Retail banks tipped for defence

Bank of Ireland is one of the European banks being recommended by Commerzbank as a defensive stock. The brokers also suggest Abbey National, Alliance & Leicester, Lloyds TSB, BBVA and Standard Chartered.

Stocks to be avoided are Dresdner, HypoVereinsbank, Credit Lyonnais, ABN Amro, Bank of Scotland and Barclays.

In a new report, Commerzbank suggests that investors will find the best defence from a cyclical downturn in domestic retail stocks, especially the UK and Irish retail banks. Those most at risk from a deteriorating credit environment are Europe's larger wholesale banks, according to Commerzbank. It points out that European banks are operating on historically low rates of profit and loss provisioning, despite an uncertain economic outlook.