Bank of Ireland has become less optimistic about the discount it expects to book on the loans it will transfer to Ireland's "bad bank", potentially increasing the amount of extra capital it will need to raise.
Ireland's biggest lender by market value said it expected the discount applied to up to 16 billion euros ($23.9 billion) in loans it is selling to the National Asset Management Agency (NAMA) would not be above the anticipated 30 percent industry average.
In September the bank said its discount would be significantly below 30 percent, though it had warned on Nov. 4 that the final discount remained uncertain.
Shares in the bank and in rival Allied Irish Banks fell, but less steeply than the double-digit swings often seen in the run-up to NAMA's approval by Ireland's president on Nov. 22.
"A bit more caution," one Dublin-based trader said. "(But) most people are not too concerned about these headlines."
Bank of Ireland's stock was down 2.95 percent at 1.65 euros by 0937 GMT, while Allied Irish fell by 3.5 percent to 1.58 and the DJ STOXX European banking index was 0.6 percent weaker.
THREAT OF NATIONALISATION
If the discount was 30 percent, Bank of Ireland would receive about 11.2 billion euros ($16.7 billion) for the assets and would take a pretax loss of about 3.4 billion euros on the portfolio, on top of 1.4 billion already provided for, it said.
"This potential loss on disposal represents the maximum loss likely to be incurred on the sale of loans to NAMA," it said.
Separately, rival Allied Irish Banks said it had no reason to believe its discount would be far from the 30-percent average.
Both banks on Monday recommended to shareholders to approve participation in NAMA. Allied Irish will hold an investor meeting on Dec. 23 and Bank of Ireland in early January to vote on the issue.
The loan transfers will take place between January and July.
The banks, which have each received 3.5 billion euros of capital from the state in exchange for 25-percent stakes, warned that missing out on NAMA's benefits could ultimately lead to full nationalisation.
"If the resolution to authorise participation in NAMA is not approved by shareholders, it would not be possible to put in place the necessary levels of capital that would be expected by the market or funding commitments in an acceptable time period to support and reinforce confidence in AIB," Allied Irish said.
