It recommended Bank of Ireland through its Quest analysis vehicle, saying it will benefit from the retreat of foreign banks from the market and is the strongest remaining player.
Analyst Gary McCarthy said: “We have been negative on the Irish banks for a very long time, but it’s time to be brave. Unpalatable as it may be, it is time to put money to work in this sector even if it feels like the monkeys have inherited the earth. Alone it stands.”
Meanwhile, Irish finance minister Brian Lenihan said Ireland would back talks between its nationalised banks and bond holders on a possible renegotiation of their senior debt.
He reiterated he was opposed to a default on senior debt but his comments on a possible voluntary renegotiation with investors chime with a similar suggestion from Ireland’s financial regulator last week.
Irish voters are angry at the €50bn (£43.6bn) bill they look set to foot to purge Irish banks of soured property loans. However, making bond holders swallow some of the cost would undermine confidence in Ireland and its banks.