08-07-2009
$16.02
Fair Value Estimate
$17.00
Fair Value Uncertainty
Extreme

RBS Reports First Half '09 Loss
Analysts 08-07-2009
See All Notes

Bulls Say
RBS is essentially a government-run bank, and its government backing will help it to win deposits from its competitors.
RBS dominates the U.K. commercial banking market and will benefit from the shakeout of nonbank competitors caused by the ongoing financial market turmoil.
RBS' acquisition of ABN Amro has diversified its operations geographically, increasing its operations in fast-growing Asia and reducing its exposure to the U.K.
RBS's participation in the Asset Protection Scheme will help protect the bank from the growing losses as its assets deteriorate.

Bears Say
RBS' massive losses and its ill-conceived takeover of ABN Amro has destroyed confidence in the institution. Further losses, which are likely, will eat into the bank's capital and may leave the government with little choice but to completely nationalize the struggling bank.
RBS grossly overpaid for ABN Amro at the peak of the credit bubble, destroying billions in shareholder value. It proceeded on with the acquisition even after the prize it was after--LaSalle Bank--slipped through its fingers.
RBS' recent government-sponsored capital raise will leave it well-capitalized but exposed to government interference--it may come under pressure to put the public's interests before shareholders'.
RBS' U.S. bank, Citizens, is too small to compete as a national player and has few available options for growth. Its growing losses are likely to force RBS to infuse new capital into the bank, thereby throwing good money after bad.
The U.K.'s commercial finance market is rapidly weakening. A significant increase in loan losses at RBS' large U.K. commercial bank could cut deeply into the bank's profitability.


Loylds
Analysts comment:
We have withdrawn our fair value estimate for Lloyds because of the uncertain outlook for its future. While Lloyds is not as deeply troubled as Royal Bank of Scotland, we have serious questions about the adequacy of its capital base. Its participation in the U.K. Asset Protection Scheme leaves it exposed to the first GBP 25 billion of losses on a GBP 260 billion portfolio plus 10% of any additional losses, plus any other losses on its remaining GBP 850 billion of assets. While participation in the scheme increased Lloyds' capital ratios substantially, we're concerned about what losses in 2009, and perhaps beyond, may mean for the bank if the U.K. recession and property price collapse deepen further. If losses are greater than the bank anticipates, it may be forced, once again, to turn to the government for increasingly costly assistance.

Bulls Say
Lloyds' acquisition of HBOS will make it a powerhouse in U.K. banking, controlling some 50% of the savings market. Moreover, the knockdown price Lloyds paid for HBOS will translate into even higher profitability in the future.
Lloyds' insurance unit Scottish Widows is beginning to deliver solid economic profits after introducing new products and enforcing capital discipline.
An investment in a state-of-the-art customer-management system has enabled Lloyds to increase wallet share and switching costs, allowing the company to retain more retail customers than its competitors.
Management's focus on costs, economic profitability, and efficient growth has led to returns on equity in the mid-20s and a huge dividend yield.

Bears Say
HBOS was a much less conservative lender than Lloyds, and Lloyds will be left holding the bag if falling property prices cause HBOS' charge-offs to increase to unmanageable levels.
U.K. property prices, which appreciated rapidly over the past several years, are falling rapidly. Deliquencies are rising rapidly and cutting deeply into Lloyds' profitabilty.
Lloyds' relentless focus on costs could cause it to underinvest in personnel, marketing, and technology.
Lloyds' reliance on government assistance in the wake of the HBOS merger means that the U.K. government now has substantial influence over the bank's business practices and makes it more likely that the bank will make uneconomical business decisions.


HSBC Fair Value Estimate $55.00

Bulls Say ( Positive outlook predicted )
Aggressively promoting a single brand and logo and winning several awards has increased HSBC's brand awareness among corporate and retail clients.
The benefits of the bank's geographic diversification were highlighted in the first half of 2007. Although operating profits at the bank's U.S. operations were nearly zero in 2007 because of the fallout from the subprime mortgage crisis, the bank's Hong Kong, Asian, and European operations picked up the slack so that overall profits still increased 9.6%.
HSBC's exposure to the fastest-growing economies and wealth-creating regions ensures robust demand for its varied products and services, from checking accounts to wealth management.
A strong presence in Hong Kong and China makes HSBC the bank of choice for multinational companies that trade a lot with China.
Management compensation incentives ensure a focus on economic profits, cost control, and total shareholder returns, making HSBC shares attractive to own.

