Bank of Ireland shares jump on hopes for dividend payment next year
Bank of Ireland says its pace of new lending will not be slowed by Central Bank mortgage caps introduced this year, noting that one in six home loans can still be written outside the new regime.
Shares in the bank surged more than 8pc at one stage yesterday to 34.1 cent after the bank announced better-than-expected full-year profits - the first since the financial crash in 2008.
Pre-tax profits in 2014 were boosted to €921m by investment returns on bonds sold by the bank over the year, as well as so-called "write backs" an accounting claw-back of money previously set aside to cover loan losses.
Bank of Ireland boss Richie Boucher became the first top banker to confirm he will appear in front of the Banking Inquiry, after announcing the results yesterday.
Mr Boucher said he would have been surprised if he had not been called to give evidence to the Dail Committee investigating the causes of the crash.
Mr Boucher said he is not involved 'for obvious reasons' in an internal team set up his bank to collect evidence about the credit bubble for the inquiry.
Around 6,000 documents, comprising 25,000 to 30,000 pages, have been provided by Bank of Ireland to the investigation.
The chief executive has run the lender since 2009 and before that was a senior executive at the bank in the years leading up to the crash.
With the bank now back in profit, Richie Boucher said it will be in a position to consider paying dividends from the second half of next year, after it redeems €1.3bn of costly preference shares.
The bank credited an improved economy for loan growth and for a write back of €280m previously set aside for loan losses, that reduced overall loss provisions to €542m, compared to €1.6bn in 2013.
New lending rose last year to €10bn from €6.6bn in 2013, although total lending fell €3bn to €82bn in the final six months of last year as repayments beat loan draw downs.
The closely watched net interest margin (NIM) a measure of profitability rose 0.19pc to 2.22pc over 2014. That margin will increase but at a slower pace in 2015, chief financial officer Andrew Keating said.
Lending will continue to grow in 2015, Mr Boucher said, although he refused to disclose a target.
That includes mortgages, he said, where new restrictions introduced by the Central Bank came into force this year. Bank of Ireland's preference was for the rules to be phased in.
"We will still write one in six mortgages over the limits," Mr Boucher said referring to flexibility built into the new regime.
"There was €1.4bn drawn down (by home buyers) in 2014 and we anticipate we will lend more than that this year," he said.
His bank is also lending to house builders, he said.
Builders' margins are tight and most schemes are smaller "in-fill" developments but good builders who can bring construction in on budget can build at a profit, Richie Boucher said.
He added that he expects repossession rates to increase in 2015, but "not exponentially"
Mr Boucher said the bank's policy is not to write off secured debt for borrowers.
Unlike some other lenders, the bank's position is "clear, consistent and transparent", he said.
Bank of Ireland repossessed 200 homes last year and there were 1,100 receiver sales of former buy-to-let properties, mostly in a single deal.
An additional 500 homes were sold in so-called consensual deals where a loan had been in default.
Currently, receivers are appointed to another 1,250 properties and repossession rates are on the rise, he said.
The number of new customers falling behind on their loans is in decline and nine out of 10 agreements where loans have been restructured are sticking, Mr Boucher said.
The bank believes it would be sheltered if the UK pulls out of the European Union because its British unit is self financing, he added.