Analysts at Deutsche Bank AG (NYSE:DB) (FRA:DBK) (ETR:DBK) Markets Research upgraded their rating for shares of Bank of Ireland (ADR) (NYSE:IRE) to hold and raised their price target to 15.4c. The analysts previously issued a sell recommendation with 14.9c price target.
Deutsche Bank Analysts Changed Their Stock Recommendation
Deutsche Bank AG (NYSE:DB) (FRA:DBK) (ETR:DBK) analysts David Lock & Jason Napier changed their recommendation for the stock of Bank of Ireland (ADR) (NYSE:IRE) because the Irish stress test has been delayed until 2014, and retail spreads seemed to widen further in April after the bank showed more stability during the first quarter of the current fiscal year.
According to Lock and Napier, the previous sell rating for shares of Bank of Ireland (ADR) (NYSE:IRE) was driven by several factors such as slower NIM improvements, uncertainty around the Irish stress test in 3Q13, ongoing drag of mortgage trackers, deleveraging beyond targets, Basel 3 impact, and valuation vs. the sector.
Bank Of Ireland Shares Close to Fair Value
Currently, Lock and Napier believe that shares of Bank of Ireland (ADR) (NYSE:IRE) are close to fair value, but they continue to perceive risk to their bullish opinion for the stock.
Lock and Napier emphasized that the postponement of the Irish stress test provides a double positive for the bank. According to the analysts, Bank of Ireland (ADR) (NYSE:IRE) will have additional time to work out its bad loan book and rebuild profitability. They believe that the 2014 Irish stress tests are “likely to be less onerous” than in 2011 because the bank will be tested in line with rest of Europe.
The analysts also noted that the delay of the Irish stress test would not solve the Basel 3 deductions (5.5 percent fully loaded ratio FY12). They said, “….a credible stress test remains crucial to ending the sovereign-banking link. But this change removes a near-term risk, and should give management more flexibility over strategy in 2H13.”
Last week, analysts at Goldman Sachs Group, Inc. (NYSE:GS) downgraded their rating for the shares of Bank of Ireland (ADR) (NYSE:IRE) to sell in anticipation of nearly zero return potential compared with more than the expected 20 percent return from the banking sector. Goldman Sachs analysts believe that the bank continues to face challenges even if the Irish economy has better prospects.