Bank of Ireland ‘top pick’ in banking sector for Davy

Stockbroker Davy has increased its share price target for Bank of Ireland to €9.50, representing a more than 30 per cent increase on the bank's current share price.

In an analyst’s note on Friday, Davy said Bank of Ireland was its “top pick” in the banking sector, following publication of its results for the first six months of 2018 a number of weeks ago.

The lender reported underlying profit of €500 million in the six months to June 30th. Operating expenses, excluding levies and regulatory charges, fell by 3 per cent to €933 million.

“H1 2018 results, showing lending growth and cost reduction, provided early evidence of progress in BOI’s recently announced strategy,” said Davy.

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“While the finalisation of the review of internal models was somewhat more negative than anticipated, this was offset by a stronger capital position.

“We forecast significant earnings growth in the coming years as BOI benefits from its strong position, a growing market and efficiencies arising from its transformation programme.

“We increase our price target to €9.50 (from €9), indicating greater than 30 per cent upside to the current share price and reiterate BOI as our top pick in the banking sector.” The bank’s current share price is €7.18.

Bank of Ireland said pre-tax profits dipped to €454 million in the six months to June 30th from €460 million during the first half of last year.

Total income was €1.4 billion for the period, down from €1.5 billion in the first half of 2017. Its net interest margin fell from 2.32 per cent to 2.23 per cent.

The bank took a non-core charge of €46 million, primarily related to costs associated with its restructuring programme.

Bank of Ireland chief executive Francesca McDonagh described the first half performance as strong. “All our trading divisions are profitable, contributing towards an underlying profit of €500 million during the period,” she said.

New lending at the bank rose by 16 per cent to €7.7 billion, with mortgage lending up by 30 per cent to about €1 billion, giving the bank a 28 per cent share of the Irish mortgage market.