Bank of Ireland has said it “does not currently expect any material change” to the £374 million (€433.6 million) provision it has made for the UK motor finance commissions scandal after UK regulators outlined a redress scheme in late March.
The bank also said in a trading update on Friday that there is “potential upside” to its full-year net interest income forecast as markets expect major central banks to increase interest rates to combat inflation stemming from the Middle East crisis.
Bank of Ireland’s signal on its UK motor book comes despite the UK Financial Conduct Authority (FCA) recently reducing its estimated cost for lenders by almost £2 billion compared to an initial estimate of £11 billion when it first outlined a proposal last October.
“The group notes the FCA’s final details on the UK motor finance redress scheme. The group does not currently expect any material change to its cumulative UK motor finance provision of £374 million,” Bank of Ireland said.
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The scheme has been challenged this week by a number of parties, including Mercedes-Benz, Volkswagen and consumer group Consumer Voice, prompting the FCA to say that these will serve to delay customers receiving compensation.
[ UK motor finance industry to pay £2bn less in revised customer redress programmeOpens in new window ]
Bank of Ireland said it started this year “with momentum” despite geopolitical uncertainty posed by the Middle East conflict.
It said that its loan book grew at an annual rate of 5 per cent to €83.6 billion, while deposits rose by €4 billion to €107.2 billion, and net asset under management inflows into New Ireland and Davy amounted to €1.1 billion.
“Asset quality is strong across our portfolios and we remain vigilant to the evolving geopolitical environment,” said chief executive Myles O’Grady.
The bank maintained its full-year forecasts for net interest income to edge up to €3.4 billion from €3.37 billion in 2025, fee income to advance about 4 per cent, and total costs to come to €2.2 billion.
However, it said that there is upside potential to the net interest income result, given the recent moves in market expectations on official rates.
Money markets are currently pricing in the European Central Bank (ECB) pushing through almost three 0.25 of a percentage point rate increases by the end of 2026 to tackle the impact on soaring fuel prices on general inflation. The ECB kept its key deposit rate on hold at 2 per cent at a meeting on Thursday.
Inflation in the euro zone is expected to have risen to 3 per cent in April this month from 2.6 per cent in March, Eurostat, the EU statistics office, said on Thursday. The ECB has a target of 2 per cent for inflation.
The Bank of England signalled on Thursday that its interest rates could rise this year as it attempts to curb inflation following a “significant energy price shock” from the Iran war.
O’Grady said on a call with analysts that Bank of Ireland hasn’t yet seen “any real impact” of the geopolitical crisis on customer behaviour.
“The Irish economy continues to demonstrate growth and resilience against an uncertain external backdrop,” he said, adding that the bank remains “vigilant” about the potential impact on customers from a prolonged conflict.
