Business Irish

Wednesday 26 April 2017

Bank of Ireland set to delay dividend - analyst

Bank of Ireland will hold off on paying a dividend for 2016. Photo: Bloomberg
Bank of Ireland will hold off on paying a dividend for 2016. Photo: Bloomberg
Donal O'Donovan

Donal O'Donovan

Bank of Ireland will hold off on paying a dividend for 2016 - despite clearing all of the technical hurdles to resume shareholder payouts for the first time since the crash - according to analysts at Cantor Fitzgerald.

AIB and Ulster Bank are almost certain to return cash to shareholders for the 2016 period, by most measures both are well behind Bank of Ireland in terms of their recovery.

However, with a relatively thin capital position and a vulnerability in its pension scheme to swings in the bond market, Bank of Ireland may delay its first dividend since the crash, Cantor Fitzgerald analyst Stephen Hall said in research note.

He expects the bank to wait and pay a dividend for the first half of 2017 later in the year. That would allow more time to build up capital. Bank of Ireland's fully-loaded core equity tier one capital will be 12.1pc for the year end, but will have recovered to 12.7pc by June, Mr Hall said.

That June level would be a more comfortable position for returning capital to shareholders.

In 2016, a rise in bond yields pushed Bank of Ireland's pension deficit to an estimated €750m from €1.45bn, bolstering its capital position over the last year, Hall said.

However, another market swing could reverse those paper gains, undermining future dividends.

"Bank of Ireland has hit all the milestones, the last step for managers is to return to being a sustainable dividend paying bank. The last thing they need is to issue a dividend and then go back on that the following year," Hall said.

Irish Independent

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