Bank of Ireland said this morning that its underlying profit before tax rose 6 per cent to €1.8 billion last year as higher lending rates helped offset the rising cost of money and slower loan growth.
In its preliminary results statement issued today the bank said its total operating income – adjusted for its disposal of stockbroking firm Davy – increased by 9 per cent to €4.12 billion in the 12 months ended March 31st.
Excluding exceptional gains, earnings rose 4 per cent to €1.50 a share, slowing from 22 per cent growth a year earlier. The return on equity dropped two percentage points to 21 per cent.
“We are in a period of slower economic growth both in Ireland and our main markets,” chief executive officer Brian Goggin said. “It would be unrealistic to expect loan volumes to grow at the level in the year we've just ended. But low double-digit growth would not be at all unrealistic”.
BoI chief executive officer Brian Goggin said the full cost of the increased cost of borrowing has not filtered through to customers in Ireland
Speaking on RTE's Morning Ireland,Mr Goggin said that the full cost of the increased cost of borrowing has not filtered through to customers in Ireland to the same extent as in England.
As a result, Mr Goggin said Irish institutions would seek to try and recover this cost over the coming years. The bank observed that the slowdown had been "sharper than anticipated".
Irish mortgage lending has slowed dramatically as loan criteria become stricter and unemployment rises.
Loan growth last year was 16 per cent on a constant currency basis, the company said. The lender forecast on March 31st growth in underlying earnings per share of 3 per cent to 5 per cent.
Bank of Ireland said volatility in global financial markets had to an increase of €45 million in funding costs and the strength of the euro exchange rate against sterling which knocked €30 million off the bank’s sterling profits.
The bank said it has “minimal exposure to those asset classes most negatively impacted by the dislocation in financial markets”.
According to the bank profits from its capital markets division grew 14 per cent to €651 million and its UK financial services profits were ahead 12 per cent at €495 million. The bank said its total Tier 1 and Equity Tier 1 capital ratios were 11.1 per cent, 8.1 per cent and 5.7 per cent respectively at the end of the year.
Profit before tax at the bank’s retail operations in the Republic were 3 per cent ahead at €716 million.
Profit before tax at Bank of Ireland’s Life division was down 27 per cent to €108 million over the year due to an negative investment variance of €50 million.
Bank of Ireland shares closed at €8.06 on the Dublin Stock Exchange this evening, down 5.7 per cent.
Additional reporting: Bloomberg