Bank of America upgrades Bank of Ireland to ‘buy’

Mortgage lending growth and cost synergies from IT investment contribute to upgrade

Bank of Ireland chief executive Francesca McDonagh outlined plans to increase the bank’s loan book at an investor day last week.

Bank of Ireland chief executive Francesca McDonagh outlined plans to increase the bank’s loan book at an investor day last week.

 

Bank of Ireland has been upgraded to a “buy” rating by Bank of America Merrill Lynch (BofAML) as it expects mortgage lending to rise in line with Francesca McDonagh’s goal outlined last week.

At an investor day in London the chief executive of Bank of Ireland outlined plans to increase the size of the institution’s loan book by 20 per cent by the end of 2021.

“With Ireland having the largest shortfall in lending against trend in the world, we see net mortgage lending reaching Bank of Ireland’s goals,” BofAML research analyst Alastair Ryan wrote in a client note.

Mr Ryan reiterated his price target of €8 for Bank of Ireland shares, currently trading around €6.70.

He also flagged sharply improving cost to income as the bank invests in information technology (IT) and restructuring.

Outlining his investment rationale, Mr Ryan wrote Bank of Ireland is expected to deliver strong earnings growth on the back of its IT renewal. “It aims to replace its core banking platform, which should deliver significant operational/cost synergies.”

BofAML also has a “buy” rating on AIB, while it has a “neutral” rating on Permanent TSB.