Ireland's largest bank AIB has seen its prospects revised downwards by analysts this week. Already struggling to extract a better performance from its Polish operations, the bank faces a threat to its profitability from its US Allfirst division. Davy Stockbrokers has pencilled in a 5 per cent fall in profits from the US next year but admits it may have underestimated the severity of any recessionary downturn. It is particularly concerned about bad debts at Allfirst, which still relies on the commercial sector for 65 per cent of its loan book. On top of this, Davy accepts its outlook for AIB's domestic performance may be unduly upbeat, with GNP growth of 1 per cent forecast by its own economist Robbie Kelleher putting the prospects for loan growth of 8-9 per cent at risk.

Even with this optimistic view, Davy says the bank is likely to see diluted earnings per share growth of just 6 per cent this year, falling to 3 per cent in 2002.