Bears Say ( negative outlook predicted)
HSBC's profitability could suffer a setback if China abandons the "one nation, two systems" policy in governing Hong Kong.
Operating in developing countries exposes HSBC to above-average credit risk. Charge-offs in emerging markets haven't been abnormal, but a global meltdown could cause a spike in loan write-downs.
HSBC underestimated the losses it would suffer in its subprime mortgage portfolio by billions. As this portfolio goes in to runoff, HSBC will be forced to inject additional capital into its U.S. subsidiary, taking it away from the rest of the bank

Financial institutions

(AZ) Allianz SE are in relatively good shape. Mostly overlooked they should be a secure prospect. Trading at only $10 on the NYSE.

Bulls Say
With more than 100 years of writing insurance in Europe, Allianz is a well-known and trusted brand.
European governments are likely to privatize retirement savings, and Allianz is positioned to win a share of this business.
Allianz bought out the minority interest of its Italian subsidiary (RAS), which gives it more exposure to the Italian market, its second-largest.
Allianz could be an indirect beneficiary of a U.S. government bailout of insurers through its multibillion investment in Hartford.

Bears Say
Insurance products are commoditylike, and large profits are unlikely to be sustainable for Allianz.
The ultimate value of Allianz's expected U.S. asbestos claims liability is highly uncertain and subject to rapid inflation.
Regulations in many markets where Allianz sells life insurance dictate that policyholders participate in profits. While this reduces the firm's downside risk, it also limits its profits.


Zurich Financial Services

Have no info!

Bank of Ireland



Bank of Ireland's profits sank in fiscal 2009 as Ireland's economy shrank and property values plummeted. While actions taken by the government promise to help stabilize the bank, they will come at great cost to shareholders. We're leaving BOI unrated, as it remains difficult to assess how much more capital the bank may need and whether it will be able to survive as a publicly held firm.

Until the economic meltdown, BOI enjoyed a comfortable position in Ireland, where it and its primary competitor, Allied Irish Banks AIB, control some 70% of the country's concentrated retail banking market. BOI earns about 60% of its profits in Ireland, and we think this protected position, rapidly rising property values, and the bank's constant focus on efficiency were largely responsible for its historical ability to generate returns on equity at or above 20% year after year.

Now, however, falling property values and rapidly rising unemployment are pummeling commercial and residential property values in Ireland and forcing BOI to accept multiple rounds of government assistance. In March, shareholders approved the sale of EUR 3.5 billion of preferred shares to the government, which increased Tier 1 capital to 9.5%. In exchange for this assistance, BOI gave the government warrants to buy between 15% and 25% of the company at a deep discount to book value. When it became increasingly clear that this recapitalization would not be enough to soak up loan losses, even with the additional EUR 1.5 billion BOI has agreed to raise, the government announced plans to create a "bad bank," the National Asset Management Agency, which will buy loans at a significant discount. While this will almost certainly help stabilize loan losses, it has created deep uncertainty about the banks' futures. The discount at which the loans will be bought will not be determined until midsummer, but the resulting losses are likely to drive the banks' need for more capital. While BOI is in slightly better shape than AIB, since only one fourth of its Irish loans are commercial and property loans compared with one third at AIB, we think both banks will probably need additional capital to absorb the losses and may have little choice but to turn, once again, to the Irish government for assistance.

We think the outlook is grim for BOI. While much of its lending looked conservative during the boom years by traditional measures such as loan/value ratios, Ireland's rapid deterioration means that its population may shrink and its property market may never fully recover. Moreover, clawback provisions in the bad-bank plan may leave BOI on the hook for larger-than-anticipated losses, even once discounts are agreed upon this summer. If BOI does need to turn to the markets or the government for more capital, the cost to shareholders is likely to be great.
Valuation
We are not rating Bank of Ireland at this time because of significant uncertainty about its future in the wake of falling asset values in Ireland. BOI recently accepted a EUR 3.5 billion investment in preferred shares from the government, while giving up warrants to buy 15%-25% of the firm, which increased its Tier 1 capital ratio to 9.5%. However, BOI plans to sell loans to NAMA at a discount that will not be determined until midsummer but that promises to be significant. We think that the resulting losses are likely to be high enough to force BOI to raise additional capital, either in the public markets or by turning to the government for additional assistance. Whichever route it chooses, existing shareholders are likely to be significantly diluted.
Risk
BOI has agreed to raise EUR 1.5 billion of new Tier 1 capital by the end of 2009 but has not announced how it plans to do so. Selling additional shares at today's depressed prices would dilute existing shareholders significantly. If the bank instead chooses to sell noncore assets, it would probably have to do so at depressed prices, thereby destroying value. Property values are deteriorating rapidly in Ireland, and about one fourth of the bank's Irish loans are in the especially troubled commercial property and construction sectors. BOI plans to sell many of these loans to NAMA at what will probably be a very significant discount. The resulting losses may eat deeply into BOI's capital cushion and force it to raise even more capital, possibly by turning to the government and significantly diluting existing shareholders' stake in the firm.


