UPDATE 2-Irish banking shares feel heat after Sinn Fein's strong election showing

(Updates prices, adds details)
By Thyagaraju Adinarayan and Padraic Halpin
LONDON/DUBLIN, Feb 10 (Reuters) - Irish stocks .ISEQ fell
as much as 1.3% on Monday, dragged down by banks, after
left-wing party Sinn Fein secured almost a quarter of
first-preference votes in a weekend general election.
Bank of Ireland BIRG.I and AIB Group AIBG.I were among
the top fallers across Europe, sliding more than 7%, as
investors feared a negative impact from Sinn Fein's policies,
which include an end to tax breaks for banks.
"Sinn Fein's manifesto contained a range of more radical
policies on banking and housing," Davy Research analyst Conall
MacCoille said in a note to clients.
The left-wing party was ahead of the centre-right Fianna
Fail and the Fine Gael party of Prime Minister Leo Varadkar in
an election analysts described as a seismic shift away from
Ireland's century-old, centre-right duopoly. A significant difference in the manifestos of the three main
parties reduces hopes among investors for a smooth formation of
government.
MacCoille said Sinn Fein, who demanded inclusion in
Ireland's next government, may end up compromising on some of
these policies. Both Fianna Fail and Fine Gael insisted ahead of the
election that they would not govern with Sinn Fein. While Fianna
Fail's deputy leader said on Monday that it was "completely
premature" to talk of forming a coalition government with Sinn
Fein, he said it would talk to its left-wing rival.
"There is no certainty that a government will be formed at
the end of these discussions and another election cannot be
ruled out in the coming months," Dermot O'Leary, chief economist
at Goodbody Stockbrokers, said.
Fianna Fail's finance spokesman Micheal McGrath told Reuters
last week that he would not make any changes to the treatment of
the Deferred Tax Assets -- a method in which Irish companies use
historic losses to offset taxes on current profits.
Ireland's finance ministry said late last year that DTAs
were worth 2.2 billion euros ($2.4 billion) to Bank of Ireland,
Allied Irish Banks and Permanent TSB, lenders bailed out by the
state after they racked up big losses during a banking crash a
decade ago.
Meanwhile, real estate stocks such as Irish Residential
Properties IRES.I and Glenveagh Properties GLV.I also took a
beating on Sinn Fein's housing policies that include abolishing
the 'Help-to-Buy' scheme and imposing a rent freeze.
($1 = 0.9147 euros)