Liams Last Post : Bond auction ok, Markets fine , AIB clarifies margin. NYSE short covering explains part of the rally ?

Good Afternoon ,

 

The bond auction passed somewhat uneventfully though at the end of the day the yield on the long bond was 6.38%. the coverage ratio's were about the same as the previous auction and with the US market having rallied last night the backdrop for a continued rally in Ireland was all there.

 

AIB did ok as news about Santander and M&T being in discussions filtered through. Clearly the AIB stake is central to this. AIB also put out a statement highlighting that the margin on its continuing business post the Polish disposal.  Their statement says targets disclosed in AIB's announcement of 4^th August 2010 included a net interest margin ("NIM") target  of c. 180 basis  points ("bps") by 2013.   For the continuing  businesses, excluding  the cost  of the  Eligible  Liabilities Guarantee Scheme, and further  adjusted to remove NAMA  loans and income, the NIM for the six months to 30 June 2010 would have been 155 bps.  On that  same basis, average interest earning assets as at  30 June 2010 would have been  c. €109 billion and,  applying the  NIM of  155 bps  to this  figure, would  have resulted in annualised net interest income of c. €1.69 billion.  The component parts of that €1.69 billion of net interest income are estimated by management to comprise net loan income of c.  €1.56 billion, net deposit cost of c.  €120 million, funding cost of  c. €310 million  and treasury /  other income of  c. €560 million.

 

Irish Life fell-3.17% as the EBS announced that the bidders will be narrowed down within the next month. Markets thought news would probably come sooner than this.

  

Smurfit Kappa rallied early but eased back a further 1% as the company made it clear that the US pricing data did not apply to them. The market is suspicious though and will be sceptical.

 

Tullow quietly is making ground and flirting with going ovr the £13 level again.

 

The Airlines remain very much in demand with Aer Lingus trading at 1.02 and Ryanair closing at 3.90 and effectively recouping all of the special dividend within the last few days.

 

The food stocks are also continue to be reasonably well bid though light on the newsfront.

 

The construction stocks remain very much range bound , CRH hanging around just below the eur13 level whilst Grafton remains resolutely in the same range of 2.85 to 2.95.  The US housing start data was better than expected and this helped Kingspan move up +2.45% to 5.76

 

Data suggesting that the level of short interest in the NYSE at end of August was 14.4bn shares , the second highest on record possibly explains what sparked the short covering rally which has seen the market in the USA basically rally through the patchy data in September so far.

 

Volumes overall not great , Bank of Ireland remains one that the market likes , Irish Life still volatile but

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

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