Bulls Say ( positive opinions/outlooks )
Ireland's rock-bottom 15% corporate tax rate makes it an attractive place to build businesses, which will help the economy to recover.
A smaller commercial and property loan portfolio means that BOI is in better shape than Allied Irish, its largest competitor.
BOI is poised to gain even more market share as Ireland's economy recovers from competitors that have been nationalized.
Selling loans to NAMA, Ireland's "bad bank," will allow BOI to start with a clean slate.

Bears Say ( negative opinions/outlooks )
Bank of Ireland's competitor Anglo Irish was nationalized in early 2009, leaving shareholders with nothing, making this once unthinkable possibility seem very real for all Irish banks.
Property prices are falling sharply in Ireland and the U.K., and further increases in delinquencies are inevitable. At best, the bank will be forced to take large losses; at worst, it may be nationalized.
Ireland's unemployment rate is increasing rapidly, which may cause positive immigration trends to reverse. If the population falls, property values may fall further.
Ireland's rapidly growing fiscal deficit will limit the government's ability to stimulate economic growth.



AIB BANK


Allied Irish Banks AIB had a very difficult first half in 2009. The group lost EUR 829 million ($1.2 billion), compared with income of EUR 1,040 million ($1.5 billion) in the first half of 2008.

Low loan demand, rising credit problems, and diminishing deposit accounts were all problems AIB faced during the first half of 2009. All these factors negatively affected the bank's operating revenues, which, if it were not for a nonrecurring gain related to the redemption of some subordinated liabilities, would have dropped by 12% compared with the first six months of 2008. Further marring earnings were provisions for loan losses, which were 17 times what they were in the year-ago period and 30% greater than what they were in the second half of 2008. This huge spike reflects the continued deterioration in the company's loan portfolio whose criticized loans make up 25% of the total, more than twice the 12% they were by the end of 2008. Continued real estate and construction value deterioration in the Republic of Ireland and in the United Kingdom are behind most of the firm's credit woes. Finally, the group is struggling to attract and retain deposits--the lowest-cost funds--as customer deposits fell by more than 10% during the six-month period.

The first half's loss offset part of AIB's efforts to boost its capital position. In early 2009, the company received a EUR 3.5 billion ($5 billion) injection from the government in the form of preferred shares. In addition, the bank exchanged certain subordinated debt securities for shorter-duration notes, which yielded a EUR 1.1 billion ($1.6 billion) gain. All in, the firm's Tier 1 capital ratio grew from 7.4% at year-end 2008 to 7.8% by June 2009. Despite this improvement, considering the Minister for Finance's assessment, there is a EUR 1.7 billion capital shortfall remaining, by our calculations.

Thesis 05-29-2009 | by Erin Davis

Allied Irish Banks (AIB) is caught in a growing tsunami of bad debt in Ireland and the U.K. as both countries suffer sharp falls in property prices and steep economic slowdowns. As part of the Irish government's EUR 3.5 billion bailout of AIB, the bank has agreed to sell a 15%-25% stake in itself to the government and raise an additional EUR 1.5 billion in the private market. While AIB has not said how it plans to do so, we anticipate that whatever it chooses will mean selling valuable assets for less than their economic value or diluting existing shareholders through another share issuance. Further uncertainty is created by the foggy details surrounding AIB's anticipated transfer of bad loans to Ireland's 'bad bank', the National Asset Management Agency (NAMA). While the transfer is almost certain to stem losses from AIB's loan book, the discount at which it will do so won't be known until mid-summer.

For nearly two decades, Ireland's rapid growth made it one of the most attractive banking markets in the world. Ireland's banking market is extremely consolidated; AIB and its largest competitor, Bank of Ireland, are estimated to control more than 70% of the market for personal current accounts. This comfortable duopoly, combined with strict banking regulations, makes it difficult for a new competitor to mount a serious challenge to AIB's position. During the boom years, AIB's results were laudable, with returns on equity averaging 20% and annual loan losses around just 0.2% of loans.

