BANKS: Bank of Ireland has indicated a strong performance in the past 12 months with no sign of a weakness in its core business, despite slower growth in the Irish economy.
In a statement ahead of its results, the bank said it expected to report low single-digit growth in profits in the year to the end of March. This is slightly better than analysts had expected.
The full-year figures are due to be issued on May 16th and some analysts have indicated they will now revise upwards their profit forecasts on the foot of the very positive signals coming from the bank.
Bank of Ireland had been expected to post pre-tax profits of around €1.1 billion, a figure now likely to be exceeded. Its shares rose on the upbeat assessment, closing up 18 cents at €12.28 in Dublin.
The bank has achieved low double-digit increases in its lending and savings during the year and on fees generated in other parts of the group. Much of this was driven by continued good growth in the volume of business being transacted, which helped to offset a weaker return from investments in world stock markets.
The group has also reported further progress on cost control. For the full year, the bank estimates costs will increase by a mid-teen percentage. Much of this was due to a more diversified business base at its British operations, according to the statement.
The implementation of the euro cost the bank €45 million last year.
The group has signalled that the quality of assets on its books remains very high with little sign of any adverse affect following slower economic growth, particularly in the Irish market. The loan loss charge and arrears as a percentage of the total loan book are expected to be virtually unchanged year-on-year.
Its retail banking business in the Republic will show low double-digit percentage increase in profits. Deposits and lending have increased by 15 per cent and 14 per cent respectively. Mortgages are expected to rise by 22 per cent with other lending up 9 per cent.
Loan losses did increase but the bank insists they remain at very satisfactory levels.
The bank's life and pensions business performed well and was boosted by the Government-backed Special Savings Incentive Scheme. Corporate, treasury and its international business also enjoyed a solid performance, the bank said.
In Britain, its Bristol & West subsidiary experienced reduced profit margins on its business but the situation did recover in the second half of the financial year.
Lending in Britain also was less profitable, with the bank yielding less of a premium as a result of lower interest rates. The British lending book is expected to increase by a high single-digit percentage with good increases across residential, commercial and other lending activities.
Weaker stock markets impacted on profits at Bank of Ireland Asset Management (BIAM) but some of the downturn was offset by record levels of new business. Assets under management are expected to grow by low double-digit figures and BIAM's investment performance will continue to be strong, according to the bank.
