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Bank of Ireland falls into loss of €235m due to Covid-19 impact


Francesca McDonagh , CEO, Bank of Ireland

Francesca McDonagh , CEO, Bank of Ireland

Francesca McDonagh , CEO, Bank of Ireland

Bank of Ireland has reported an underlying loss of €235m for the first three months of this year due to the impact of the coronavirus.

Towards the end of the three months to 31 March the bank experienced the initial affect of Covid-19, with adverse movements on valuations and other items of €155m and impairment charges of €266m.

Falling equity markets and widening credit spreads generated negative movements of €120m in its wealth and insurance business relating to unit linked assets and bond portfolio valuations, according to an interim statement from the group.

A further €35m movement was incurred from group financial instrument valuation adjustments, the bank said.

Meanwhile, the impairment changes includes Covid-19 management overlay of €250m, primarily reflecting the initial impact of the deteriorating economic environment.

During the three month period the bank did not experience loan loss outcomes related to Covid-19.

The group warned that Covid-19 would have a “material impact on 2020 results.”

It said new lending this year could be between 50pc – 70pc of 2019 volumes.

Business income is expected to be 30pc – 40pc lower due to reduced economic activity.

Francesca McDonagh, Bank of Ireland CEO, said: "We made a good start to the year - growing lending, selling more than a quarter of all new mortgages in Ireland, reducing costs, and with the lowest level of arrears of any Irish bank. However, right now everything is seen through the lens of Covid-19."

“The economic outlook for our core markets in Ireland and the UK has deteriorated, with reduced levels of activity across our businesses. The economic effects will have a material impact on the group's 2020 financial performance," Ms McDonagh said.

"The full impact remains uncertain and will be driven by the duration of Covid-19 restrictions and the successful reopening of the Irish and UK economies,” she added.

Elsewhere, customer loan volumes were €79.6bn at the end of March, an increase of €0.1bn since the end of December 2019.

The bank's net interest margin - a key barometer of a bank's profitability - was 2.07pc, three basis points lower than the last quarter of 2019, reflecting the low interest rate environment. 

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