Shares in Irish banks ‘should increase by 10%’

SHARES in Irish banks should increase by 10% this year, with AIB Bank heading for growth of 11.7%, according to Davy Stockbrokers.

The Bank of Ireland-owned stockbroking house has selected rival AIB to be the top performing Irish financial stock in 2005.

In a special report, Irish Financials in Strong Demand, Davy analysts Emer Lang and Scott Rankin say that Irish financials have already put in a robust performance in 2005 advancing 7.4%.

"Irish financials have picked up where they left off last year, with a strong performance so far this year. In aggregate, Irish banks have delivered average compound earnings growth of 12% over the past five years.

"We are forecasting average earnings growth of around 10% this year and next, and we think the risks to this lie on the upside," Davy said in the 29-page report.

The Davy duo note that all four large Irish financials have outperformed their peers in Britain or Europe. The strong Irish economic backdrop continues to be the key.

"We remain very positive on the AIB story and on the back of the recent results we raised our end-year share price target from 1800c to 1900c. This implies upside of 17.7% from here," they said. Davy says there has been no let-up in Anglo Irish Bank's share price momentum. Since January, the price has raced from €19.17 to €20.40, an increase of over 6%.

"This implies upside of less than 8% to our €22 target by year-end, but our target price is earnings driven (as opposed to banking on any further re-rating), and we think there is still some room for more momentum here," they add.