Bank of Ireland, the nation's largest lender by assets, has said it is ready to exit the State guarantee programme set up for the country's banks four years ago.
Liabilities covered by the Eligible Liabilities Guarantee fell to less than €28 billion in November from €36 billion at the end of June, the bank said today. The net interest margin has been bolstered by cutting rates the bank offers to deposits, and by increasing charges for borrowers.
The Eligible Liabilities Guarantee which came into force in December 2009 superseded the original blanket guarantee scheme introduced in September 2008. The guarantee is subject to review and approval by the European Commission every six months.
Last week, the secretary general of the Department of Finance, John Moran, said the bank guarantee scheme would probably be lifted early next year.
Today's report gives "positive indications of an income recovery to complement balance-sheet healing we've been witnessing for some time", said Stephen Lyons, an analyst with securities firm Davy.
Bank of Ireland's comments on exiting the State guarantee follow recent statements from the Central Bank and Department of Finance that the Government may be coming close to being able to end the support, brought in after the collapse of Lehman Brothers Holdings in 2008.
Irish banks have since received €64 billion of bailout funding.
The pace of growth of home-loan arrears continued to ease since June, Bank of Ireland said in an interim management statement.
The nation's banks are struggling with residential mortgages after the state-owned National Asset Management Agency took over most of their risky commercial real-estate assets in 2010.
"We maintain our expectation that impairment charges will reduce from the elevated levels experienced in 2011, trending over time toward a more normalised impairment charge as the domestic economy recovers," Bank of Ireland said.
The lender reported a €1.94 billion impairment loss last year.
Meanwhile, Bank of Ireland has hired five international banks to test the water for a debt-raising through a public sale of a covered bond backed by Irish residential mortgages – its first public sale since October 2010.
Citigroup, Morgan Stanley, Nomura, Royal Bank of Scotland and UBS will test investor appetite for the bank's covered bond.
The proceeds from any debt raised will go towards reducing the bank's borrowings from the European Central Bank, which stood at €28 billion in June.
Bank of Ireland rose 3.2 per cent in Dublin trading this morning, giving it a market value of €2.9 billion. The shares are up 11 per cent this year.
Additional reporting: Bloomberg
