Saturday 16 December 2017

AIB rises after RBS recommends buying shares

Fergal O’Brien

Allied Irish Banks rose the most in more than a month in Dublin trading after analysts at Royal Bank of Scotland recommended buying the shares and more than doubled their price estimate.

The bank gained as much as 14pc, the most since March 5, to €1.43 and traded at €1.41 euros as of 9:26am. Bank of Ireland rose 3.6pc to €1.86.

RBS analysts including Asheefa Sarangi in London raised AIB to “buy” from “sell” and set a share-price estimate of €1.75.

The upgrade comes a week after the lender began transferring toxic loans to NAMA and said it would sell US and Polish assets to boost capital and meet a new target set by the financial regulator.

“While we accept that a degree of uncertainty and high execution risk remains over the coming months, we believe this provides a buying opportunity for investors,” Sarangi said.

AIB, which needs €7.4bn in total, may generate €3.9bn in capital from the asset sales, RBS said.

The Government may have to inject money into the bank to make up the shortfall, which could give it a majority stake. The state already holds an indirect 25pc stake in preference shares.

“AIB is fully aware of the difficult task in front of it,” Sarangi said.

“Given how hard the bank has fought to remain out of majority government ownership thus far, we expect the bank to do its uppermost to limit the full €3.5bn conversion of the government preference shares.”


The RBS analysts also raised Bank of Ireland’s rating today, to “hold” from “sell.” They increased the share-price estimate to €1.70 from €0.52.

Referring to both banks, RBS said “uncertainty will remain” until the recapitalisation plans are “fleshed out,” all loans are transferred to the asset agency and the European Union rules on the lenders’ restructuring plans.

“Given AIB’s plan to divest all of its major foreign assets, we believe the risk of a negative surprise from the EU is more likely at Bank of Ireland where the develeraging process has been slow,” Sarangi said.


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