New levy will cost Bank of Ireland €120m over three years
BANK of Ireland said yesterday that the bank levy introduced as part of last month's Budget will cost the lender €120m over three years.
The new tax on banks aims to raise €150m a year in 2014, 2015 and 2016, and is being levied on all the main banks based on the size of their deposits.
Bank of Ireland's estimate for the cost of the levy means it expects to be hit with more than a quarter of the total charged.
The figure is contained in an interim management statement (IMS) issued to the markets yesterday.
The bank gave no estimate, however, for the financial benefit it will reap from Budget changes that allow it to use a greater share of its so-called deferred tax assets to reduce future tax bills.
In its IMS, it said it was rebuilding profitability. The bank said its net interest margin – the difference between what it pays savers for deposits and charges borrowers for loans – is now in excess of 1.9pc. That's up from 1.65pc at the end of June.
Its improving margin is good news for the bank but a sign that both savers and borrowers face a tougher environment.
The recovery in margins does mean new lending is a more attractive prospect for the bank.
"We are actively seeking new lending opportunities of the appropriate credit quality and at appropriate levels of return," the statement said.
The bank's improving margin is the latest in a run of positive news, after the European Banking Authority (EBA) effectively cleared the way for the bank to repay a €1.8bn rescue loan to the State, by accepting that the so-called preference shares will count as core capital for the bank regardless of who owns them.
Analysts said it meant the bank could refinance the "prefs" on the bond markets and use the cash raised to repay the State, limiting any need for a share issue many market watchers had been expecting later this year.
On a less upbeat note, the bank said mortgage arrears remained stubbornly high.