BoI may announce resumption of dividend payment

Bank of Ireland is likely to announce the resumption of a dividend payment when it publishes its interim results later this year, an analyst at Irish stockbroker Goodbody has forecast.

In a note to clients on Monday morning, Goodbody analyst Eamonn Hughes also predicted that the costs of Bank of Ireland's €400 million annual investment in IT infrastructure could rise to €500 million a year due to cost inflation.

The bank has embarked on a major upgrade of its IT system in a project called Temenos.

Mr Hughes said investors were likely to focus on this project in the absence of a dividend declaration when the bank publishes its full-year 2016 results on Friday.

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Bank of Ireland had been expected to announce a dividend for this period, which would have been its first since the global crash in late 2008. However, a combination of Brexit (about 40 per cent of the bank’s balance sheet is based in the UK) and a widening of its pension deficit for much of 2016 means the company is unlikely to announce a dividend for last year.

Goodbody has forecast a pre-exceptionals, pre-tax profit of €933 million for Bank of Ireland in 2016. It has pencilled in a net interest margin of 2.17 per cent and a cost-income ratio of 63 per cent.

Mr Hughes said the resumption of dividends at the half-year stage as its core equity tier 1 ratio improves, the stabilisation of its Irish loan book, and an improving yield and rate outlook would underpin the 20 per cent “upside” to its price target of 28 cent.

Bank of Ireland shares were trading Monday at just over 23 cent.