BoI makes loss of €235 million on home loans

Bank of Ireland made an after- tax loss of €235 million last year on its Irish residential mortgages, according to a filing for the entity that handles this business.

Latest accounts for Bank of Ireland Mortgage Bank indicate this was €2.8 million lower than the loss recorded in the previous year. They also show that its impairment provisions rose by 31 per cent to €1.35 billion last year.

The accounts state that this hole was plugged by its parent company, the Bank of Ireland group, which bought shares at €8 each in the subsidiary.

As it has issued securities, separate accounts for this entity are filed by Bank of Ireland with the stock exchange around the same time as the group’s annual results.

The mortgage bank’s interest income declined sharply to €542 million from €712 million in 2012, while its interest expenses fell by 38 per cent to €419 million.

Operating income
The bank's total operating income more than trebled last year to €123 million. However, a €95 million rise in its impairment charge and other expenses dragged it into the red.

The report of the directors stated that while trading conditions “remain challenging”, there are growing signs of recovery in the Irish economy. It noted that new mortgage lending in the Republic reduced by €100 million to €2.5 billion last year due to muted demand. It said Bank of Ireland accounted for more than three out of every 10 new mortgages here last year in value terms.

Defaulted owner-occupied loan volumes of €1.5 billion were unchanged on 2012. Defaulted buy-to-let loan volumes rose during the year but at a lower rate than in 2012.

Improved rentals
The directors said this partly reflected improved rental market conditions, particularly in prime urban areas. Increased repayments as interest-only periods come to an end and customers move to fully amortising loans "continue to impact buy-to-let borrowers", the directors added.

Loans to customers, before impairments, amounted to €20.3 billion, down from €20.8 billion in 2012. Ninety-four per cent of its €15.8 billion owner-occupied mortgage book and 69 per cent of its €4.5 billion in buy-to-lets were paying both the principal and interest costs.

Loans deemed to be past due but not in arrears amounted to €600 million last year, while defaulted loans were €2.7 billion.

The bank said 13,312 mortgage accounts or 9 per cent its total had a formal forbearance measure in place at the end of last year. This was up from 11,942 accounts in 2012. These are customer loans the bank deems to be “sustainable”.

Forbearance measures include interest only, reduced payment, term extension, capital or arrears and hybrids.