Bank of Ireland shareholders given reasons to be cheerful

Profits are up, bad loans are down but the Brexit vote casts a long shadow

 Andrew Keating, chief finance officer, and Richie Boucher, chief executive, of Bank of Ireland: profits rose by 30 per cent, on foot of strong lending growth  in Ireland and the UK. Photograph: Cyril Byrne / The Irish Times

Andrew Keating, chief finance officer, and Richie Boucher, chief executive, of Bank of Ireland: profits rose by 30 per cent, on foot of strong lending growth in Ireland and the UK. Photograph: Cyril Byrne / The Irish Times

 

There were many reasons for Bank of Ireland shareholders to be cheerful about the company’s 2015 financial results, published yesterday.

Profits rose by 30 per cent, on foot of strong lending growth (up 42 per cent to €14.2 billion) both in Ireland and the UK. It’s stock of non- performing loans declined by €3.8 billion, while its book of mortgage arrears reduced once again.

Customers are meeting the terms of some nine out of 10 restructuring arrangements, which is ahead of the industry norm.

The bank also generated sufficient capital to clear the path towards a dividend payment.

The figures show a strong year of mortgage lending, in spite of issues around supply here and tighter macroprudential rules imposed by the Central Bank of Ireland.

New mortgage lending picked up pace as the year went on, rising from €500 million in the first half of the year to €900 million in the second half. Its market share rose by five points in the second half to 31 per cent, helped no doubt by attractive cash offers on its fixed-rate loans.

Its stock of tracker mortgages reduced by €1.5 billion during the year, which is a big help given that they must be loss-making.

The bank recorded a stellar year of mortgage growth in the UK, with new lending rising to £3.3 billion from £1.8 billion a year earlier.

It was such a successful year for the bank that chief executive Richie Boucher no longer felt compelled to waive €118,000 of salary and pension accruals, with the result that his remuneration increased to €961,000 last year. Still no bonus, though.

With the general election just three days away, it will be interesting to see if this revelation causes any discomfort for Minister for Finance Michael Noonan from the disparate parties and candidates of the left, whose support continues to rise in the polls.

Concerns over Brexit

Not that it’s all strawberries and cream for Ireland’s biggest lender. Sterling fell

1 per cent against the euro yesterday amid concerns over Brexit and is now well down on its end November highs. It was sterling’s worst one-day fall against the euro since 2009 and continued weakness in the run-up to the June referendum on Britain’s membership of the EU would be a drag on the bank’s profits given its exposure to the UK economy.

Stock-market volatility also widened the deficit in the bank’s defined-benefit pension scheme in January, wiping out the gains made in 2015.

Another bum note was the fact that profits for its life and pensions business fell last year by 23 per cent in spite of a 9 per cent rise in new business. This was due to lower returns from investment fund growth and interest rates.

At least the bank’s share price got a bounce, up more than 5 per cent in Dublin yesterday after a poor run this year that had wiped more than 25 per cent of its value.

Talk of dividend payments being resumed next year suggest even better days ahead for the bank. Providing there are no nasty shocks to the global economy, of course.