Irish bank shares have performed very strongly over the past nine months, running ahead of UK and European banks, but Davy Stockbrokers suggests they may be running out of steam. In a new report, the brokers say that, unless there is a further rerating of banks generally, there is not a lot to go for in the near term with price performance over the next six months likely to be more related to earnings growth.

The exception is Bank of Ireland, however, which may enjoy some further upside following its inclusion in the Morgan Stanley Capital Index. Since last August, Bank of Ireland and Anglo Irish Bank have risen by 70 per cent and 102 per cent respectively. First Active is up 55 per cent, Irish Life & Permanent gained 40 per cent and AIB is up 38 per cent.

These gains compare with just 1 per cent for the Eurotop 300 bank sector and 12 per cent for the UK sector.

As a result, the ratings gap that had existed between Irish banks and their overseas peers has been eliminated.