Bank of Ireland reports 17% profit rise compared with first nine months of 2019

Bank of Ireland has reported a 17 per cent increase in operating profit in the nine months to the end of September compared with the same period in pre-pandemic 2019, the bank said in a trading update on Friday.

It said net interest income is 2 per cent higher in the nine months to September when compared with the same period in 2020. This reflects “reduced funding costs and the increased application of negative interest rates on certain deposits”.

The application of negative interest rates is “helping to partially offset the low interest rate environment that continues to impact on liquid assets and structural hedges”, it said.

The group reported that it continues to maintain “strong commercial pricing discipline” with higher loan asset spreads in the nine months to September compared with the same period in 2020.

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Business income is 8 per cent higher in the nine months to September, when compared with the same period in 2020, supported by growth in wealth and insurance, and corporate and markets’ fee income.

Recovery

Additional gains, valuation and other items provided a “positive contribution” in the period, it said. “During the third quarter of 2021, we have seen continued recovery of business activity, supported by a more positive economic environment and outlook,” said Francesca McDonagh, Bank of Ireland group chief executive.

“The continued improvement in our performance in the third quarter is reflected by higher income, lower costs and an increase in capital.

“Continued execution of our strategy has supported a 17 per cent increase in operating profit pre-impairment to end-September 2021 compared to the same period in 2019, pre-Covid-19. In the nine months to end-September, our green mortgage lending in Ireland has increased nearly 30 per cent versus the same period in 2020.

"The third quarter also marked an important moment in normalising the relationship between the Irish State and Bank of Ireland, with the Department of Finance progressing its selldown of the State's shareholding in the group, now down to less than 10 per cent. This is a positive development – for Irish taxpayers, the Irish economy and Bank of Ireland."

Cost base

The bank said it “continues to maintain tight control” over its cost base while investing in “transformation and absorbing cost inflation”.

Operating expenses are 4 per cent lower compared with the same period in 2020. “We continue to expect 2021 costs to be less than €1.65 billion,” it said.

Customer loan volumes were stable at €76.7 billion at the end of September versus €76.6 billion at end-December 2020.

New lending, excluding revolving credit facilities, increased 7 per cent compared with the same period in 2020.

The group’s liquid assets of €47.7 billion increased by €17 billion since December 2020, primarily reflecting its €10.8 billion participation in the ECB’s targeted longer-term refinancing operations in March and an increase in customer deposits.

Customer deposits were €91.3 billion at the end of September. Wholesale funding was €21.2 billion, €12.4 billion higher than December 2020 primarily due to the ECB’S refinancing operation.

The group’s non-performing exposures decreased by €300 million since December 2020 to €4.2 billion.