Friday 1 July 2016

Bank of Ireland bosses confident of coping with fallout from Brexit

Published 23/02/2016 | 02:30

Bank of Ireland group chief executive Richie Boucher, right, and Andrew Keating, group chief financial officer, who presented the preliminary results for 2015 yesterday. Photo: Mark Condren
Bank of Ireland group chief executive Richie Boucher, right, and Andrew Keating, group chief financial officer, who presented the preliminary results for 2015 yesterday. Photo: Mark Condren

Bank of Ireland bosses believe the lender can ride out the effects of a UK exit from the European Union with relatively little impact.

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The country's biggest bank yesterday reported a 30pc increase in profits to €1.2bn for 2015.

After paying off the last of its expensive bailout debts this year, Bank of Ireland said it will resume payment of a "modest" shareholder dividend in 2017.

The plan is to gradually increase shareholder payouts to half of earnings over a number of years, chief executive Richie Boucher said.

After being hammered in recent weeks, Bank of Ireland shares rose sharply on the news, up almost 6.5pc at one stage to 26.30 cents each.

Last year's €298m increase in income to €2.27bn was boosted by higher net interest income, higher fees and €237m gained as a result of bond sales, property revaluation and the sale of businesses taken over as a result of soured loans.

The bank also gained from a 45pc decline in the cost of losses on historic bad loans, to €296m.

Net interest margin - a standard measure of banks' health based on the difference between what it pays for money, including from savers, and what it charges to lend - increased by 0.08pc to 2.19pc.

At 3pc the average margin on new loans is ahead of expectations, managers said. The bank is making that same 3pc lending margin on new mortgages, which are mainly fixed-term loans, Richie Boucher said.

Despite political pressure for the bank to cut the higher price it charges to existing mortgage customers with standard variable rate loans, Mr Boucher indicated that borrowers would have to switch to fixed rate deals to cut their borrowing cost. The bank is investing to move the market to a lower risk fixed rate model, he said.

"We've calculated that the average saving from switching from a standard variable to a fixed rate mortgage is €1100 a year," he said.

Borrowers owing a combined €1.3bn made that switch last year, Mr Boucher added.

Around 40pc of Bank of Ireland's lending is in the UK. Despite that, Mr Boucher said the potential fallout from a UK withdrawal from the European Union would be limited.

The bank's main UK business are partnerships with the Post Office and the AA that do not require big upfront investment, he said.

UK lending is through a stand alone subsidiary regulated by the Bank of England and funded in sterling, which lessen the potential impact, he said.

Irish Independent

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