Scandals ‘won’t take shine off AIB shares’

THE three overcharging scandals uncovered so far at AIB Bank should have no effect on the company’s share price with all major brokers rating the stock a buy.

Merrion Stockbrokers head of research Rory Gillen said the scandals will have no impact on AIB’s share price.

“The headlines in the newspapers over the last couple of days will not matter a damn to investors.

“The cost to the bank, €30 million or so, is immaterial to a company that will make profits of well over €1 billion this year,” he said.

The view regarding the latest trust overcharging controversy, as voiced by NCB stockbrokers analyst David Odlum, is typical of broker reaction.

In a note to clients, Mr Odlum, who rates the shares a buy, pointed out that their estimate for pre-tax profits at AIB for 2004 is €1,442m.

“Overall, while not good news, following recent revelations about foreign exchange charges and mortgage payment protection policies, the amount is immaterial for the group and the bank had informed the Irish Financial Services Regulatory Authority (IFSRA),” he said.

Merrion’s Rory Gillen said that the two main Irish banks, AIB and Bank of Ireland represented exceptionally good value at the moment generating a dividend yield of more than 5%, at a time when the interest rate is around 2%.

Mr Gillen said that shares are a better bet than property at present, as property investors have to pay 9% stamp duty on their investments.

Mr Gillen acknowledges that AIB and Bank of Ireland shares have been very frustrating for investors in recent months as they have been range trading.

Mr Gillen said the problems perceived by investors at AIB and Bank of Ireland included pedestrian profits growth and that while margins are good they are perceived to be under pressure.