Nice Price for Allied Irish Banks

We are maintaining our Buy rating on Allied Irish Banks, Plc (AIB - Analyst Report). We consider the stock attractive at its current price. In its first-quarter trading update, AIB noted overall performance was good, with EPS expected to be off 6% in the first half due to market dislocations and lower bad debt recoveries.

We are continuing our 2008 diluted EPADS estimate at $6.20, in line with guidance calling for low-single-digit growth in earnings per share, and initiating our 2009 estimate at $6.50. AIB’s results should benefit from solid loan growth (up 10%), partly offset by increasing loan impairment provisions and declining net interest margins due to slow deposit growth, higher funding costs, and increased competition.

At its current price, AIB is trading at 5.5X the 2008 estimate and 5.5X the 2009 estimate, based upon consensus estimates for 2008 and 2009, respectively. AIB’s growth prospects, estimated at 12% over the next few years, are above the industry’s, and its dividend yield exceeds the industry median by a wide margin. Our target price of $45 represents about a 7X P/E based on our 2009 estimate of $6.50 per share.

Read the full analyst report on AIB

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