Davy says AIB’s €2bn M&T stake is not sustainable

AIB BANK’S €2 billion investment in US bank M&T is not a sustainable strategy, according to Davy Stockbrokers, who believe AIB will exit the investment in the medium term.

Davy banking analyst Scott Rankin sees a 22% upside in AIB shares over the next 12 months with their sum-of-the-parts model generating €15.90 price in a year's time. The shares closed at €13 yesterday. "We are increasingly of the view that the 'M&T discount' will eventually disappear.

"We believe it is highly likely the group will exit the US in the medium term via a disposal or de-merger as holding a 22.5% stake is not a sustainable strategy in our view. Selling M&T now would generate a profit of maybe €100 €150 million," Mr Rankin said in a note to clients.