DAVY downgraded its earnings forecasts for Irish banks yesterday due to slower loan growth.
It also said fee income in many areas is under pressure and strain is building in the impairment line.
AIB, the country’s largest bank, recently indicated that loan growth in its core retail business in Ireland would be 4% this year, down from 20% in 2007.
Davy said this suggests that the bank will probably grow its book very little, if at all, in the second half of this year.
Davy also cut its share price targets for some of the country’s biggest banks by up to 18%, due it said, to higher cost of equity and lower book value estimates.
It also lowered its 2008 and 2009 earnings-per-share estimates for AIB, Bank of Ireland, Anglo Irish Bank and Irish Life & Permanent by as much as 12%.
In a further blow to some of the country’s biggest firms, the stockbrokers cut its forecasts for Grafton Group, the country’s largest builders’ merchant, and Kingspan Group, by as much as 20%, citing factors including the slowdown in economic growth, cooling consumer spending and the decline in home building.
Davy also said yesterday that housing remains mired in a deep recession, adding however that the pace of decline in activity has moderated.
The Irish Homebuilders Association (IHBA) said yesterday that the Davy report misses some key points when it comes to the housing market. Director of the IHBA, Hubert Fitzpatrick, said that once existing stock has been purchased there will be renewed demand so it is important that sufficient housing is in place to meet demand.
Meanwhile a report released by EBS said one in five people surveyed said they believed that the value of their home had decreased over the past 12 months.
Also over half of respondents felt that the value of property would decrease over the next 12 months.
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