Business Irish

Friday 25 May 2018

Analysts losing interest in covering our 'pillar' banks


Emmet Oliver

The main Irish banks are in danger of not being covered by any overseas equity analysts as US bank JP Morgan become the latest firm to drop any coverage of AIB and Bank of Ireland.

The so-called "pillar banks" are mainly now followed by Irish brokerages, with only a small number of UK analysts actively covering Bank of Ireland or AIB.

While equity analysts are pulling out of coverage of the pillar banks, the two lenders still attract a lot of attention from bond and credit analysts.

JP Morgan, which has been one of the most intensive firms in following the Irish financial sector, said it was no longer able to provide any coverage of Irish banks due to staff changes.

One of the reasons the Government has given for retaining public shareholdings for AIB in particular is that analysts would still be able to track the company.

But with AIB's free float so small, few overseas clients are likely to have an interest in AIB for the forseeable future.

Bank of Ireland still has a chance of retaining some coverage, one analyst said last night.

While both banks are unlikely to be too disappointed at the lack of interest from outside analysts, analyst interest is usually a sign of interest in the stock. It can also help put the banks to the fore in capital markets.

The last JP Morgan analyst was Ignacio Cerezo, but the bank still claims to be tracked by banks like Nomura and Goldman Sachs.

JP Morgan was consistently bearish about AIB throughout last year, saying in August that the bank would be "virtually'' nationalised by year end.

In fact, the bank failed to forecast the full capital requirement AIB eventually needed.

The US bank said the bank was facing a shortfall of €3.5bn to €4bn. However, the stress tests in March, ordered by the Financial Regulator, insisted AIB needed €13.3bn.

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