Bank of Ireland has pleased investors with a good performance in the first half of this year but the group's asset management business, long viewed as the jewel in the crown, has been tarnished.
The bank's chief executive, Mr Brian Goggin, described the bank's six-month performance as "excellent" and pledged to implement a strategy to enhance the bank's efficiency and to address problem areas. Bank of Ireland's 9 per cent rise in pre-tax profits to €700 million was slightly ahead of market expectations.
Bank of Ireland shares improved on the news, rising seven cent to €11.03 with brokers largely leaving their forecasts for its full-year performance unchanged. Investors will receive a 12 per cent increase in their dividend to 16.6 cent.
When exceptional items are deducted, the bank's profits rose by 4 per cent to €676 million.
Its performance was chiefly boosted by another strong contribution from its retail banking operations in Ireland where profits rose by 20 per cent to €243 million. Its wholesale division, which includes its corporate banking unit and Davy Stockbrokers, achieved a 13 per cent increase in profits to €216 million.
Bank of Ireland's life assurance operations showed a 19 per cent decline in profitability to €59 million with the bank blaming one-off contributions in the previous year for the downturn.
And while Bank of Ireland Asset Management showed a 10 per cent increase in profits to €64 million, the bank admitted that the poor performance of its US investment funds coupled with the departure of four of its senior fund managers to a rival triggered a large outflow in client funds.
During the six months, BIAM clients withdrew €5.7 billion of investment funds, switching these assets to other fund managers. Mr Goggin, who led BIAM before being appointed to the chief executive's role in June, said the €5.7 billion loss was not insignificant and was a disappointment.
The investment style of the particular fund that had attracted monies from large US pension funds had been "out of sync" with the market for the past 18 months which upset some clients. "Clients will only be patient for so long," he said.
Mr Goggin said the bank would not be altering its investment style. "We will see this out. The US product is the only one that is affected. The performance of our global funds is good."
Profits at the bank's UK operations rose by 6 per cent to €200 million and it reported strong volume growth in its business banking and personal lending.
Mr Goggin said the bank was reviewing its entire UK business. The possible sale of its Bristol & West branch network is among the options being considered. Mr Goggin said this business continues to face serious challenges.
"Continuing to run it on the basis of its current performance is not an option". The group will announce a decision on the future options for this division before the end of this year.
