Bank of Ireland (IRE) Plumments Following Irish Bailout, Imminent Moody's Downgrade (AIB)
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Following Ireland caving and accepting a bailout from the European Union and International Monetary Fund over the weekend, Bank of Ireland (NYSE: IRE) shares are trading significantly lower this morning, down 15.7%. The drop comes following a late-week rally last week, pushing shares back over the $2.50 price level on hopes of a bailout for Ireland and the sale of non-core assets by the Bank of Ireland and Allied Irish Banks (NYSE: AIB). AIB shares are down only 1.6% this morning, following a much more muted move last week.
Although EU finance ministers offered a $110 billion three-year plan to the nation, investors may be worrying about a multi-notch downgrade to Ireland's sovereign-credit rating by Moody's. The agency currently rates Ireland's credit at Aa2, which would be moved to A1 on a two notcher. An A rating means the obligations are considered "upper-medium grade and are subject to low credit risk," compared to Aa ratings, which are "high quality and are subject to very low credit risk."
The rating cut will still leave Ireland in "investment-grade" territory.
Earlier in the day, Ireland's Green Party announced that they would leave the government once the 2011 budget and bailout funds were in place. The move is added pressure for current Prime Minister Brian Cowen, who has already come under fire lately to resign his position.
Cowen's Fianna Fail party, the Greens, and several independent lawmakers hold a slim majority in parliament. The coalition has seen their popularity drop to historically low levels over the past several months, amid Ireland's economic crisis.
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Although EU finance ministers offered a $110 billion three-year plan to the nation, investors may be worrying about a multi-notch downgrade to Ireland's sovereign-credit rating by Moody's. The agency currently rates Ireland's credit at Aa2, which would be moved to A1 on a two notcher. An A rating means the obligations are considered "upper-medium grade and are subject to low credit risk," compared to Aa ratings, which are "high quality and are subject to very low credit risk."
The rating cut will still leave Ireland in "investment-grade" territory.
Earlier in the day, Ireland's Green Party announced that they would leave the government once the 2011 budget and bailout funds were in place. The move is added pressure for current Prime Minister Brian Cowen, who has already come under fire lately to resign his position.
Cowen's Fianna Fail party, the Greens, and several independent lawmakers hold a slim majority in parliament. The coalition has seen their popularity drop to historically low levels over the past several months, amid Ireland's economic crisis.
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