Bank of Ireland to pay dividend for first time since 2008

Bank of Ireland is expected to signal a resumption of dividend payments to shareholders when its publishes its full-year financial results for 2015 today.

It is understood that the bank will flag to investors that it expects to pay a dividend for the 2016 financial year. It is likely to announce some of the parameters around the dividend without actually giving a firm figure to markets.

The payments will not be made until the first half of next year after the bank’s annual general meeting is held.

It is expected that dividend would be announced in a year’s time when the bank publishes its annual results before being submitted to shareholders for approval at its AGM.

The resumption of dividends could also benefit the State, which owns 14 per cent of shares. In January, Bank of Ireland redeemed the remaining €1.3 billion in preference shares held by private investors in a move that cleared the path for it to resume dividends.

Stockbroker Davy is forecasting that Bank of Ireland will pay a dividend of 0.9 cent a share for 2016 and 1.5 cent a share for 2017. These would represent dividend yields of 3.5 and 5.9 per cent respectively.

Based on the current number of shares in issue – 32.3 billion – these payments would cost the bank about €290 million for this year and €485 million for 2017. These projections assume that there are no major shocks to the financial system or the Irish and UK economies in the meantime.

The bank has not paid a dividend to shareholders on ordinary stock since 2008 when it announced a final dividend of 39.4 cent. This brought the payment for the financial year to the end of March 2008 to 63.6 cent, which represented an increase of 5 per cent on the previous 12 months.

On September 17th, 2008, just days before the Government’s blanket guarantee to the domestic banks, the group announced its intention to cut its dividend by 50 per cent to bolster its capital ratios against the backdrop of market volatility and economic turmoil.

It then cancelled its dividend payments on November 13th, 2008, stating that it did “not expect to resume paying dividends on ordinary stock until more favourable economic and financial conditions return”.

In 2009 the government had recapitalised the bank via €3.5 billion in preference shares. Bank of Ireland is expected to post a strong set of full year results today.

Goodbody Stockbrokers is forecasting a net profit of €980 million, up from about €844 million. Davy expects the bank to report a net interest margin of 2.20 per cent for the full year, a cost/income ratio of 57 per cent, a loan loss charge of 34 basis points and a profit of €1 billion.