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Reaction in the markets this morning largely ridicules. Ukraine has been a corrupt fiefdom since it managed to break from the Soviet Union in the 90s. It was always a buffer zone between Russia and Western Europe and was just played along as such. It was never given access to the EU, nor NATO and never would be. The US used it as a playground to aggravate the Russian. Now the Russians have dealt with the tick on their butts and the Yank cry foul. What nonsense! Good for US off course as they can now sell their gas into Europe while sanctioning the Russians. What idiots. The Russian pact with China is already in place. The only loser is Europe. Its loans and bank exposure to Russia will be wiped out and Russia will rebuild its financial infrastructure via the BRICS, lead by China. What a joke!!!
Choose your sectors and buy the dip. Irish banks are one of them. Zero exposure to Russia.
Consider things from a different angle:
HSBC dropped 5% from its recent peak. Stunning results moved it back 2% as of today.
Barclays dropped 10% from its recent peak. Stunning results moved it back 4.36% as of today.
BIRG dropped 17% from its recent peak. Stunning result??? takes it back to 6.51 (50% retracement).
Here's hoping, but then hoping has never paid the bills lads!!! Sorry buy we saw the peak at 7!!!!!
Let's consider the debate the other side: Industry expectations is for ATP 821m. Normally they are close on this number having come through H1 and having access to bank management. If we assume that 50% of ATP is available for distribution; this is high but consider that shareholders were were sidelined after 2019 by the Central Bank. So available to management could be 410m.
Under the buyback authority, management can buyback 5% of issued shares, which equates to c50m shares. the value of a full buyback at 6.75 would be c338m. For me the best outcome would be to remove the balance of the State holding at this point, therefore taking back the 5% still in play as we stand. The balance of c72m could be applied to a dividend payout. This would equate to c7c per share. How this equates to the dividend in 2019, I am not sure, but I do recall that the payout on that occasion was quite low.
Fair trade? Why not. Sorts out management's objectives on both. Shareholders of course would have been better served if management had come to the party much earlier at SP sub 2 levels when the NAV had got as low as 0.20. Buying back assets at 20% on the euro was indeed a gimme!!! Hindsight is an exact science!!
Agree with @johnhume on this one.
No obvious connect between the two parties, nor the circumstances.
Also believe JH comments earlier re the dividend level come end Feb. While we would like to see a 50% ATP payout, there is no history to believe that this might happen. A lessor number would take the momentum of the recent price rises out. However, if management were to take the State out of their remaining and final 5%, we could still see a further good spike. It still comes down to the call at end Feb.
For now, the run up in SP has been too hot, so expect some further weakness before month end. Nothing to worry about.
@Greengrass53
I have to say, I am a bit betwixt and between on the micro and macro scenarios on BIRG at the moment. Perhaps my initial comment settled more on the micro, giving rise to your comment about being unclear.
The micro issues going into results at end Feb are very pertinent: The RSI ratio levels are high and must be respected; the actual SP move from around 5 to current 6.50 (30% in less than a month) is dramatic and needs to be weighted; the implications of a meaningful dividend and/or a share buyback has to be factored in to the SP, now at 6.50; the anticipated level of ATP for 2021 is massive but must be viewed as having been discounted into the 6.50 SP, for the most part. So on the micro side, I am inclined to believe that the only outlier is the dividend and share buyback which we will not see before end Feb. A 5% buyback or a 50% ATP dividend payout can drive the SP to 7. A lessor outcome can take the SP back to 6. Therein my dilemma.
On the macro side, BIRG has potential but it is not blue sky stuff. BIRG can perform at the top end of the European retail bank spectrum in the next 3 years, it is not a breakout story for two reasons: It is limited to a retail space and therefore can look for standard economic growth (if Europe gets it). Its benefits from being in a two horse show in Ireland but does not benefit much more from its exposures in the UK. The UK is a declining society, with a faster decline in store given Brexit; The normalisation of the Euro curve is very positive in the next 3 years. Apart from the natural curvature to come, the Irish bank were massive takers of the ECB Long Term Deposits. They have secured 3 year funding at a level of approx 0%. NI will accelerate to level not seen in 10 years, starting in 2022.
These are positives but are they enough to break the chain of the average TNAV in European Banks. I gave the realistic trading range using this ratio as a basis. How much more could you argue for. A TNAV at 1:1, a level we have not seen in 5/6 years would place the SP at 8.24 in 2022. Can happen, but that truly would be a bonus.
I think BIRG is a great share but never lose sight of reality: It was losing sight of reality that destroyed the share in 2007 and again in 2020. Here we are in 2022 and believing we own a shooting star. Maybe Icarus is a better role model!!
This is not a competition for space, SilverAss!
