Davy Stockbrokers has highlighted the newly merged Irish Life & Permanent as offering good potential for investors. At current levels, the share price is undervalued, with the prospects for the group looking favourable. Davy said Irish Life & Permanent shares have been surprisingly weak of late.

The 26 per cent decline in the price year to date compares with the more moderate fall of 10 per cent in the British life sector. Meanwhile, its two key domestic markets of life, pensions and mortgages, are continuing to grow.

Irish Life & Permanent's interim results are due over the next couple of weeks and are expected to show a buoyant first half of 1999. Davy is forecasting after-tax profits of €114 million (£89.8 million) with a stronger outturn expected in the second half.

At current levels the brokers believe the markets are not giving the enlarged group any credit for potential revenue enhancement. While it is clearly less tangible than cost cuts, it seems inconceivable that the group will not be able to harness the added distribution provided by the Irish Permanent network with Irish Life's strong brand, to generate meaningful cross-selling benefits in the medium term, according to Davy.