AIB’S SHARE price rose by more than 14 per cent yesterday after analysts at Royal Bank of Scotland (RBS) recommended buying the stock.

AIB gained almost 17 per cent at one point during yesterday’s session on the Dublin Stock Exchange. At the close it was up 14.5 per cent, or 18 cent, at €1.43. This jump represented the largest daily gain in more than a month.

The level of activity in the stock was extremely strong, with 12 million shares trading hands in Dublin. This is about three times the daily average for the last three months.

In a report published yesterday by RBS, analysts upgraded AIB from “sell” to “buy” and raised its target price for the stock to €1.75 from €0.70. “While we accept that a degree of uncertainty and high execution risk remains over the coming months, we believe this provides a buying opportunity for investors,” it said.

The upgrade came after the lender transferred its first tranche of loans to the National Asset Management Agency (Nama) on Tuesday. Last week AIB said that it would sell foreign assets to boost capital and meet a new target set by the Financial Regulator.

RBS expects AIB – which requires total capital of €7.4 billion – to generate €3.9 billion through the sale of its stakes in Polish bank BZ WBK and US bank MT. This will leave a deficit of €3.5 billion, which will either be funded by private shareholders or the Government through the conversion of some or all of its preference shares in the bank, it said.

“Given how hard the bank has fought to remain out of majority government ownership thus far, we expect the bank to do its uppermost to limit the full € 3.5 billion conversion of the government preference shares which would take the direct Government stake to 77 per cent,” it said.

RBS also upgraded Bank of Ireland from “sell” to “hold” and increased its target price from €0.52 to €1.70. However, yesterday the lender lost recent good form and its share price slipped by almost 3 per cent, or 5 cent, to €1.74. Commenting on the recent gains in both AIB and Bank of Ireland’s share price, one Dublin trader said that the “market loves clarity”.

“We now know the haircuts and the amount of capital the banks have to raise,” he said. “A lot of people had been waiting to get all that detail last week and they can now make a decision as to whether to buy bank stocks.” – (Additional reporting Bloomberg)