AIB and Bank of Ireland shareholders could be in for a buy-back windfall within the next year, if the latest prognostications from Davy Stockbrokers come to pass.

Davy believes slower growth over the next year will boost the banks' surplus capital to a level where they will probably offer to buy back shares. The broker believes that AIB's surplus capital at end-2002 could be up to €800 million (£630 million), with Bank of Ireland having a surplus of €500 million.

Some of this excess capital will probably find its way into acquisitions, but if the banks find it difficult to locate productive outlets for this money, then we can only concur with the Davy view that "if excess capital is not put to work, it should really be returned to shareholders".