Just as analysts were telling investors that bank stocks had run out of steam, the blockage of the Lloyds TSB and Abbey National deal triggered further strength for Irish banks on speculation that they may become takeover targets.

AIB and Bank of Ireland have been the main beneficiaries of developments in the British market which has effectively put an end to any further consolidation there by its four big banks. These institutions will now be forced to look overseas for further expansion with Ireland being pointed to as a good half-way option for them in expanding their European presence.

Bank of Ireland in particular is being mentioned as a possible suitor because of its substantial UK business through its Bristol & West subsidiary. AIB's attraction lies in its US business, although there are concerns about developments in the US economy at the moment and the likely impact on the banking sector there.