Davy Stockbrokers has lowered its share price targets for Irish financial stocks, saying the turmoil in credit markets has added to pressures sparked by concerns about a slowdown in the Irish property market.
In a report the broker said Irish financial stocks should be less affected by global credit market problems than their counterparts elsewhere, but investors were not recognising this.
Davy also said that, as a downturn in housing was starting to lead to job losses, even a small pick-up in bad debts would affect its earnings forecasts for the banks next year.
The report said any potential for improved growth in earnings at AIB and Bank of Ireland this year was gone, and there was a risk that the broker may have to downgrade its 2008 forecasts at some point.
Davy added that bad news about the Irish economy was likely to continue going into the final quarter of the year, and the housing downturn was still at an early stage.
The broker points out, however, that a peak in interest rates would be good news for the banks.
Its target for AIB is lowered from €25.50 to €22.50, while Bank of Ireland is cut from €18.25 to €16.50 and Anglo Irish from €19 to €17. The Irish Life & Permanent target is cut from €24 to €20.50.
