Bank of Ireland has contacted tracker customers about redress

Bank of Ireland has begun contacting mortgage customers who are entitled to redress as part of a sector-wide review ordered by the Central Bank of Ireland last December.

At a press briefing yesterday to announce its half-year results, Bank of Ireland chief executive Richie Boucher said: "We've been in contact with customers. We've identified issues and, with the permission of the Central Bank, we're contacting those customers and giving them redress."

Mr Boucher declined to say how many customers had been contacted or how much the redress programme would cost the bank. “That process hasn’t completed yet so I can’t really speculate.”

The Central Bank wants lenders to put affected customers back onto the tracker rate as a first step in the redress, and to then offer them compensation, with a right to appeal.

On Thursday AIB apologised for its failure to apply a tracker interest rate to certain customer accounts. The bank has set aside €190 million to meet the costs of the review and redress but has not said how many customers are affected.

Permanent TSB has set aside about €140 million for its redress scheme.

Borrowers

Financial services broker

Padraic Kissane

, who has pursued cases with the banks on behalf of borrowers, has estimated that about 3,300 customer accounts are affected at Bank of Ireland, including about 1,800 staff, and around 3,000 at AIB.

Bank of Ireland had a separate redress programme in 2010/11, when about 2,000 customers received redress, Mr Boucher said.

Bank of Ireland announced an underlying profit of €560 million in the first six months of this year, down from €743 million in the same period of 2015.

The bank warned that Brexit “may affect” new business generation and signalled that the timing of a resumption of dividends could be impacted by the referendum result.

“It’s a question of timing,” Mr Boucher told the media, adding that paying a dividend had not been taken off the table.

The bank has not paid a dividend since 2008, and had flagged its intention to resume this payment next year in respect to the 2016 financial period. Mr Boucher said a final decision on the matter would be taken by the board after the year-end.

The UK accounts for about 25 per cent of Bank of Ireland’s income.

Share price

Bank of Ireland’s share price closed down 2.6 per cent in Dublin on Friday at 18.5 cent, following the release of its results. The share price has declined by about 45 per cent in the year to date, partly the result of market volatility for banking stocks across Europe.

The bank said its new lending in the first six months rose by 14 per cent to €6.9 billion in the period. Its non-performing loans reduced by €2.1 billion and defaulted loans are now at 10 per cent of customer loans, less than half their reported peak in June 2013.

Its net impairment charge continued to reduce – by 21 basis points in the first half of the year. The bank had a fully loaded core equity tier 1 ratio of 10.7 per cent and a transitional CET1 of 12.8 per cent.