Now, however, AIB's pursuit of this easy money is catching up with it. Despite its efforts to maintain high lending standards--66% of new Irish residential mortgages had loan/value ratios of less than 75% in 2007--the bank over-lent to property developers whose ambitious plans are rapidly heading south. Commercial property and construction loans make up over one third of AIB's Irish loan book and losses in that portfolio are accelerating. While AIB plans to sell many of these loans to NAMA, it will have to do so at a significant discount, perhaps 20% or more.

AIB's efforts to diversify itself geographically--50% of its income came from abroad in 2007--have not reduced the company's risk as much as it may have hoped. Its largest subsidiary abroad is its bank in the United Kingdom, but commercial property and construction loans are rapidly souring there as well. Credit quality deterioration has not been as rapid in Poland, AIB's fastest-growing geography, but may accelerate if the recession in Europe does not abate quickly. We think AIB's Polish subsidiary, as well as its 25% stake in M&T Bank MTB, may soon be on the chopping block as AIB looks for ways to raise the necessary EUR 1.5 billion of new capital. Given its many difficulties, we do not expect AIB to return to its former level of profitability in the foreseeable future.

Valuation
We are not rating Allied Irish at this time because of significant uncertainty about its future. While the government's EUR 3.5 billion capital injection will boost the bank's year-end 2008 pro forma Tier 1 capital ratio to 10%, AIB has agreed to raise another EUR 1.5 billion in the market and we think the bank may find it difficult to do so. Moreover, AIB will have to take a significant haircut on the loans that it sells to NAMA. This haircut may be large enough that the resulting losses quickly eat through AIB's capital cushion, in our opinion, and may force the bank to seek additional assistance at great cost to shareholders.

Risk
AIB has agreed to raise EUR 1.5 billion of new capital but has not announced how it will do so. It may find itself forced to sell assets at fire-sale prices or sell new shares at a fraction of book value, thereby significantly diluting existing shareholders. More than a third of AIB's Irish loan book comprise commercial property and development loans. Many of these are deeply distressed and are likely to be sold into the government's protection scheme at a significant discount. The size of this discount will not be known until midsummer, but the resulting losses may be enough to force AIB to raise even more capita

Bulls Say
Some of AIB's competitors have been nationalized and the bank is likely to win market share as Ireland's recession recedes.
Despite the fall in property prices, AIB's conservative underwriting meant that just 6% of its homeowners were underwater as of the first quarter of 2009.
Ireland's "bad bank" scheme will help AIB clean up its loan book and start over with a clean slate.

Bears Say
Allied Irish's competitor Anglo Irish was nationalized in early 2009 leaving shareholders with nothing, making this once unthinkable possibility seem very real for all Irish banks.
Ireland's hot real estate market has fallen off a cliff. The coming sharp increase in delinquencies, which is all but certain to materialize, will deeply damage the bank's profitability and capitalization.
Ireland's deep recession and very high unemployment rate may mean a shrinking population--a sign that its property markets may never fully recover from the crash.
AIB's decision to sell loans to NAMA, likely at a large discount, will mean large losses for the bank and may mean another capital raise is ahead.
AIB's ADR price could fall materially if the dollar strengthens relative to the euro.

Daragh101

great post ...thanks!:D

Smcgie

Thanks for sharing that with us Pirelli

karltimber

hi, great post
do you have a link for that article or did you just write it yourself


thx

k

soddy1979

Pirelli, just a quick question.

Why did you pick the ADR line of societe generale as opposed to the line traded in Paris?

Thanks, Soddy

pirelli

soddy1979 wrote: »

Pirelli, just a quick question.

Why did you pick the ADR line of societe generale as opposed to the line traded in Paris?

Thanks, Soddy

In any given search Google will find all non USA companies first and fore mostly listed as an ADR if one exists and usually will not find foreign stocks unless they either have an ADR and or are of such a size to be worth listing.

So iI must have copied and pasted the name straight off google.

pirelli

karltimber wrote: »

hi, great post
do you have a link for that article or did you just write it yourself


thx

k

LOL No!

I did not write it myself.It was from morning star and I cannot link it as it is subscriber only.
http://www.morningstar.com/
The AIB analysts note is from AUGUST 2009 and is quite recent but the thesis dates back to April 2009. Also the entire bank of Ireland analysis dates back to April 2009 also. The other banks are more up to date. So things have changed significantly since then. Bank of Ireland Looks much better than AIB now.

patbrady877

There isnt a whole lot in it. weak sterling would make me favor UK banks