AIB among least favoured

AIB was among the European banking stocks least favoured by analysts at UBS as it predicted a dreadful year for earnings in 2009.

“Our least preferred stocks are those exposed to the unwinding of policy errors and the bubbles in Spain and Ireland,” UBS analysts said.

Other stocks rated “sell” include Banco Sabadell, Credit Suisse Group and Danske Bank, UBS said.

Banking across Europe faces an “unprecedented and synchronised slowdown” as higher impairments, slumping stock markets and lower volumes take their toll, the analysts said.

Still, bank stocks “can rally” while the economy deteriorates as investors realise that the possibility of even worse scenarios has diminished, they added.

“With the authorities now reflating the system at seemingly any cost, we believe the catalysts for such a shift may well be under way,” UBS said.

UBS has “buy” recommendations on Raiffeisen International, National Bank of Greece, Societe Generale and Intesa Sanpaolo, which are all “defensive names with emerging market exposures at a reasonable price”, it said. While maintaining a “neutral” rating, UBS sees similar attractions for HSBC Holdings.

Meanwhile AIB plans to sell the first Government-guaranteed bonds under the country’s bailout program, following similar sales in Britain and France.

The lender may sell the two-year bonds in euros at a yield of 50 to 60 basis points more than the benchmark mid-swap rate, according to a banker involved in the sale, who declined to be identified because the deal isn’t complete. A basis point is 0.01 percentage point.

The proposed yield is 10 times the 5 basis-point spread France’s Societe de Financement de l’Economie Francaise, the agency set up to provide guaranteed loans to banks, paid on three-year notes issued last week. Five British banks have issued government-backed debt at spreads of 18 to 25 basis points.

AIB got the top ratings for a €15 billion government-guaranteed debt, Standard & Poor’s said last week.

Moody’s Investors Service is expected to rank the bonds an equivalent Aaa, the banker said.