Pension issue won't hit our buyback plan says Boucher
Bank of Ireland said it remains on track to buy back €1.3bn of preferred stock issued during the financial crisis, even as its capital level fell in the third quarter on a widening pension deficit.
The common equity Tier 1 capital ratio, a measure of financial strength fully taking into account incoming banking rules, was at 10.6pc in September, it said yesterday in an interim management statement.
That's from a reported 11.1pc in June. The widening pension shortfall was sparked by "market volatility over the period", it said.
Richie Boucher, chief executive since 2009, has said he wants to redeem the bank's preferred shares between January and July of next year as a milestone in his plan to resume dividends.
The bank, which hasn't awarded shareholders since 2008, may be able to make a cash payment in 2017, Emer Lang, an analyst with Dublin-based stockbrokers Davy, said.
"Without a build of capital, the bank did not, as many had hoped, clarify the likely timing for de-recognition of the preference shares, merely reaffirming that it is on track to de- recognise them," said Fiona Hayes, an analyst with Cantor Fitzgerald in Dublin.
"The risk now is that our core belief that it would be early January is too optimistic."
The State bought €3.5bn of preferred stock in the bank in 2009 as part of its bailout. The Government converted €1.7bn of these into equity in the following year.
Almost €540m of the notes were redeemed in 2013, and the remainder sold to private investors.
The notes carry a 10.24pc coupon.
Bank of Ireland said its defaulted loans are seen declining further after dropping by €800m to €12.5bn in the third quarter.
Loan volumes slipped to €84bn at the end of September from €85bn previously reported for June, as a weaker sterling weighed on UK assets when translated into euros.
The bank's shares fell as much as 3.3pc in Dublin trading and were down 2.1pc at 32.8 cents as of 8:49 am in Dublin. They have gained about 4.8pc this year. (Bloomberg)