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Banks will not make (much) money until 2012: JP Morgan

Emmet Oliver

Kevin Murphy of IL&P

Richie Boucher of BoI

AIB's Eugene Sheehy

Fergus Murphy of EBS

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The Irish banks will not be "making a decent amount of money'' again until 2012 at the earliest and will need "substantial" recapitalisations at some point, according to JP Morgan, one of the largest investment banks in the world.

In a review of AIB and Bank of Ireland and their prospects post-Nama, JP Morgan said the chances of them avoiding large scale state ownership "remains very thin''.

It said it could only happen if the banks avoided a 'haircut' on their property loans of 25% or more.

The government would also need to not insist on a core equity level of 4.55 to 5%, the investment bank added.

It said while the markets were likely to react to Nama positively in the short term, the long term outlook remained "clouded''. The bank said a 25% 'haircut' was effectively a "red zone'' for the banks where government capital injections would start to kick in.

"In our view it remains difficult to normalise earnings for Irish banks, but we have made an attempt to see underlying profitability levels post Nama.

"On our estimates we need to go to 2012 to see both banks making a decent amount of money,'' said the bank.