DUBLIN, March 29 (Reuters) - Ireland's government may have to take a stake in bancassurer Irish Life & Permanent after stress tests on its loan books this week, The Irish Times newspaper reported on Tuesday.
Irish Life is the only domestic lender to so far avoid taking state capital because of its lack of exposure to the commercial property market and its profitable life insurance arm, but its heavy reliance on borrowing to fund residential mortgages is expected to hit it hard under the stress tests.
'It's a question of whether the government will take over or under 50 percent,' the newspaper quoted a source familiar with the company's situation as saying.
Ireland is conducting fresh stress tests on all its banks as part of an EU-IMF bailout and will publish the results on Thursday at 1630 GMT.
In November, when the bailout was agreed, Irish Life & Permanent was given until May of this year to raise 243 million euros ($343 million) to bring its core Tier 1 ratio, a measure of financial strength, up to 12.7 percent.
Under the stress tests this week all lenders will have to have a minimum core Tier 1 ratio of 10.5 percent.
A Reuters survey of analysts on Friday showed they expected around 25 billion euros out of the 35 billion set aside for the banks under the EU-IMF deal would be required as a result of the stress tests.
A decision by the European Central Bank (ECB) to provide medium-term funding for Ireland's banks, revealed to Reuters on Saturday by a euro zone central banking source, has helped to cut the potential capital hole.
Without the ECB move, Ireland's banks would have had to sell off some of their loan books quickly into a depressed market, triggering further capital losses. Analysts at Davy Stockbrokers estimated such a move could require an additional 20 billion euros in capital.
(Reporting by Carmel Crimmins)
($1=.7084 Euro) Keywords: IRELAND IRISHLIFE/ (carmel.crimmins@reuters.com; Reuters Messaging: carmel.crimmins.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Irish Life is the only domestic lender to so far avoid taking state capital because of its lack of exposure to the commercial property market and its profitable life insurance arm, but its heavy reliance on borrowing to fund residential mortgages is expected to hit it hard under the stress tests.
'It's a question of whether the government will take over or under 50 percent,' the newspaper quoted a source familiar with the company's situation as saying.
Ireland is conducting fresh stress tests on all its banks as part of an EU-IMF bailout and will publish the results on Thursday at 1630 GMT.
In November, when the bailout was agreed, Irish Life & Permanent was given until May of this year to raise 243 million euros ($343 million) to bring its core Tier 1 ratio, a measure of financial strength, up to 12.7 percent.
Under the stress tests this week all lenders will have to have a minimum core Tier 1 ratio of 10.5 percent.
A Reuters survey of analysts on Friday showed they expected around 25 billion euros out of the 35 billion set aside for the banks under the EU-IMF deal would be required as a result of the stress tests.
A decision by the European Central Bank (ECB) to provide medium-term funding for Ireland's banks, revealed to Reuters on Saturday by a euro zone central banking source, has helped to cut the potential capital hole.
Without the ECB move, Ireland's banks would have had to sell off some of their loan books quickly into a depressed market, triggering further capital losses. Analysts at Davy Stockbrokers estimated such a move could require an additional 20 billion euros in capital.
(Reporting by Carmel Crimmins)
($1=.7084 Euro) Keywords: IRELAND IRISHLIFE/ (carmel.crimmins@reuters.com; Reuters Messaging: carmel.crimmins.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.