Bank of Ireland says growth on track despite Brexit

Bank of Ireland has said economic growth in its core markets of Ireland and the United Kingdom remained positive during the first quarter of this year despite the ongoing uncertainties in relation to Brexit.

In a trading update for the three months to March 31st, published on Friday, the bank said it continued to deliver against its 2021 strategic targets for loan book growth, transformation and associated cost reduction.

It also said its ambition to grow its wealth and insurance business was on target during the period. “The group continues to trade in line with expectations,” it said of its income statement.

Net interest margin (2.16 per cent for the three months to March 2019), net interest income and other income were all in line with expectations.

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Transformation programme

“The group continues to maintain tight control over the cost base, while making appropriate investments in our businesses, infrastructure and people including our multi-year business transformation programme,” said the update.

“We continue to expect that operating expenses will reduce in 2019 and in that regard operating expenses (excluding levies and regulatory charges) are lower in the first quarter by about 3.5 per cent compared to the same period in 2018.”

Bank of Ireland said it expects levies and regulatory charges to total €115 million to €120 million in 2019.

Customer loan volumes were €79.1 billion at the end of March 2019, which was an increase of €2.1 billion since the end of December 2018, primarily driven by corporate (€500 million) and retail UK.

However, Investec analyst Owen Callan said €1.5 billion of this was due to the stronger sterling seen during the quarter.

The group’s market share of new mortgage lending in Ireland averaged about 23 per cent in the first three months of 2019 with mortgage applications and drawdowns increasing during the quarter.

Mr Callan described this as “slightly sluggish”, implying about €430 million in new lending during the three months, based on drawdown data.

For the bank’s SME customers, it saw increasing activity, confidence and credit demand during the quarter with positive momentum into second quarter.

Expectations

“Asset quality across our loan portfolios has continued to improve in line with our expectations,” it said. “The group will continue to progress with a full range of resolution strategies in response to the associated and evolving regulatory framework.

“Customer deposits were €79.7 billion at the end of March, from €78.9 billion at December 2018. Wholesale funding was €10.8 billion at the end of March 2019.”

Bank of Ireland announced last month the agreement of terms to acquire a portfolio of about €260 million of performing commercial loans from KBC Bank Ireland with the transaction expected to close in the coming months.

It also entered into a securitisation of a portfolio of non-performing mortgages secured on buy-to-let investment properties in the Republic. The portfolio has a gross value of about €377 million.