Investing.com -- Bank of Ireland Group (IR:BIRG) was downgraded to “sector perform” from “outperform” by RBC Capital Markets, which cited stretched valuation metrics relative to history and peers, while maintaining its €15.50 price target against a current price of €16.07, in a note dated Friday.
The lender, the largest listed Irish bank by assets, continues to operate in what RBC described as an attractive market, but the brokerage said pricing now limits near-term upside.
RBC stated that Bank of Ireland is trading at 1.35x price-to-tangible book value on a two-year forward basis, about 80% above its 10-year historical average of 0.75x, and at 8.9x forward P/E, approximately 10% above the historical average of 8x.
The brokerage also trades at a 0.07x P/TBV premium relative to large UK and Irish banks, compared with a historical discount of 0.07x, while two-year forward ROTE expectations are only 0.07 percentage points below peers, versus a historical average gap of 0.40 points.
The analysts wrote that they did not shift the rating lower to “underperform” because they consider FY26E profit-before-tax consensus for large Irish banks too low and expect top-line driven earnings upgrades during the year.
RBC’s own forecast for Bank of Ireland’s PBT is €1.97 billion for 2026E, compared with the consensus €1.85 billion.
RBC retained its valuation model, applying an 11% implied cost of equity, versus 10.5% for AIB and 12.4% for large UK and Irish peers. The brokerage set a downside scenario of €11, assuming no improvement in loan growth, higher cost of risk and intensified competition, and an upside scenario of €17.50 under more resilient net interest margin conditions.
The brokerage said Bank of Ireland continues to operate in a favourable Irish macro environment but flagged caution surrounding rate sensitivity, increasing competition, structurally higher costs and less developed technology.
The broker stated a preference for AIB over Bank of Ireland, describing AIB as holding higher dividend and total return yield supported by greater excess capital, higher market share in a concentrated market, stronger loan growth tied to fewer legacy portfolios, a larger impairment overlay and greater upside potential against consensus PBT.
Bank of Ireland’s shares outstanding total 964 million, and its market capitalisation stands at €15.49 billion, with a 3.9% dividend yield. The lender’s CET1 ratio is 14.6% for 2024A and 14.5% for 2026E, and it operates with a 2.68% 2025E NIM, 3% projected 2025E cost growth, and 29bps 2025E cost of risk.
The downgrade follows a series of previous upward revisions, including an upgrade to Outperform and a price target increase to €15.50 on October 31.
