Shares in Bank of Ireland rose 3.8 per cent yesterday as the bank reported full year 2012 results that contained no nasty surprises for the markets.
Importantly, the bank’s core Tier One ratio of 14.4 per cent and “fully loaded” Basel III ratio of 8.6 per cent were slightly better than most analysts had expected.
The bank’s chief executive Richie Boucher signalled that he does not expect the bank will need new capital when new stress tests are carried out later this year.
The bank also signalled that the flow of owner-occupied mortgage arrears has stabilised. Bank of Ireland posted a loss before tax of €2.16 billion for the year to the end of December 2012, up from €190 million a year earlier.
Operating income declined 9 per cent to €1.88 billion while expenses were flat at €1.63 billion. This had the effect of reducing the bank’s operating profit before impairment changes and the sale of assets to the National Asset Management Agency to €242 million from €413 million in 2011.
Bank of Ireland took a hefty impairment charge on customer loans of €1.7 billion last year, down 11 per cent on the previous 12 months.
Redundancies
It also recorded a charge of €679 million relating to non-core items. This included a €150 million cost for redundancies, losses of €326 million relating to the deleveraging of financial assets and a loss of €69 million from the sale of its Burdale loans.
The bank’s net interest margin fell eight basis points (0.08 of a percentage point) to an average of 1.25 per cent for 2012. However, the bank said this margin had improved significantly in the second half, averaging 1.34 per cent.
Customer deposits rose 6 per cent to €75 billion while wholesale funding was down 24 per cent to €39 billion.
Its loan book reduced by 9 per cent to €93 billion.
The bank shed 1,200 staff via voluntary redundancies in the final two months of last year.
Additional redundancies will be implemented this year, funded by an unused €57 million provision booked in 2012.
The bank said nine out of 10 of its 162,000 owner-occupied mortgages were fully performing. There were 90 repossessions last year by the bank, 284 voluntary sales and 74 properties where possession orders were granted. The bank has also appointed 1,100 rent receivers to commercial properties and is in a legal process on 500 buy-to-let mortgages.
Mortgage arrears
Mr Boucher said the bank’s mortgage arrears were “reducing” and “stabilising”. He said any debt forgiveness by the bank would be a “cost to someone” and said the issue was “containable” for the bank.
When asked if Bank of Ireland might support a move to put its loss-making tracker mortgages, along with those of its domestic peers, into some form of State-linked special purpose vehicle, Mr Boucher said: “We are not involved in any discussion on moving our tracker book into another vehicle.”
