Merrion downgrades FBD and AIB

Broker suggests both shares had hit their target price in recent weeks

 

Merrion stockbrokers has downgraded its share ratings for insurer FBD and AIB following recent market moves.

Merrion placed a “hold” recommendation on FBD shares, suggesting the company’s shares had reached its target prices of €9.70. “FBD has rallied by 13 per cent since we recommended it as a ‘buy’ as recently as October 24th. Valuations are now fair, with the stock trading at 1.4 times book value and expected to report a 10-11 per cent return on equity. We would be happy to take some profit on its shares at current levels,” Merrion said.

Meanwhile, it also downgraded AIB’s share rating to “market perform”, noting its shares were now trading above its current fair value of €5.30.

“On September 15th, Allied Irish Bank shares had corrected to €4.79 and we highlighted that this was a good opportunity to accumulate their shares,” Merrion said.

“ Since then Allied Irish Banks have returned 12.7 per cent. Its shares have outperformed Bank of Ireland (-2 per cent) over the same period, while PTSB shares are trading up about 30 per cent over that same period.”

“Given that AIB’s valuations now look fully valued once again, we downgrade our recommendation to ‘market perform’.”

Merrion also noted the ongoing Central Bank review of the tracker mortgage examination, suggesting that although the banks have taken significant provisions, “we are not fully sure at this stage what the final compensation requirements that the Central Bank will enforce on the banks”.