Bank of Ireland reported a 31 per cent drop in net profit for the first half of the year as its net interest income declined and the bank increased loan impairment charges as US tariff-related risks weigh on the economic outlook.
Group chief executive Myles O’Grady said he plans to cut 260 jobs in the second half of this year and sees further redundancies in 2026, as the bank aims to keep running costs in check.
The bank also marginally increased its full-year net interest income forecast and maintained its medium-term financial targets.
Bank of Ireland’s net profit fell to €608 million in the first half, it said in a statement on Tuesday.
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While its net interest income declined to €1.67 billion from €1.8 billion for the same period last year, the result was better than the company had expected, as its Irish loan and deposits books grew, it said.
The lender hiked its net impairment losses to €137 million from €50 million, driven by a charge taken against its US acquisition finance book and as management took a €40 million general provision to reflect “the evolving macroeconomic outlook”.
While Bank of Ireland’s economists upgraded their Irish economic forecasts in recent weeks, this was predicated on the EU reaching a trade deal with the US that would leave tariffs on most Irish goods at 10 per cent. The accord reached over the weekend will see a 15 per cent tariff apply to most imports from the EU.
Looking ahead, the bank now sees its net interest income coming in at €3.3 billion for the full year, up marginally from €3.25 billion previously forecast. It reported €3.56 billion of net interest income last year in a higher interest rate environment.
It continues to expect its so-called business income – including income from its New Ireland life business, Davy and shares of joint ventures – to rise by 5 per cent.
“The group had a good first half performance,” said Mr O’Grady. “Against an uncertain international backdrop, the Irish economy is resilient. Bank of Ireland is well positioned to navigate this environment, generating strong levels of capital to support customers, grow our balance sheet, invest in the business and deliver attractive shareholder returns.”
The bank’s one-off costs jumped to €83 million from €11 million a year earlier, driven by €69 million of restructuring costs, including for planned redundancies, aimed at keeping running costs at €2 billion over the next three years. Mr O’Grady told analysts on a call that the bank is planning 260 voluntary redundancies before the year end and “more likely in 2026 as well”.
Full-time equivalent employees at the bank rose 2 per cent on the year to 11,386 in June, primarily due to temporary seasonal staffing and insourcing of information technology (IT) work.
Mr O’Grady said that artificial intelligence (AI) will play a role in the bank’s headcount falling over the coming years. “I think it will change roles,” he said. “But AI also offers huge opportunities for colleagues to upskill as well.”
Bank of Ireland reaffirmed its full-year guidance for net profit equivalent to about 15 per cent of shareholders’ tangible equity in the business.
It set aside a provision of £143 million (€167 million) last year for a potential compensation scheme stemming from a regulatory examination of the UK motor finance industry. A key UK supreme court ruling on some tests cases is due on Friday. That will influence whether regulators introduce an industry-wide compensation scheme for customers potentially overcharged because of historical use of discretionary commission arrangements.
Having recommenced interim ordinary dividends in 2024, the bank announced that it will pay an interim dividend of €243 million on its result for the first half – or 25 cent per share.
Since the start of 2023 the group has returned €2.6 billion to shareholders through a series of buy-backs and dividends, it noted.
