Friday 23 August 2019

Tracker controversy may stop Bank of Ireland paying a dividend

(stock photo)
(stock photo)
Charlie Weston

Charlie Weston

BANK of Ireland may not be able to pay a dividend as promised this year after owning up to thousands of extra tracker mortgage overcharging cases.

The fact that the bank has now admitted to an additional 6,000 cases has also raised issues about the honesty of the bank, a leading banking analyst said.

It comes as a banking trade union claims thousands more people who work in banks are due to get tracker mortgages back and be refunded.

Earlier this week Bank of Ireland said it had identified another 6,000 customers who were wrongly removed from low-interest tracker mortgage loans.

This brings to 10,300 the number of people affected by the controversy at Bank of Ireland alone.

The total cost of putting customers back on low tracker rates, refunding them for overcharged interest payments, and compensating them at a rate of 10pc of the refunds, will cost the bank up to €200m.

This is up from €26m previously set aside by the bank.

Banking analyst at Merrion Stockbrokers Darren McKinley questioned the honesty of the bank, and said it may not be able to pay a dividend.

“We are concerned about the broader implications of such an announcement, weeks after Bank of Ireland had stated that they had the issue under control post an internal review in 2010.

“It questions Bank of Ireland’s ability to communicate honestly about the bank’s operational and financial performance. To rebuild trust with investors, we assume that there needs to be further changes to management and culture.”

Mr McKinley said the tracker mortgage redress will hit Bank of Ireland’s net income for 2017 by 20pc and it may impact its plan to pay a dividend.

Bank of Ireland, under the leadership of new chief executive Francesca McDonagh, has set aside up to €140m this year to pay a dividend.

It had been expected to pay a dividend of between 2.5pc and 3pc. But this could now fall to between 1pc and 1.5pc, if it pays a dividend at all.

Almost 2,000 of Bank of Ireland’s own employees are among those affected and all are set to be compensated.

General Secretary of the Financial Services Union Larry Broderick welcomed the Bank of Ireland admission, and said AIB had promised to treat staff members denied a tracker the same as customers in general.

But he said there are likely to be between 1,000 and 1,500 bank staff affected by the tracker issue in other banks.

“The concern for us has always been for bank officials or customers having to take on the powers of a bank who have huge legal support. We need a resolution to this that recognises unfairness in the interest of staff and indeed customers,” he told RTE Radio.

Mr Broderick said the challenge was that the banks took a “legalistic approach” to the tracker mortgage issue and did not consider implications for the people concerned.

He said this scandal had been going on for eight years and that the culture in banking needed to change. The scandal was first reported on in the ‘Irish Independent’ in 2009.

Online Editors

Also in Business