by Tom Sieber

After some pretty dismal full-year results Bank of Ireland saw analysts slash price targets in response.

Lehman Brothers’ Robert Law, who remains ‘underweight’ on the stock, cut his target price from €10.90 to €9.30 – although the share price has actually already sunk below that target to €8.17. He reflected on the management’s pessimistic comments: ‘The outlook statement was cautious in our view, with the management indicating that the slower pace of economic growth and market dislocation would continue to impact earnings. Management also cited expectations from independent commentators for a challenged economic outlook in Ireland and the UK at least until the end of 2009, which we agree with and see as the key risk to earnings expectations over the period.’

Alex Potter, banking analyst at Collins Stewart, was equally bearish on the medium-term prospects for the bank. He reiterated a ‘sell’ recommendation and cut his target to €7.78 from €9, noting that: ‘Irish banks have had ‘halcyon’ credit conditions (which are) now changing.

‘The strong growth of the Irish economy and especially asset price inflation have meant extremely low loan losses for Irish banks. The former is slowing rapidly and the latter is now deflating. This means that loan losses will move up from historically low levels. We believe the bank will struggle to generate any real PBT (profit before tax) growth over the coming two years.’

Elsewhere, Abigal Best of Credit Suisse, who has an ‘underperform’ rating on the stock, cut her target price from €11 to €9.