MARKETS in Dublin and London reacted enthusiastically to the Bank of Ireland takeover of Bristol & West Building Society, although dealers said there was no great size to the trading.

In Dublin, the shares dealt from the overnight 426p up to a high of 445p before settling at 440p at the close. In London, just over half a million shares traded and the shares reached a high of 460p sterling before closing up 16p on 455p sterling.

The comparatively low level of trading in Bank of Ireland shares was partly due to the absence of a number of Irish fund managers on a trip to its British hotels organised by Jurys. Otherwise, turnover in the shares might have been substantially higher - as most of yesterday's demand came from Irish institutions with little sign of overseas institutional interest.

But the shares closed well bid in both markets and dealers believe Bank of Ireland has the capacity to "grow" its share price further. Yesterday's 14p rise in the share price added £67 million to Bank of Ireland's market value and narrowed the gap in market value between Bank of Ireland and AIB to just Bank of Ireland's earnings of £81 million. At yesterday's close, Bank of Ireland has a market value of £2,109 million while AIB is worth £2,192 million.

If Bank of Ireland shares continue to rise, as some dealers forecast, there is the prospect of the bank shifting AIB from its number one position in the Irish stock market.

Analysts are suggesting the takeover could add 10 per cent to share in a full year, although it will be the 1998-99 financial year before Bristol & West makes a full year contribution to earnings.

It is moor whether the rise in Bank of Ireland shares should automatically match the forecast rise in full year earnings, but if this is the case then the share price has a considerable way to go before peaking. Yesterday's rise was just over three per cent from the overnight 426p - add in another 7 per cent rise and Bank of Ireland shares would be nudging 470p.

One London brokerage, Lehman Brothers, yesterday rated the shares as likely to "outperform" the market in future. The analyst, Mr Ian McEwen, said he expects a 10 per cent upside from here. "I'd be happy to see it at 500p," he said.