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Saturday 10 December 2016

BOI to raise loan-loss forecasts says Davy

Published 16/02/2012 | 05:00

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BANK of Ireland is likely to "scale back" its profit targets and increase predictions for mortgage losses when management reports full-year earnings next week, stockbrokers Davy said yesterday.

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BOI's results on Monday mark the first full-year trading review from a major Irish bank, ensuring they will be closely watched by the market, looking for signals about likely numbers for AIB and Ulster Bank.

Enhanced disclosure

BOI will also become the first bank to use the Central Bank's new "enhanced disclosure" rules and to report results incorporating the regulator's demand for loan losses to be recognised as early as possible.

In a preview of the results circulated to clients yesterday, Davy noted that BOI had "cautioned" about its profit margin in a November interim management statement. At the time, the bank warned its margin targets would face challenges in a prolonged, low interest-rate environment -- a scenario that ultimately developed.

"This may see the 2014 (margin target) scaled back or pushed further out," Davy noted, adding that it did not see BOI returning to "meaningful profitability" until 2014.

On 2011 results, Davy expects BOI to report profits before loan-loss provisions of about €490m -- against €1.017bn in 2010.

BOI had been expecting loan losses of €6bn "through the cycle". Davy said it would "not be surprised to see that €6bn moved up a bit to accommodate higher anticipated Irish mortgage losses".

Several banks noted higher mortgage impairment charges towards the end of last year as the economic woes deepened. The new personal insolvency regime, which could allow mortgage holders to strike write-downs with their banks, could accelerate banks' recognition of mortgage losses and increase the amount of losses suffered.

Shares in BOI soared as much as 80pc in the first weeks of the year, peaking at 15c.

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