DUBLIN REPORT: Iseq:2,447.77 (+113.81) Settlement date:February 2nd

SPECULATION THAT US president Barack Obama is preparing plans for a “toxic bank”, and the fading likelihood that Irish financials are facing nationalisation, saw Irish banks outperform their European peers yesterday.

News that the US administration is considering a federal dumping ground for the bad loans that have brought its financial system to its knees boosted European banks yesterday.

But the Irish banks sprinted ahead of almost all others after taking a hammering last week on fears that the Government would be forced to nationalise them.

AIB closed up almost 40 per cent at €1.66. While the numbers of shares traded was far short of the 49 million-plus that were sold last week, volumes were still healthy, with over 8.5 million units changing hands in Dublin.

The bank ended the day 470 per cent ahead of the lows of 29 cent that it plumbed last week.

Bank of Ireland was up 27 per cent at 79 cent, with similarly healthy volumes of 9.15 millionshares traded.

Irish Life Permanent was up 16 per cent at €2.02 and 2.25 million shares in the mortgage and life specialist changed hands in Dublin.

One trader said it was “nice to see positive numbers on the screen for a change” as the market generally lifted.

Building materials group CRH had an “up and down day”, rising strongly before falling and then rallying to close 3.33 per cent up at €19.22.

While its peers are weak, it has one of the strongest balance sheets of all multinationals in its sector, and it is poised to benefit from a proposed US highway spending programme.

Grafton Group, which one dealer said took an unwarranted hammering on Tuesday, recovered handsomely, closing 13 per cent up at €1.625.