Bank of Ireland shares gain 4% as buy-back programme begins to roll

BANK of Ireland shares rose

Following its aborted bid for Abbey National last year, group chief executive Mike Soden said the bank would now start a rolling programme of purchasing its shares on the market to increase shareholders' value.

"These purchases are consistent with the bank's overall capital management strategy, which seeks to maximise capital efficiency, whilst maintaining prudent regulatory ratios and enhancing returns to shareholders," Mr Soden said.

The bank bought 275,000 of its shares on Tuesday at the cost of 2.6 million.

Mr Soden added: "We are confident that the share buy-back programme will, over time, have a positive impact on both return on equity and earnings per share, which are two key performance measures."

Analysts at NCB Stockbrokers said the purchase, equivalent to just 0.03% of BoI's share capital, is good news as it should reduce the widely held perception that Bank of Ireland is a stock with a high acquisition risk withholding the share price.

They said the purchases will reduce its surplus capital, leaving the company unable to make a transformational acquisition, something that NCB says is not what the market wants to see. Bank of Ireland did not say when it would make its next foray into the market.

The bank's shares fell heavily last year when it made a tentative approach to Abbey National, but they have recovered the ground since.

The bank is favoured by many analysts as a better investment option than rival AIB.

Merrion Stockbrokers believes that a major deal should not be considered by the bank when there are opportunities to grow its existing British franchise.

They said that Bank of Ireland should sell its British mortgage business, Bristol & West, and concentrate on its other opportunities in the country.

Merrion have an end-2003 price target of 12.20 on the shares, a 25% premium to the current price.

Bank of Ireland shares closed up 37c on the Dublin market yesterday.