The Governor and Company of the Bank of Ireland (Bank of Ireland) reported a y-o-y decline in Net Interest Income (NII) and bottom line in 1H 10; attributable to decrease in Net Interest Margin (NIM) and higher impairment charges, respectively. However, the bank reported a significant increase in non-interest income driven by investment gains at assurance business. Nonetheless, as we continue to anticipate higher impairment charges going forward, attributable to the downturn in the Irish property market and growth in unsecured consumer lending amid rising unemployment, we maintain our bleak outlook for Irish common stock and expect to trim our target price in our next update report. As a result, although the current target price suggests a HOLD we downgrade our rating from a HOLD to a SELL for the common stock. We will reassess our target price and rating in our next update report. As we now anticipate a marginal negative currency impact on the ADR over the next 6-24 months and given current price levels we maintain our HOLD rating for the ADR. We will reassess our ADR (1 ADR = 4 common shares) rating for Bank of Ireland in our next full update report.

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