Tuesday 11 December 2018

BoI shares boosted as tracker fears ease

'Bank of Ireland’s core capital ratio – a key measure of financial strength – increased by 30 basis points over the past three months to 12.8pc.'
'Bank of Ireland’s core capital ratio – a key measure of financial strength – increased by 30 basis points over the past three months to 12.8pc.'

Gretchen Friemann

Shares in Bank of Ireland soared by 5.3pc yesterday after the lender unveiled a better than anticipated third quarter trading update and eased concerns about the impact of a potential increase in provisions from the escalating tracker mortgage saga.

Investor confidence was lifted, too, by reassurances that the bank remains on course to pay a dividend next year as it lifted its net interest margin to 2.34pc, drove down costs and fortified its capital levels.

The share price closed yesterday at €6.62.

Bank of Ireland's core capital ratio - a key measure of financial strength - increased by 30 basis points over the past three months to 12.8pc.

But it was the predictions about its ability to absorb higher provisions resulting from the tracker mortgage scandal that helped ease market concerns and bolster sentiment in the stock, according to analysts.

As Investec's Owen Callan pointed out, shares in the bank were already trading higher yesterday morning prior to the trading update.

They rose as the market responded positively to new CEO Francesca McDonagh's commitment on Wednesday evening to paying redress and compensation to the affected borrowers, "subject to their agreement, by the end of the year".

Investors then seized on the bank's reassurance that any further payouts associated with the tracker mortgage will "be manageable in the context of the group's capital position".

Mr Callan estimates the new cohort of borrowers caught up in the saga could result in additional provisioning of €25m to €125m.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business