The takeover speculation that has driven both big Irish banking stocks to record highs finally fizzled out yesterday and both AIB and Bank of Ireland shares fell heavily, driven lower partly by a downgrading by analysts at Credit Suisse First Boston (CSFB). Just as there was heavy trading when the shares were rising, there were also heavy volumes as both fell. AIB closed down 50 cents on €16.70 (£13.15), compared with a high of €18.15 (£14.29) at the peak of the takeover speculation. Bank of Ireland lost virtually all of Wednesday's gains with a 95 cent fall to €19.80 (£15.59).

CSFB analyst, Mr Patrick Barton, declined to give the details behind their decision to move AIB from a "buy" to a "sell" and Bank of Ireland from a "buy" to a "hold", but it understood the CSFB report on the Irish banks took the view that, while the arrival of the euro would maintain short-term earnings at a buoyant level, the shares of AIB in particular were overvalued at their recent record levels.

Few in the Dublin market quibbled with the assessment and analysts said that, in the absence of a takeover bid, it was difficult to justify AIB and Bank Ireland shares trading at such a multiple of book value - more than five times and four times book respectively. Dublin market sources still believe that the recent activity, in AIB shares in particular, was driven by London market-makers playing their own book rather than any realistic prospect of a bid from Deutsche Bank or Lloyds TSB.