Bank of Ireland interim profit beats forecasts

Bank of Ireland has reported a strong half-year performance, with pre-tax profits up 20 per cent to €508 million (£400 million), and is predicting further growth in the next six months.

Announcing what he described as a "very satisfactory" out-turn for the six months to September 30th, group chief executive Mr Maurice Keane said the bank was enjoying good momentum in its business at the moment and was well placed to benefit from continued good growth in the Irish economy.

The half-year performance was ahead of market expectations and lifted Bank of Ireland shares, which gained 27 cents on the day to close at €8.25. The bank has declared an interim dividend of 7.36 cents per share, up 26 per cent on the previous year.

Mr Keane warned the rate of profit growth in the second half of its financial year might be at a slower pace, with factors such as lower margins on mortgage products having an impact. So far, growth in the demand for mortgages has offset tighter margins, but Bank of Scotland's aggressive entry into the Irish market in recent months has forced interest rates even lower and its impact on margins will only be fully evident in the bank's full-year figures.

The 20 per cent increase in pretax profits was underpinned by a solid contribution from Irish and UK operations, while a series of one-off gains - amounting to €44 million - also provided a boost. This included the sale of a property for €20 million. After tax profits rose by 28 per cent to €387 million while earnings per share hit 35.7 cents, also up 28 per cent.

The bulk of the profits were earned in the bank's retail operations in the Republic, which contributing €188 million. Its life assurance businesses, Lifetime and New Ireland, generated €56 million, while its corporate and treasury division added a further €72 million.

Its other activities in the domestic market, which include Davy Stockbrokers and Bank of Ireland Asset Management, put in a solid performance, earning €97 million for the bank.

Its British subsidiary, Bristol & West, also enjoyed strong growth, generating €114 million of group profits during the six-month period.

Mr Keane said the results reflected the bank's ability to be successful in a low interest rate environment. It would continue to focus on achieving high returns.

Looking ahead, he said Bank of Ireland wanted to expand its operations in the Irish and British markets. The bank expects to hear shortly whether the Government has accepted its bid for ICC Bank. Bank of Ireland was the only bidder to tender for the State-owned bank and is keen to add the specialised small business bank to its Irish operations. It is also actively considering potential opportunities in Britain.

An initiative to aggressively cut costs will get under way, with the bank aiming to reduce its cost base by up to €65 million within the next three years.