Is it possible that irish banks could be taken over as shares are so low?
- Thread starter barryl
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Brendan Burgess
Founder
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Re: banks takeover
In most takeovers, the acquiring company offers cash or its own shares. So if Santander, for example, offered to buy Bank of Ireland for €3 a share, that's what the shareholders would get if they accepted the offer.
However, what is being suggested at the moment is that the Irish government will have to input capital into the banks. If they do that, they will probably buy shares at less than the market price, thus reducing the share price of the acquired bank even further.
Brendan
In most takeovers, the acquiring company offers cash or its own shares. So if Santander, for example, offered to buy Bank of Ireland for €3 a share, that's what the shareholders would get if they accepted the offer.
However, what is being suggested at the moment is that the Irish government will have to input capital into the banks. If they do that, they will probably buy shares at less than the market price, thus reducing the share price of the acquired bank even further.
Brendan
Re: banks takeover
If Ireland was suffering its financial meltdown in isolation there would be good grounds to believe that Irish banks could end up in foreign hands. However, the most likely buyers IMHO are the UK banks and none of the obvious candidates is in a position to make a bid for anyone. The healthier UK banks (Barclays, HSBC & Standard Chartered) appear to have ambitions to grow in geographic areas other than Ireland. Moreover, for those banking deal that have taken place, the approach that seems to work at the moment is to wait for the company to go under and then buy the bits you want from the administrator or the government.
If Ireland was suffering its financial meltdown in isolation there would be good grounds to believe that Irish banks could end up in foreign hands. However, the most likely buyers IMHO are the UK banks and none of the obvious candidates is in a position to make a bid for anyone. The healthier UK banks (Barclays, HSBC & Standard Chartered) appear to have ambitions to grow in geographic areas other than Ireland. Moreover, for those banking deal that have taken place, the approach that seems to work at the moment is to wait for the company to go under and then buy the bits you want from the administrator or the government.
Brendan Burgess
Founder
- Messages
- 52,204
Re: banks takeover
Capital = owners' equity.
The shareholders may be asked to subscribe more capital through a rights' issue.
brendan
Capital = owners' equity.
The shareholders may be asked to subscribe more capital through a rights' issue.
brendan
.Re: banks takeover
They will borrow it and then make annual payments of interest for as long as the loan is outstanding - probably 10-30 years and then pay it back (probably by more borrowing)
When I say they, I mean of course we - ie current and future taxpayers. Unfortunately, they do not have much option unless you want the whole economy to come crashing down. The real disaster is that they allowed this to happen and most people stood by and cheered. There were some who questioned the effect but they were largely ignored and shouted down.
FF were elected in the last election with great cheers and hurrahs!
They will borrow it and then make annual payments of interest for as long as the loan is outstanding - probably 10-30 years and then pay it back (probably by more borrowing)
When I say they, I mean of course we - ie current and future taxpayers. Unfortunately, they do not have much option unless you want the whole economy to come crashing down. The real disaster is that they allowed this to happen and most people stood by and cheered. There were some who questioned the effect but they were largely ignored and shouted down.
FF were elected in the last election with great cheers and hurrahs!
Re: banks takeover
The amount needed to recapitalise the Irish banks (if that is the route that is taken) is probably in the order of high single digit billions. The government could offer to underwrite a capital raising but in all probability, the private sector will be unwilling to give more cash to the banks. In the medium term the government would hope to sell its stakes in the banks at a profit.
Whether this is costly for the taxpayer or not is something of a moot point because the Irish banking system cannot survive without the government guarantee and/or a recapitslisation. So if you want any Irish bank to survive this is the route that must be taken.
The amount needed to recapitalise the Irish banks (if that is the route that is taken) is probably in the order of high single digit billions. The government could offer to underwrite a capital raising but in all probability, the private sector will be unwilling to give more cash to the banks. In the medium term the government would hope to sell its stakes in the banks at a profit.
Whether this is costly for the taxpayer or not is something of a moot point because the Irish banking system cannot survive without the government guarantee and/or a recapitslisation. So if you want any Irish bank to survive this is the route that must be taken.
Re: banks takeover
It depends what type of capital the government subscribes too (assuming they do at all). At present I cannot see the banks raising the necessary capital from the private sector so this is where the state comes in. If the state buys new ordinary shares then they are unlikely to receive a dividend because if the banks really need capital they should not pay dividends out in the first place.
The government could also buy new high-dividend paying preference (non-voting) shares - this has been done in a number of other countries.
Ultimately, the state will dictate the terms to the banks if it comes to this. In theory, since this is in effect a bailout, the terms under which the state subscribes for new bank capital should be punitive but I cannot see this government taking a hard line with the banks unless there was widespread popular pressure to do so.
It depends what type of capital the government subscribes too (assuming they do at all). At present I cannot see the banks raising the necessary capital from the private sector so this is where the state comes in. If the state buys new ordinary shares then they are unlikely to receive a dividend because if the banks really need capital they should not pay dividends out in the first place.
The government could also buy new high-dividend paying preference (non-voting) shares - this has been done in a number of other countries.
Ultimately, the state will dictate the terms to the banks if it comes to this. In theory, since this is in effect a bailout, the terms under which the state subscribes for new bank capital should be punitive but I cannot see this government taking a hard line with the banks unless there was widespread popular pressure to do so.