UK subsidiary pays £220m dividend to BoI

Bank of Ireland’s subsidiary in the UK paid its first equity dividend last year with £220 million (€253 million) handed over to its Irish parent company in September 2016. This is revealed in accounts just filed for Bank of Ireland (UK) plc, which show that the company’s after-tax profit was reduced by 13 per cent to £164 million in the year to the end of December.

In his statement in the company’s annual report, Robert Sharpe, chairman of Bank of Ireland’s UK subsidiary, described the dividend payment as a “very important milestone” for the subsidiary. The accounts also state that the company “expected . . . to pay dividends in coming years”.

In addition to the dividend, the UK business also paid £24 million to its Dublin-based parent in equity coupons relating to additional tier 1 capital instruments.

Bank of Ireland’s UK accounts also show a strong recovery in profitability in Northern Ireland. The lender made a profit of £50 million in the North in 2016 compared with £7 million in the previous year.

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Cost control

This was attributed to “improved funding costs, efficient cost control and ongoing management of impairment charges on its commercial loan portfolio”.

In spite of this spike in profits, Bank of Ireland decided last year to close eight of its 34 branches in the North following a strategic review. Two had closed by the end of December with the remainder to shut by the end of this month.

“These plans are to ensure the long-term sustainability of the branch network while supporting the evolving needs of customers given the increasing use of digital banking channels,” the accounts state.

Bank of Ireland’s consumer business in Britain is built around partnerships with the Post Office and the Automobile Association. Some £2.8 billion worth of new mortgage lending was achieved in the year with Post Office savings balances amounting to £14.5 billion.

There was net growth in customer lending of more than £500 million while its impairment charges reduced by 48 per cent year-on-year to £23 million. Its net interest margin, a key indicator of profitability, reduced to 2.07 per cent from 2.11 per cent a year earlier.

Direct employees

Bank of Ireland’s UK business closed last year with a cost-to-income ratio of 63 per cent compared with 61 per cent in 2015.

It had 177 direct employees and 328 staff who were on long-term secondment arrangements from its parent company.

Some £39 million was paid to staff directly employed by the company, up £6 million on 2015. Its other administrative expenses rose by 11 per cent to £226 million, reflecting costs incurred in relation to services provided by its parent.

The UK company paid £4.3 million to its key management personnel, up more than 20 per cent on 2015. This included £1.5 million paid to directors.

The highest amount paid to a director was £394,239, up from £307,087 in the previous year. The director is not named.

In a statement, Des Crowley, Bank of Ireland’s UK chief executive, described 2016 as a “strong year” with “continued progress and profitable growth” for the business.

“While the UK market remains highly competitive, with interest rates remaining low, we believe our distinct approach as the partnership bank, combined with a strong capital and funding base means that we can continue to focus on delivering compelling, value for money product propositions for the increasing number of customers we serve,” he said.