BoI reports loss of €2.9 billion

Bank of Ireland reported a pre-tax loss of €1.8 billion today, with underlying losses soaring to €2.9 billion as impairment charges rose substantially.

Shares in the bank soared closed 24 per cent higher to €1.60 on the Dublin market today with over 22 million shares traded.

The preliminary results published this morning cover the nine months to December 31st 2009, and come only a day after Minister for Finance Brian Lenihan announced details of plans to transfer loans to the National Asset Management Agency (Nama) and recapitalise banks.

"This nine month trading period was very difficult for both our customers and our business and this has been reflected in the substantial increase in credit losses," said chief executive Richie Boucher.

"With hindsight, it is clear that the bank's growth ambitions in previous years had been framed against an overly optimistic view of the outlook for the Irish economy and it was too exposed to the property sector and too reliant on wholesale funding."

Underlying operating profit before impairment charges was just over €1 billion for the period, a 28 per cent fall from the same period in 2008. However impairment charges of €4 billion brought this to a €1.8 billion loss before tax, with underlying pre-tax losses for the period reaching €2.9 billion.

Some €2.2 billion of the impairment charges relate to assets expected to transfer to Nama.

The bank said it had conducted an internal review of impairment estimates on non-Nama loans and confirmed previous guidance of impairment charges of €4.7 billion over the three years ending March 31st 2011.

"We believe that the impairment charge on our non-Nama bound loans and advances to customers has peaked in 2009 and will reduce progressively in each of 2010, 2011 and 2012," the bank said in a statement.

The bank expects to transfer €12.2 billion in loans to Nama, retaining about €3 billion. Of the loans it intends to keep on its books, about one third relate to land and development, while two-thirds are associated loans.

Speaking on Newstalk this morning, Mr Boucher said the bank had guided the markets "appropriately" on the loss on disposal of the Nama-bound loans.

"We gave the market guidance that our losses on disposal to Nama would be within €4.8 billion, that remains the case," he said.

The bank has plans to raise "significant" amounts of capital, he said. and does not see the State taking a majority stake.