BoI falls 12.5% after earnings warning

Bank of Ireland (BoI) shares fell by 12.5 per cent today, the fastest pace in 18 years after it said slowing growth in its main markets, particularly Ireland, would “adversely impact our earnings”.

At 10.05am BoI shares were trading at €4.43 on the Iseq, a fall of 63 cents in the day, bringing its market value to €4.5 billion. The bank’s shares have fallen by 56 per cent since the start of the year.

In an interim management statement released ahead of its annual general court meeting of shareholders in Dublin’s RDS later today, the bank said the slowdown in activity and volume growth "is most pronounced in our retail businesses in Ireland". At the 2007 meeting the bank’s shares were trading near €15.

BoI noted today that the euro remained strong against sterling and the dollar and that this was depressing business and consumer sentiment "leading to our anticipation of lower levels of economic and overall business activity".

The bank said its residential mortgage portfolios were "proving resilient in a weakening housing market" but noted that further house price falls were expected this year.

While the bank expects to increase customer lending this year, it said a "prudent and selective approach" was being taken to growth in the current environment.

"Credit grade slippage", particularly in the banks business banking portfolios, had been noted over the quarter although this remained "in line with management expectations of an increase in impairment charge from the unsustainably low charge in our prior financial year . . ."

Bank of Ireland said it has raised over €3 billion of term funding from wholesale markets since March 31st. This, along with customer credit growth "continues to support our business through this period of market dislocation".
"Our capital position continues to fully support our business in this challenging environment."

The bank said its focus remained on managing its capital and funding positions, and "managing our credit risk in a supportive and prudent manner and rigorous cost control".

Scott Rankin, an analyst at Dublin-based securities firm Davy, said in a research note that he planed to cut earnings estimates for 2008 and 2009 by “at least” 5 per cent after speaking the company. He said the bank’s management had acknowledged that the “environment has changed considerably since the full-year results in May”.

Eamon Hughes, analyst with Goodbody stockbrokers, said the fact that the statement did not give earnings per share guidance “may cause some uncertainty in the short term”.