Bank of Ireland extends maturity of its €1.4bn Nama bonds

Bank of Ireland

is to extend the maturity of €1.4 billion of senior bonds issued to it by the National Asset Management Agency in 2010.

This is detailed in the notes attaching to the bank’s full year results, published on Monday.

The bonds were issued as consideration for the loans transferred by the bank to Nama following the financial crash, and were due to mature on March 1st.

However, on February 2nd, the bank agreed to accept the issuance of new bonds from Nama that will mature in March 2017.

Bank of Ireland’s accounts state that Nama redeemed €968 million of senior bonds held by the company last year. This compared with €1.6 billion in 2014.

The results also show that Bank of Ireland paid the State €10 million in guarantee fees last year. The State’s Eligible Liabilities Guarantee Scheme (ELG) – a successor to the original blanket bank guarantee from 2008 – was ended in March 2013.

Liabilities

Liabilities have been gradually coming off the scheme since that date and at the year end the bank had €700 million of liabilities still covered by the ELG, all relating to customer deposits.

At the end of 2014, some €2.8 billion was still guaranteed by the State, of which €1.9 billion related to senior debt and the balance to customer deposits.

The bank paid €37 million in ELG fees that year.

The accounts also indicate the effect of low interest rates on customer accounts. Interest expenses on these accounts was €469 million in 2015 versus €660 million in 2014. This was in spite of a €5.3 billion increase in deposits during the year to €80.1 billion.

The bank said the reduction reflected lower interest rates being offered to customers and the “ongoing shift from term deposits due to the low interest rate environment”.

In addition, the results show the value of Irish sovereign bonds held by the bank reduced to €5.1 billion at the end of last year from €6.9 billion at the end of 2014.

Bank of Ireland said this represented the impact of its “liquid asset rebalancing strategy” in the first half of last year with bonds either maturing or sold. “We recognised €173 million in our other income relating to bond sales,” it added.