Davy stockbrokers feel a re-rating for Irish bank shares is unlikely in the current environment but it considers its clients, Bank of Ireland and Irish Life & Permanent, represent good defensive plays in a European context because of their high mortgage and life and pensions exposures. Bank of Ireland is trading about 10 times 2002 earnings, a discount of 5 per cent to its European peer group, while at 9.6 times earnings AIB is at a 9 per cent discount. But with a likely negative news flow in coming months a re-rating is unlikely.

Analysts at Commerzbank prefer AIB to Bank of Ireland and have set a 12-month (0ctober 2002) target price of €12 for the shares - from the current price of about €10.90. Setting a less-challenging price target of €9.60 for Bank of Ireland from a current price of €9.40, the analysts consider it not to be as strategically sure-footed as AIB.