Are AIB’s days as market darling numbered?

It must have been hard for Richie Boucher, in his final months as chief executive of Bank of Ireland, dealing with the fact that investors had found a new market darling in AIB.

Shares in AIB have surged almost 20 per cent since the bank returned to the main stock markets in Dublin and London at the end of June, when the Government secured €3.4 billion for the sale of a 28.8 per cent stake to investors.

Bank of Ireland, on the other hand – the nation’s only bank to avoid State control during the crisis and only bank to repay its entire taxpayer bailout, and then some – has languished, with its shares only edging about 1.5 per cent higher over the same period.

However, analysts at Wall Street giant Goldman Sachs now believe the 20 per cent discount that Bank of Ireland is trading on compared to AIB (based on the value of assets on their balance sheets) will “close over time”.

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The catalyst? Well, that may be some months off. But Goldman expects that Bank of Ireland’s full-year results in February, presided over by new CEO Francesca McDonagh, could be the time, when she is expected to make good on Boucher’s last big pledge – returning to dividend payments for the first time since 2008.

“We also see this as the first significant opportunity for new management to provide the market with more disclosure on the company’s IT project (and its cost savings potential),” Goldman says.

We understand that there has been some disquiet internally as progress on the €900 million endeavour has slowed down in recent months, and McDonagh is also expected to carry out her own deep examination of the programme.

But Goldman is optimistic and has duly upgraded its stance on Bank of Ireland’s stock to an outright ‘buy’, with an €8.30 price target. That points to almost 20 per cent upside from where it is currently hovering.

Meanwhile, Goldman, which was among banks to share millions of euro in fees on AIB’s initial public offering in June, has cut its price target for the stock to €5.10 from €5.20, suggesting it might dip from its current level at €5.24.