Bank of Ireland shares rise amid stock, debt rating upgrades

Merrion Capital says Bank of Ireland’s shares now undervalued

Photographer: Frantzesco Kangaris/Bloomberg

Photographer: Frantzesco Kangaris/Bloomberg

 

Bank of Ireland shares rose as much as 2.3 per cent on Wednesday as Standard & Poor’s upgraded its rating on the lender’s credit-worthiness, and investment firm Merrion Capital raised its stance on the company’s stock to outright “buy”.

The bank’s shares rose to as high as €6.86 on the Dublin stock market.

Standard & Poor’s (S&P) raised its rating on Bank of Ireland by one level to “BBB+”, highlighting how the group raised the equivalent of €1.18 billion since mid-August from the sale of senior unsecured bonds that can be “bailed in” in the event of a future financial crisis.

S&P also noted how the bank’s common equity Tier 1 capital ratio, a gauge of a lender’s ability to withstand shock losses, was 14.1 per cent at the end of June, above its medium term target of at least 13 per cent.

Meanwhile, Merrion Capital analyst Darren McKinley said in a note to clients that Bank of Ireland’s shares are undervalued by the market following a recent sell-off and that management should consider launching a €250 million share buyback over the next 12 months.

Mr McKinley had previously downgraded his rating on Bank of Ireland’s stock to “hold” in early August on valuation grounds.