Bro­ker cuts AIB, BoI share tar­gets on slower lend­ing

Irish Examiner - - Business - Ea­mon Quinn

Ir­ish banks face “nu­mer­ous head­winds” in grow­ing lend­ing to house­holds and SMEs, said In­vestec Ire­land, as it cut its share price tar­gets for AIB and Bank of Ire­land (BoI) and raised its tar­get for Per­ma­nent TSB.

An­a­lyst Owen Cal­lan said a “step down” in growth in new mort­gage lend­ing means it now fore­casts new mort­gage lend­ing to reach €8.7bn this year, down from its ear­lier fore­cast for €9.1bn. In 2019, it fore­casts mort­gage lend­ing of €10bn, com­pared with €10.9bn pre­vi­ously. “Ad­di­tion­ally, as a re­sult of the con­tin­u­ing un­cer­tainty be­ing pro­vided by Brexit, we down­grade cu­mu­la­tive Ir­ish non-prop­erty busi­ness lend­ing fore­casts by circa 5%” through 2021, said In­vestec.

Amid lower lend­ing vol­umes, it cut its earn­ings per share tar­gets for AIB, Bank of Ire­land, and Per­ma­nent TSB, and re­duced “slightly” its share price tar­gets for AIB and Bank of Ire­land to €5.20 and €9.00, re­spec­tively. For Per­ma­nent TSB, it ups its share price tar­get to €2.00, af­ter the bank cut back its bur­den of non-per­form­ing loans through sales. “Given the re­cent Euro­pean bank sell-offs, we be­lieve cur­rent val­u­a­tions of­fers at­trac­tive op­por­tu­ni­ties for all three of the Ir­ish banks given the strong macroe­co­nomic back­drop and the pos­i­tive struc­tural po­si­tion — high mar­gins, low com­pe­ti­tion — of the sec­tor,” said Mr Cal­lan.

Brexit has put pres­sure on Ir­ish bank shares but the pres­sure has in­ten­si­fied this year, as in­vestors looked askance at the problems of lenders across Europe and Ital­ian banks, in par­tic­u­lar. Some of those pres­sures in­ten­si­fied this week.

De­spite gains in the lat­est ses­sion, AIB shares have lost around 30% of their value this year, Bank of Ire­land shares have shed 20%, while Per­ma­nent TSB shares are down 25% this year.

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