One more thing:With the share prices of Irish financial stocks declining by up to 31 per cent in the year to date, analysts at Merrion and NCB have issued downgrades for the sector to clients.
Merrion has reduced its 2008 earnings forecasts by up to 5 per cent to reflect a lower outcome for Irish house completions (just 50,000) and the effects of a slowing economy.
The broker has pencilled in economic growth of 2 per cent next year, compared with 4.5 per cent in 2007, placing it at the lower end of the scale of forecasts from Irish economists.
Merrion has also reduced its growth forecast for the Irish mortgage market in 2008 to 6 per cent from 8 per cent previously.
NCB has been slightly more conservative with its forecasts.
Its earnings estimates for AIB and Bank of Ireland have both been pegged back by 3 per cent, while Irish Life & Permanent (IL&P) has been revised downwards by 1 per cent.
Forecasts for Anglo Irish Bank, which has no exposure to the residential housing market here, have been left unchanged.
NCB's earnings downgrades mostly reflect an expected increase in the cost of funding and reduced contributions for AIB and BOI from their capital markets divisions.
In spite of the downgrades and the share price slippage, both brokers continue to recommend Irish financials to their clients.
NCB has maintained its buy rating on AIB, BOI and Anglo and upgraded IL&P from a hold to a buy. Merrion, meanwhile, has cut its price targets for all the stocks but still believes there is up to 35 per cent upside from their current share price levels.
AIB is its "top pick", with IL&P upgraded to a buy. With AIB, BOI and IL&P among the best dividend payers on the Irish market - they offer yields of close to 5 per cent each - the recent share price weakness represents a good buying opportunity.
