Bank of Ireland has reported another strong performance, showing a 24 per cent rise in pre-tax profits to £831 million (€1.1 billion) in the 12 months to the end of March 1999. The out-turn was boosted by the proceeds of the sale of its US Citizens operations for £172 million last year, but also reflects continuing strong growth in profits from its domestic and international banking, life assurance and stockbroking activities. Announcing the results yesterday, group chief executive Mr Maurice Keane was confident about the bank's future growth prospects, saying it is well positioned to prosper from the favourable economic conditions. He also signalled that bank customers could be facing a further fall in interest rates - possibly of around 0.5 of a percentage point this year, depending on economic conditions within the euro zone.
Despite the good results, which were broadly in line with brokers' forecasts, Bank of Ireland's share price drifted lower on the Dublin market yesterday. The shares dropped from €19.2 to lows of €18.15 before recovering to close at €18.47. The shares had soared ahead of the results earlier this week amid expectations that the bank's earnings would exceed market forecasts. Shareholders will receive a final dividend of 19.8p (0.2514 cents). This, together with the interim dividend of 9.2p, gives a total year-end dividend of 29p, a 26 per cent increase.
Investors are now closely watching for the bank's next move, with all eyes focused on its next acquisition. Mr Keane said that the British market is the most "logical" route of expansion and that it is continuing to assess opportunities there. The bank has a substantial war chest, boosted by the Citizens sale last year, and can afford to make a very large purchase, spending well in excess of £800 million if necessary. It is also expected to be one of the front-runners in the tender process to buy ICC Bank in the coming months.
The bank shrugged off concerns about its mortgage lending activities in the wake of the Central Bank's warning to banks and building societies about the breaching of affordability guidelines when approving customer loans.
Bank of Ireland's head of retail banking, Mr Pat McDowell, said the bank employs prudent criteria when assessing loan applications. The bulk of the bank's mortgage lending is to its existing customers, and despite a 19 per cent share of the total mortgage market its book contains a relatively small proportion of recent first-time buyers. Mr McDowell stated that the average mortgage on the bank's books is for around £60,000 and is broadly unchanged from last year.
Adjusting for the Citizens sale, the bank's pre-tax profits climbed from £530 million to £659 million during the 12 months. Some £253 million was earned at the bank's Irish retail banking operations, up from £208 million in the previous year.
Group net interest income - the difference between the amount it pays on deposits and the amount it earns on loans - grew by 17 per cent to £126 million. The decline in interest rates put a further squeeze on the profit margins earned on its core business, which are down to 2.62 per cent from 3.01 per cent last year. The demand for lending though was very buoyant, with an upsurge in new business driving profitability ahead.
Its life and pensions business, which includes a full-year's contribution from its New Ireland subsidiary, brought in a good donation to group profits, increasing from £43 million to £72 million. The bank's corporate and treasury division recorded substantial gains, with profits up 30 per cent to £109 million. Its Bristol & West building society in Britain contributed a further £151 million, up from £92 million in the previous year.