If you want to make outrageous statements then back them up with some science. Prove them, like you were asked to prove your hindsight trades!! Quoting UBS is just pathetic, they went bust in 2007, just never told anyone!
In the meantime tell your cohorts and yourself to stop publishing nonsense buys and sells. No one is vaguely interested in your pointless trading efforts.
@ Icarus covers some good points. The RSI ratio, currently at 70% is the most pertinent, highlighting an overbought situation in BIRG, in the short term. Always a danger that retracement can occur from this level. No apparent internal issue (all positive for now)but the rerating of the US Markets cannot be ignored. Should be more than offset by the reversal of Uber Dove La Garde (finally knocked of her pathetic perch by the Northern States).
Looking past this ratio, BIRG has powerful news flow between now and end Feb: Firstly the massive turnabout in earnings; ATP reversal from minus 707m in 2020 to expected 821m in 2021. A 1.5 b turnabout. This is massive. It moves TNAV from 729 in 2020 to potential 821 in 2021. Priced off current SP of 6,25, this puts the ratio on 2020 numbers at 0,8570, well above the European Banking average TNAV of 0,7300. If one projects 0,8570 on the new projected TNAV, one gets a SP of 7.04. Projecting the new TNAV value at the average mean European Banking TNAVon gets a SP of 5.99. A trading range of 5.99 to 7.04 is therefore predicted for 2022.
Not fully factored in the SP, in my opinion is the share buyback and/or dividend payment during February and the now inevitable massive reversal of negative rates in the Euro Zone to a normal bond curve. With the SP already having moved from 5.00 to 6.25, the argument for management to trigger a 5% share buyback is perhaps less appealing than declaring a dividend of say, 50% of ATP (E350m). This would equate to approx 32c per share. That puts the SP at 6.55/60. All in all a toss up. My original call at 6.40 probably stays unchanged in all this debate.
One thing is for sure. February will bring a lot of news and a lot of volatility. Chose your moment to lighten up and/or sell. Dreams about a SP of 7+ in 2022 does not bear up with facts and and is largely illusionary and bound by the history of the past!!! Do not be caught again.
The State's announcement of it stake at 6.93% and that it intended to accelerate the sale limits on its AIB Holding was disappointing (to the market) and negative for the BIRG SP. Every indication was that they would be down at 5% by mid February. Technically, BIRG was overbought at 6.00 (having run up from 5.00) so this negative news has allowed a sharp downward swing in price over the past week. Nothing meaningful in it all but the trend will now need management to announce the share buyback and strong operational results, later in February. Till then the market will remain nervous and weaker.
@JohnHume. You are off course right regarding the hitch hikers on this site. Forever hopeful of a ride but failing to understand that their finger motions are of no interest to anyone not looking in the same mirror. It is unfortunate that Site Compliance is not of greater strength in dealing with people of this ilk, so we all suffer their harassment and delusion. A sad state of affairs!!
The reversal in the Euro bond curve remains the single biggest driver in the SP. Unlikely to stop its move to higher yields as the ECB is brought to heel by the Northern Axis! Further benefits from the rout in US bonds as the realisation that no international takeoff will destroy the bubble that they cultivated for so long. Thanks inflation. Next stop is the demise of the dollar, no longer demanded by a world that has moved on. Couldn't happen to a better bunch.
Am guessing that BIRG management are a bit miffed by the run through 5.75 to announce their share buyback. Not really a problem though as at the end of the day that benefit is for shareholders. If it ends up above 6.40 by mid February, then time to consider calling it .....definitely in the short term (to end 2022).
What to do with our hind sight asses! Amazing how each buy and each sale gleefully announced is at the high or low of the day....such perfection that exists only in the lunatic mind of the creator!! Now the latest joke of a holding sub 2....no doubt at 1.25!!!! Rather than crow on the back of fictional trades, the ring leader could snapshot a picture of his mystical trades, including the hindsight of all hindsight trades @ 1.25!!!!!
In the meantime perhaps Wasbenlittle, the latest addition to the goon show could rejoin junior school and learn how to read and write English. Sadly this site is conducted in English, not some hybrid version tossed around in nursery school!!! Better still, just get the hell off BIRG!!!!
The move in the BIRG SP above 5 was premised on the reversal (under duress) of the ECB stance on inflation/monetary policy in Euroland and the coordinated sale completion of the State's stake to 5% by mid February. This opens the door for management to clean the slate with the full remaining authorised share buyback. Management will look to set the pricing at levels not higher than 5.75. No dividend will be announced.
The buyback and finalisation of the government's exit will boost the SP to level around 6.40. By my calculations this would be approx 0.85 NAV, the average level that the European Banking section has traded at over the past 5 years or so. Beyond that level, the bank will need to achieve a lot more by way of growth and strategy to move higher. Not impossible, but very difficult given the niche in Irish Banking.
