Pawel Dziedzic and the team at Goldman Sachs Group, Inc. (NYSE:GS) in an equity research report published today anticipate almost zero return potential from the bank as against an over 20 percent return expected from the banking sector.
The research report notes Bank of Ireland (NYSE:IRE) has outperformed its European peers by providinga 49 percent return year-to-date. With the valuation gap evaporating, the research team feels the bank’s stock is now fairly valued, giving limited upside potential.
Interestingly Goldman Sachs Group, Inc. (NYSE:GS) has hiked its estimates for Bank of Ireland (NYSE:IRE) on three occasions during this year. However it anticipates the Irish bank’s capital position remains sensitive owing to Basel III requirements and state aid repayment.
The analysts, however, expect the Irish bank to break even during 2014E.
Bank Of Ireland's First Half 2013 Results
The research team feels Bank of Ireland (NYSE:IRE)’s first half 2013 results provide sufficient insight into the group’s restructuring process. The bank’s share price would move in tune with the news flow relating to restructuring of distressed consumer debts and settlement over a step-up in the balance of preference stock.
Pawel Dziedzic and team feel owing to Bank of Ireland (NYSE:IRE)’s current rich valuation its price is at a premium to other banks in Spain, Portugal and Italy.
The analysts expect the Irish bank to post a loss in 2013 before turning green by 2016.
Using a ROE/COE approach for valuing the Irish bank’s share, the analysts arrived at an unchanged target price of €0.18.
The analysts view some of the key risks for the Irish bank as macro conditions, credit losses, regulatory and legislative developments.
The Irish bank and its subsidiaries offer a range of banking and other financial services. Bank of Ireland (NYSE:IRE) operates in five broad segments encompassing Retail Republic of Ireland, Bank of Ireland Life, UK Financial Services, Capital Markets and Group Centre.
A number of other analysts have also recently weighed in on Bank of Ireland (NYSE:IRE). Analysts at HSBC also initiated an ‘underweight’ coverage on shares of Bank of Ireland (NYSE:IRE) in a research note.