As everybody knows by now, Irish banks have been European flavour of the past few months and, despite profit-taking in the past week, AIB, Bank of Ireland, Irish Life and Anglo all have good prospects of recovering more of the ground they lost since their highs early this year.
The gains in recent weeks have been largely on the back of various upgrades, and the most recent gushing comment has come from Merrill Lynch, which also takes a decidedly benign approach to Irish inflation.
Merrill Lynch has set a 12-month target of €14.50 for AIB (they are currently trading around €11.70) and €10.50 for Bank of Ireland compared to the current trading range in the market between €8 and €8.20. The banks are still at an "unwarranted discount" to European peers, given the strong growth prospects.
Accelerating inflation is not seen as a danger to the banks' prospects. "We believe these fears are overstated. Rather than a negative, we see Ireland experiencing a unique conjunction of positive environments from a banking perspective - moderate inflation and low interest rates.
"We expect continued reasonable inflation, and strong credit and economic growth (the latter underpinned by continued foreign direct investment) to continue to accelerate the structural transition of Irish wages and wealth towards eurozone levels," opines Merrill.
That's all a bit different from the latest pronouncements of doom and gloom from David McWilliams. But then, if economists always agreed where would we be?
