Bank of Ireland said yesterday that it expected to deliver a strong performance for the last year despite the difficulties faced by its asset management division.
The bank confirmed that the loss of funds from its asset management arm had continued in the second half with a net outflow of around €11 billion on top of €2.5 billion in the first half.
When equity market gains are taken into account, Bank of Ireland expects BIAM's assets under management to have fallen by around €10 billion by the end of this month on the March 2004 level of €57.5 billion.
The bank has also revised upward the impact on pretax profits of the loss of every €1 billion in funds
. Previously, it had put this figure at €2.5 million but has revised this up to €3.2 million, reflecting the higher margin attached to the lost funds which are mainly specialist equity mandates. As a result, pretax profits at the division are expected to be 8 per cent below last year.
Nonetheless, Bank of Ireland said it is on target to grow earnings per share by around 7 per cent to 114 cent per share for the year to March 31st, slightly ahead of consensus market expectations of 113 cent.
Profits before tax and exceptional items are expected to increase by 5 per cent from last year's level of €1.27 billion.
A strong performance from its Irish operations helped offset the difficulties at BIAM and a weaker performance in Britain.
The bank's retail operation in the Republic continued to reap the benefits of the strong Irish economy and is expected to report 17 per cent growth in pretax profit, driven by strong lending.
The bank estimates that mortgage lending is up by around 26 per cent, while business lending is around 22 per cent ahead of last year with deposit growth of around 12 per cent expected for the year ending March 31st.
The bank's life business also performed well, increasing operating profits by 17 per cent and growing its share of the life and pensions market by three percentage points to 24 per cent.
The Irish wholesale financial services business is expected to enjoy profit growth of around 10 per cent with lending volumes up by around 25 per cent in corporate banking.
In Britain, the bank's financial services operations are expected to achieve profit growth of 2 per cent on a constant currency basis.
Performance at its joint venture with the UK post office is in line with expectations, resulting in an operating loss of around £38 million sterling, of which Bank of Ireland's share is £24 million. Bank of Ireland is currently evaluating a number of expressions of interest in buying Bristol & West's branch network and associated deposit base, which make up its non-mortgage business.
The bank has indicated its intention to exit this business to focus on business banking, mortgage and consumer banking in the UK.
The bank said that its net interest margin is expected to fall by around 20 basis points as the low interest rate environment, strong lending growth allied to the higher cost of funds and repricing of the UK mortgage back book contribute to the decline.
The bank said asset quality remains strong. Following a review, the bank has made a special release of €100 million from its general loan loss provisions.
