Merrion Capital has tempered its recommendations on telecoms company ITG and AIB bank from a strong buy to a buy for investors at the moment.

In a report on ITG this week, the broker explains its downgrade is due to concerns about the impact on the company of the grouping together of the UK operators such as Vodafone and Orange on ITG's card services division. ITG has had to revise its strategy in this area and will now provide terminals to all UK operators. In AIB's case, the broker's reservations are based on the potential impact of any DIRT liability on the bank's finances. It suggests the bank's tight surplus capital may be further constrained if it is forced to make a substantial settlement with the Revenue on DIRT.

AIB's shares are currently trading some 40 per cent below other leading financial stocks internationally and Merrion suggests the bank may now be attractive as a takeover target at these levels.

Without a bid, it expects AIB's shares to continue to trade at a discount to the sector and only gradually improve over the next 18 months to two years.