J.P. Morgan has added AIB Group to a Positive Catalyst Watch list, arguing that recent weakness in Irish banking shares relative to the European banking index has been driven by an overly cautious view of the rate outlook and competitive pressures rather than immediate fundamental deterioration.
The broker's analyst team said the sector's underperformance versus the SX7P index over the past month reflects concerns about an evolving rate environment and a changing competitive landscape, but described those worries as overstated. While the Irish market has seen an increase in participants, J.P. Morgan highlighted evidence that deposit outflows from established banks remain limited.
In its assessment, the broker pointed to new entrants and competitive moves that have raised market attention - including Monzo and Marcus entering the Irish deposits market alongside Revolut, BAWAG's bid for permanent tsb, and Avant's deposit strategy. These changes accompany robust market volume growth, a deposit beta of around 20%, and mortgage margins in excess of 100 basis points.
Despite that expanding competitive set, J.P. Morgan's outreach to Irish banks produced feedback indicating only modest deposit leakage so far. The broker underscored behavioural anchors it believes the market underestimates - namely customer trust and a tendency for households to prefer liquidity over term deposits - which they say help keep Irish deposit betas low.
Revolut is a focal example in the broker's note. Since launching deposit accounts in 2022 and savings accounts in 2024, Revolut has accumulated 3.4 million customers in Ireland, compared with an approximate 4 million adult population. Nevertheless, Central Bank data through March 2026 show Irish households held just 4.20 billion of deposits with all non-Irish banks combined, equal to 2% of total household deposits and around 4% of deposit flow.
J.P. Morgan observed that many of the new market entrants are competing primarily through rate-led savings offerings. As a result, the broker sees limited near-term potential for a pronounced step-change in deposit migration away from incumbent banks, noting that incumbent institutions are not prepared to match on price.
The broker also highlighted the Irish self-invested asset (SIA) market as an area likely to develop gradually, pointing to a gap in financial literacy that should slow rapid adoption. While it acknowledged a generational trend toward neobanks as a longer-term factor to monitor, J.P. Morgan said any such shift will take time to fully materialise. That timeline gives established Irish banks opportunities to protect market share through higher investment in capabilities. Indeed, the broker noted an increase in investment activity already evident this year and improvements in digital functionality.
Overall, J.P. Morgan concluded that prevailing market narratives assuming terminal deposit value erosion for AIB Group and Bank of Ireland Group are too conservative. By placing AIB on Positive Catalyst Watch, the broker is signalling potential upside, particularly from net interest income, while still recognising the evolving competitive backdrop and the gradual nature of behavioural shifts.
Implications for investors and markets
- Broker attention on net interest income suggests potential earnings upside for AIB if deposit dynamics and mortgage margins hold.
- Competitive intensity is rising with several new entrants, but deposit migration has so far been limited according to bank feedback and central bank data.
- Incremental digital and investment spending by incumbents could influence customer retention over time.