I am astonished (and irritated) that these nutcases remain on this site (I filtered them some months back). Judging from the comments that I see amongst the endless filtered messages from them, the complete nonsense that continues to be posted is mindless, stupid and pathetic.
Is anyone aware of there being an ombudsman attached to this site. Time to act, toss out the lunatic element and regain sanity for normal beings!!!!
JH, revisit your initial post.
"Lloyds NAV = 69.73. SP = 46. Discount = 34%" Really!!!! Add 69.73 to 34 and what do you get??????
"AIBG NAV + 4.4. SP = 2.5. Discount = 43%. NTNAV = 3.73" Hint!!! NTNAV is the value to use in the calculation!!!
Do we need to go step by step???
As I suggested, do your own CORRECT analysis before posting on a public site. No one wants to read rubbish.
Bag the semantics. Do your own analysis before you post on factual matter. Your first post on Asset Values was drivel, your second (response) was pathetic!
Are you the fellow that constantly harassed the cut and paste brigade....now you are doing the same!!!
Not sure where you are getting your info, but a number of your values are wrong. In fact I would suggest your calculations are flawed as well.
BIRG's declared NAV is 7.35 (you have 8). At 5.25, BIRG is trading at 71.43% of NAV, therefore giving a discount of 28.57%. The 5 year running average for tier one banks in Europe is 0.85:1 NAV. Regaining that level would project a SP 6.25. Likely top in this run, if we get there.
Looking at the balance sheet in rounded numbers you have shares issued of approx 1 billion, capitalised value of approx E4 billion (at E4 per share). You have other Tier 1 Capital of approx E8.5 billion, so total Capital of approx E13 billion, or capital, a ratio of approx 13%. Typically a share buyback programme would be set at 20% of total capital, so E2.6 billion or 650m shares. Tranches would then be determined based off minimum capital levels, cash availability, dividend ability, profitability ect ect. In this share the capital constraints would be the most important determinant. Most likely you would not want the capital ratio to be lower than 11.5% as a sustainable ratio. That would give you a max buyback of approx E1.5billion. I would guess that the first tranche would/should be between E500m-E1 billion. This would equate to 125m-250m shares out of total shares of approx 1 billion. The State hold approx 150m (15%) shares in BIRG.
If the State is used as the exit backstop then the issue becomes, at what price relative to NAV they would walk away. 6.40 per share equates to approx 0.85 NAV. Above that the value of the deal to shareholders diminishes rapidly and there is no good reason to pursue it as the NAV of all European banks has averaged this value over the past 5 years. Obviously benefit on capital accretion decreases the closer to par on NAV. The Bank could leave a bid in the market for shares to fill its buyback but again the metrics would force the price up to approx 6.5 before you got serious sellers to offer. Bottom line the State's holding provides an excellent total strategy. Time for them to exit the Private Sector.
The timing of a first share buyback could be closer than we think. With no ability to pay a dividend on the 2020 results, having cancelled the 2019 dividend, management would be wise to paid heed to disgruntled shareholders and take heed of what other European Banks are now fighting back against Central bank meddling with.
Lloyds perhaps the most interesting variant....their buy back in progress involves buying in the UK government holding and cancelling the shares.
Suggested this back when the SP was sub Eur2 but am guessing management were scared of their own shadows back then. Now with surplus capital (and no realistic use for it in a low growth environment), a massive continuing NAV below 1:1 ( approx 0.55:1 having bottomed at 0.15:1) the Bank has the ability to reward suffering shareholders and at the same time deploy surplus capital to a highly accretive outcome. The alternative would be to seek out and secure loan book sell offs (Ulster Bank) trading at a 45% discount to book. Not going to happen. Probably a good thing to follow the Lloyds example and remove a portion of the State holding of 15%. They are going to need the funds to pay down their now excessive debt (out of control?).
Target pricing on BIRG....0.85 NAV or approx 6.40. This is why the bid is in the market and will/should remain.
Management wake up!!!
BoI would be well advised to seek out a Private Wealth Platform to supplement fee income flows. Their ability to grow their base retail offering and adhere to the rigorous capital requirements now part of the bank regime and manage the lunacy of a sub Euribor marketplace is limited. Evidence of this was seen in their results for 2020. The same experience in AIB was worse and actually retrogressive. They are pressing ahead with the acquisition of Goodbody, as a Private Wealth Platform.
Recent events at Davy may well open that platform as an option. The destruction of trust in senior management is rarely replaced. The nature of the offence is simply mind boggling in the context of the business that they conduct and is reminiscent of the excess that took place on old styled broker platforms in London back in the 1980s and 90s. All those platforms were absorbed into meaningful bank and asset management platforms, not management. The Davy debacle is a timely reminder of the fragility of the individual and it would be wise for them to exit while they still have a business to sell.