Bank of Ireland has reported a 32 per cent fall in pre-tax profits to €650 million for the six months to the end of September and will not pay a final dividend.
Net income in the six months to September 30th was €626 million ($784 million), or 63.5 cents a share, compared with €919 million, or 95.8 cents, a year earlier, the bank said in a statement today.
At 8.44am Bank of Ireland shares were 3 per cent higher on the Iseq at €1.36, giving it a market value of €1.4 billion. Shares in the bank have fallen 87 per cent this year.
The company is facing rising losses on loans to property developers in Ireland, where a decade-long construction bubble burst as the economy entered recession this year. Second-half earnings will be "marginally better than breakeven", the bank said.
The increase in loan losses "reflects the impact of the severe economic downturn in our main markets and its impact on the credit environment, particularly on the property sector", the bank said in the statement.
The bank won't pay a dividend in a bid to shore up capital. The Tier 1 capital ratio, an indicator of the bank's ability to cushion loan losses, rose to 6.3 per cent from 4.9 per cent a year ago.
The bank isn't ruling out raising equity capital "but it is not an option that we are considering at this time", chief executive Officer Brian Goggin told reporters this morning.
Bad-loan provisions amounted to 0.38 per cent of total lending in the fiscal first half, up from 0.12 per cent a year earlier and above a September 17th forecast of 0.35 per cent, the bank said.
Provisions for the full year will be in the region of 0.60 per cent of loans, above a previous estimate of 0.45 per cent.
Provision in the next fiscal year may rise to as much as 1.10 per cent, the bank said. Bank of Ireland may sell some "businesses, investments and portfolios", Mr Goggin said.
"Any one of them individually might not be significant, but when you combine a number of them together they can have a worthwhile and meaning impact on our capital ratios.''
Bank of Ireland will pay about €115 million to the Government a year in return for State guarantee of its deposits.
The bank is one of six local lenders covered by the guarantee announced by the government in September to protect the financial system from the global credit turmoil.
Bloomberg