Banks to continue buy-back schemes

AIB and Bank of Ireland's share buy-back sprees could continue over the next two years, as management at both banks use the tactic to support earnings in the face of reduced growth.

Davy Stockbrokers yesterday speculated that the share buy-back programme at AIB which was initially intended to eliminate €450 million in shares and the similar Bank of Ireland programme could both continue for far longer than had been anticipated.

Davy is a 100%-owned subsidiary of Bank of Ireland.

Davy analyst Scott Rankin said in a note to clients: "Both AIB and Bank of Ireland have no doubt concluded that buy-backs are a powerful weapon, enabling management to support earnings in the face of various downward pressures.

"With both banks sporting tier 1 ratios of over 8.0%, there is a risk that we may be substantially underestimating the level of likely buy-backs over the next two years."

AIB and Bank of Ireland were both very circumspect when asked about their buy-back policies for the remainder of the year.

"AIB continued to buy back shares on May 22 and 23, pushing above its stated target level of €450m.

"The total acquired to date stands at €457m and, in response to queries, management indicated that they will tell the market 'when they are finished'," said Mr Rankin.

When contacted by The Irish Examiner, AIB offered the same guidance as it gave to Davy Stockbrokers.

Bank of Ireland, which has purchased €150m of its own shares in two separate bursts this year, was equally cautious when contacted by The Irish Examiner.

A spokesman for the bank said: "We will give no guidance."

Asked if the company would indicate when the buy-back programme is completed he said: "I don't see us giving any guidance on that either."