THE exceptional charge which knocked £48.1 million off Bank of Ireland profits for the year to the end of March arose because of changes in its US operations. The charge covers movements in will and revenue reserves on the balance sheet, which necessitated an adjustment in the profit and loss account, according to group finance director Mr Paul D'Alton.

Bank of Ireland has merged its US operation, First New Hamp with Citizens Financial Group, the US subsidiary of Royal Bank Scotland. Under accounting rules the new arrangements involve adjustments on the balance sheet and a charge against profits.

No further profit or loss is expected on the US deal, Mr D'Alton said. But some £17 million is expected to be written off against reserves in the current year when the 23.5 per cent stake in Citizens will be treated as an investment in an associate in group accounts, he said.

Under the final terms Bank of Ireland is getting more of the payment in cash as well as $5 million more than originally expected. The total consideration for Bank of Ireland is $709 million (£454 million). It comprises a 23.5 per cent stake in Citizens valued at $435 million, cash of $215 million and loan notes of $20 million, to give a total of $670 million.

The $670 million payment compared with a carrying value for First New Hampshire in the Bank of Ireland accounts of $434 million, giving a profit of $236 million. But this profit then had to be adjusted against previous goodwill write offs of $311 million on the US operation. It was this net difference - $75 million or £48 million - that resulted in the exceptional charge in the 1995/96 accounts.

Because the $435 million value of the 23.5 per cent stake in Citizens compares with an asset value of $175 million for the stake, its inclusion as an associate will involve a goodwill item of $262 million in the next accounts.