Monday 19 March 2018

BoI to unveil €2.5bn loans loss as it awaits EU ruling

Joe Brennan

Bank of Ireland chief executive Richie Boucher is expected next Tuesday to unveil bad loan losses of up to €2.5bn for the nine months to the end of December.

But he will have to hold off until after Finance Minister Brian Lenihan's 'Super Tuesday' speech on the future of the banking sector before teeing up an ambitious equity raising.

The consensus view among analysts polled by the Irish Independent is for BoI to post an underlying pre-tax loss of €2.1bn.

"We're looking for a loan impairment charge of €2.4bn for the period," said Oliver Gilvarry, of Dolmen Securities.

The bank, which is aiming to raise more than €2.5bn in the coming months, will not be in a position to formally launch a cash call until the European Commission delivers its final verdict on its restructuring plan.

Talks on the plan are in the final stages, with the EU understood to be pushing for BoI to sell its UK business banking and mortgage book.

Sources say the bank's planned fundraising has three strands: a subordinated debt-for-equity swap, generating €500m; a conversion of some government preference shares in the group into ordinary stock; and a €1bn-plus 'rights issue'. It is understood that the state holding will end up around the 40pc mark.

The final tally on what the bank needs will be informed by its expected NAMA discounts, a stress test of loans not going into the 'bad bank', and the financial watchdog's new capital reserve targets.

NCB Stockbrokers analyst Ciaran Callaghan estimates that BoI would need to keep generate €2.5bn of capital to keep this key ratio above 7pc at the trough of the cycle this year.

This is on the basis of BoI writing down €8.5bn of loans over three years to next December. The bank's most recent guidance has been for three-year loan losses to hit €6.9bn, but most analysts' estimates are way above this figure.

BoI recently raised €405m from a bond restructuring deal, in addition to €1bn generated last summer. The rights issue is shaping up to be underwritten by both the State and a group of investment banks.

Credit Suisse, UBS, Deutsche Bank are known to be in the frame, though Citigroup and Goldman Sachs are also believed to be considering signing up to underwriting agreement.

Irish Independent

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