Friday, 29 October 2010

Collateral Damage from the Bank Collapse

Nat O'Connor: The Irish Independent has published a table of major losers from the fall of AIB bank shares. This is merely illustrative of the damage done to cautious investors who went for traditionally safe options. The table shows how €33 million in shares was reduced to 1.7 per cent of its former value.

If you extract named individuals and two firms from the list, it reveals that €25 million was held by religious organisations and charitable bodies; now reduced to €380,000. In some cases this money doubtless represents the funds raised over the years by these bodies. And, in terms of sensible finances, their boards of governance cannot really be blamed, as they went for a very sensible, safe option - in normal circumstances. The only fault might be if they didn't balance their portfolio. Of course, we don't know how many bodies might also have held shares from Bank of Ireland or the other banks.

Obviously, these shares may rise again over time, but they are unlikely to reach their previous heights. Also, the article dramatises the loss somewhat, as we don't know when the shares were purchased, or at what price. Plus, we don't know what level of dividend was paid over the years; which might have made the investment not so bad overall.

Nevertheless, there is a need in the economy for a safe investment. Government bonds, anyone?

1 comment:

SlĂ­ Eile said...

@Nat Would this be a case of shareholders at prayer?