Sunday 22 April 2018

Bank of Ireland to repay €1bn of its capital notes by summer

Richie Boucher and Archie Kane at the annual shareholder meeting in UCD yesterday. Photo: Gareth Chaney/Collins
Richie Boucher and Archie Kane at the annual shareholder meeting in UCD yesterday. Photo: Gareth Chaney/Collins
Colm Kelpie

Colm Kelpie

Bank of Ireland has said it will repay its €1bn of contingent convertible (CoCos) capital notes, which were sold by the State to private investors in 2013, at the end of July.

At the bank's annual shareholder meeting yesterday, the lender said the costly bonds, which carry interest charges of around 10pc per year, or €100m, has a fixed repayment date of July, and that the bank would meet this target.

Strong investor demand allowed the Government to sell all of the Bank of Ireland CoCo bonds it owned three years ago.

CoCo bonds are regarded as higher risk than standard debt owed by banks because bondholders are automatically "burned" if a bank gets into trouble, when the bonds convert into riskier bank shares. But they are less risky than ordinary shares that get wiped out when a bank fails.

The bank said the repayment will help its net interest margin (NIM).

Chief executive Richie Boucher said he believes the bank should see some net interest margin expansion in the future if it achieves its targets.

The meeting at University College Dublin was at times fractious, with a number of shareholders questioning the salary of Mr Boucher, and why the bank's directors do not own more shares.

One questioned whether the entire executive board should be removed.

The bank's chairman, Archie Kane, reiterated that the bank intended to pay a dividend to shareholders in 2017, although he suggested this would be determined by a number of external factors that could upset the plans, including a Brexit, and global growth fears.

However, he said that he believes the bank is well positioned to deal with the outcome of a Brexit vote.

Mr Kane also gave a robust defence of Mr Boucher. "Richie has worked incredibly hard over a number of years for this bank," he said.

"The results … are due to Richie and his team who have put in an incredible effort over a considerable period of time.

"The net result is that we have a profitable bank, a growing bank, a strong capital base, and we're the only bank that has received state aid who have fully repaid it. I think the facts speak for themselves," he said.

He said Mr Boucher had the full confidence of the board.

Independent TD Shane Ross, who is also a shareholder, criticised the number of shares held by the board members.

Mr Kane previously said that the directors own more than the minimum number of shares required, and that beyond that was a matter for them.

Mr Ross said this was not an adequate answer, claiming they were not prepared to spend money to buy the shares.

"I think they [BOI board] have done very well, because they have stayed clear of Bank of Ireland shares in a way that the rest of us haven't been able to do. They've lost very, very little money," he said.

He also asked about the high rates on variable mortgage rate mortgages.

Mr Kane said the bank had focused on the pricing of its fixed rate products and had made it as "easy as possible" for existing customers to move from variable rates to fixed rates. He said the bank's focus was on its net interest margin.

And he said there had been 36 repossessions since the start of the year.

Irish Independent

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