Rating agency Fitch has said that last week's Irish sovereign upgrade does not automatically mean that the country's banks will follow suit.
The agency said last Friday night that it was upgrading Ireland's rating from A- to A, with a stable outlook.
Fitch had said the upgrade follows a positive reassessment of the prospects for strong economic growth in Ireland and steady improvements in the country's public finances.
But today Fitch said that the Irish banks' ratings were "not sensitive" to the sovereign upgrade.
It said that Bank of Ireland and AIB are likely to benefit from the improving operating environment which contributed to the country's rating upgrade.
But their weak asset quality remains an obstacle to upgrades in the short term.
"Asset quality is the key vulnerability for these banks and working through the €30 billion backlog of impaired loans will take time. In the meantime, this vulnerability constrains their fundamental creditworthiness," Fitch said.
However it also added that the two banks have made "good progress" in reducing their stock of impaired loans and the agency said it believes this trend will continue.
"Our view is that the medium-term growth potential of the Irish economy is 2-2.5%, which should provide a more favourable backdrop for banks' continued working-out and offloading of impaired assets," Fitch stated.
