BANK OF Ireland chief executive Richie Boucher yesterday signalled that he wanted to wean the financial institution off State support in the next three years after stabilising its losses on bad loans and restructuring the business.
His comments were made as the bank unveiled a loss of just more than €1.2 billion for the first six months of this year.
This was almost double the deficit recorded for the same period of 2009 but the figure was better than stock market analysts had expected.
“Our goal is to get off the guarantee as quickly as we can and as prudently as we can,” Mr Boucher told reporters yesterday.
In relation to the €1.8 billion worth of preference shares held by the State, Mr Boucher said: “Our plan is that by 2013 that these will be redeemed through profit accretion.”
These preference shares carry a coupon, or interest rate, of 10.25 per cent and the bank is due to make a cash payment to the exchequer next February.
Mr Boucher described the preference shares as “quite expensive” for the bank. “We don’t begrudge that but we note it,” he added.
The State also holds a direct 36 per cent stake in Bank of Ireland, which is held through the National Pension Reserve Fund. “They will have to decide what to do with that,” Mr Boucher said.
But, unlike his counterparts at Allied Irish Banks and Anglo Irish Bank, Mr Boucher stopped short of calling on the Government to extend the bank guarantee scheme, which is due to expire at the end of 2010 and has provided security to international investors with funds committed to Irish banks.
He said Bank of Ireland wanted to “disengage in a safe and prudent manner . . . as market conditions allow”.
The bank’s participation in the guarantee schemes cost the company about €154 million in the first six months and will cost the same again in the second half.
Bank of Ireland made an operating profit of €553 million but it was forced into the red by impairment charges on financial assets, and losses associated with the transfer of loans to the National Asset Management Agency (Nama).
The bank took an impairment charge of €893 million on customer loans and a hit of €932 million on loans that have either been transferred to Nama or are waiting to be moved to the agency.
A raft of “non-core items”, including a €676 million reduction in its pension liabilities and a €27 million tax credit, actually allowed the bank to post an after-tax profit of €143 million for the period.
Mr Boucher said trading in Ireland and the UK remained “challenging” although growth had resumed in both economies.
Its Irish retail business made a loss of €548 million in the first six months, 6 per cent more than last year.
The capital markets division recorded a loss of €401 million compared with a profit of €125 million last year.
The only division to return a profit in the period was Bank of Ireland Life, with a surplus of €30 million compared with a €5 million loss in the previous year.
Mr Boucher said the bank would not increase mortgage interest rates this year other than in line with European Central Bank.
He said demand for new mortgages here “remains muted” while there is “extremely low demand” for buy-to-let loans.
The bank processed 10,000 mortgage applications in the first six months, of which “74 to 75 per cent” were approved.
