ANGLO IRISH Bank has fallen 8.3 per cent after NCB Stockbrokers reduced its ratings on Irish bank stocks, blaming the deterioration in the housing market.

Anglo dropped 47 cents yesterday to €5.12, giving the State's third-largest bank a market value of €3.9 billion. NCB reduced its rating on Anglo to "add" from "buy" and lowered Irish Life & Permanent (IL&P) to "hold" from "buy". It cut its rating on Bank of Ireland to "hold" from "buy" and on AIB to "add" from "buy".

"With GDP set to fall 1.6 per cent in 2008 and remain flat in 2009, rising impairments present a significant risk to earnings forecasts for Irish banks, increasing the risk that capital positions will come under pressure," analysts John Cantwell and Ciarán Callaghan said in a research note.

NCB's estimate of Anglo's 2009 bad debt charge is 1.13 per cent of total loans, higher than a previous projection of 0.45 per cent. IL&P's bad debt charge may rise to 0.33 per cent in 2009 from an estimate of 0.1 per cent in 2008, it said.

Bank of Ireland's share price fell 0.7 per cent to €5.35, AIB gained 1.2 per cent to €7.94, while IL&P rose 0.5 per cent to €5.17.

Mr Cantwell said that the capital positions of the Irish banks were "adequate" but there was a higher risk of bad debts rising.

"Should that occur then there would be pressure on the capital of the banks. It would be prudent to rein back on dividends," he said.

AIB revised its bad debt target for this year up to 0.35 per cent of loans, 75 per cent above the 0.2 per cent forecast only 11 weeks ago, NCB said. The bank raised its interim dividend by 10 per cent.

"We have increased our Irish banks impairment forecasts and now expect peak construction and property charges in 2010," the stockbroking firm said.

The broker cut the banks' 2009 earnings forecasts by an average of 32 per cent and expects earnings to fall 34 per cent next year.