BoI and AIB enjoy strong gains

Bank of Ireland and AIB shares continued to make to make strong gains on the Dublin market this morning following advances yesterday.

At 10am Bank of Ireland stock was up 15 per cent at €1.36 building on advances of 26 per cent yesterday, giving the bank a market capitalisation of €1.34 billion.

The stock has risen 64 per cent so far this year. Volumes were strong with almost 5 million shares traded in the first two hours.

AIB shares were up 5.8 per cent at €1.27 after a rise of 15 per cent yesterday. At this share price its market value is €1.22 billion. AIB shares have fallen 27 per cent so far this year. Just over 3 million shares were traded.

The gains come ahead of the publication of the US government’s bank stress tests later today.

Davy banking analyst Scott Rankin said in emailed statement this morning that the doubling in European bank stocks since early March - and the quadrupling in Irish financials over the same period - has turned a previous vicious circle into a virtuous one.

In a note to investors Goodbody analyst Anna Lalor said sentiment seems to have “warmed significantly to the Irish banks”, with their stock prices the worst performing (probably globally) as the sector as a whole declined and, therefore, they may be perceived to offer good potential upside in the current market rally.

Among the reasons for renewed investor optimism is the creation of Nama with assets transferred at a 15 per cent hair-cut coupled with a Government equity injection.

She said the upward momentum in share prices was probably helping as a result of the circular benefit of lower dilution potential as share prices rise.

Another factor providing comfort to investors for both banks could be the possibility of the exchange of hybrid capital for debt below and the possible sale of assets by AIB.

Shares in Irish Life and Permanent were up 3.5 per cent at €2.37, following a rise of 9 per cent yesterday.

In Europe Barclays was up 5.2 per cent after it said its first quarter profit rose 15 perc ent from a year ago as strong growth at its investment bank arm made up for a big jump in bad debts.

HSBC, BNP Paribas, UniCredit , UBS and Standard Chartered were 2.4-3.7 per cent higher.

But Societe Generale slumped 7.3 per cent after it announced a surprise first-quarter loss as higher-than-expected write-downs and provisions hit earnings.

Additional reporting Reuters