Profit-taking takes savage toll on big banks

It look a long time to manifest itself, but when profit-taking hit the two big banks the losses proved to be pretty savage. Dealers in Dublin were taken aback by the scale of yesterday's losses, but emphasised that volumes in the two banks were relatively modest and a rebound is likely in the next couple of days.

The last month has seen the Irish banks outperform the European banking sector by almost 27 per cent, so profit-taking was not a surprise. What was a surprise was the willingness of some investors to take profit in Bank of Ireland at as low as €8.27 yesterday. Bank of Ireland fell over 8 per cent as it dealt down 73 cents to close at €8.33 but turnover in Dublin and London was little more than four million shares.

Both banks were hit by downgrades, the latest by UBS which moved both stocks from "strong buy" to "hold". AIB was down 52 cents in Dublin/London turnover of just over three million shares, but Irish Life was not affected by the profit-taking and actually gained 14 cents to €11.35.

The banks might have fallen almost 5 per cent, but the main market index was down less than 2 per cent thanks to big gains by index heavyweight Elan, where the share was up $4 by midday at just below its all-time high, with big volumes of stock changing hands. There is some speculation that if Elan breaks through $60 it may split the shares - which are up 180 per cent on a year ago.

Elsewhere, Fidelity emerged as a recent big buyer of IAWS, snapping up 500,000 shares in the past week to take its stake to 9.49 million shares or 8.15 per cent.

Fidelity has reinforced its position as the second biggest shareholder in IAWS, after the IAWS Co-op, leading some in the market to wonder why domestic institutions are not as aggressive as Fidelity in building up a sizeable stake in one of the market's blue-chips.

The biggest volumes were in Dunloe Ewart, where both Mr Liam Carroll and Orb are thought to have been in the market buying shares ahead of possible bids. Dunloe closed one cent lower on 47 cents as Mr Noel Smyth scrapped his much-criticised privatisation plan.

Eircom was three cents lower on €2.49, Fyffes recovered three cents to 80 cents, Smurfit was unchanged on €1.99, while Waterford Wedgwood eased two cents to €1.28 as Mr Tony O'Reilly confirmed his interest in bidding for Coach, the leather group being floated by Sara Lee at an initial value of $640 million.