DUBLIN: Bank of Ireland said on Thursday it has set aside more money for a possible return to paying dividends early next year for the first time since the onset of the financial crisis. The development came as the group’s level of bad loans continued to fall and its capital position improved in the three months to the end of September.
In a trading statement issued a day ahead of schedule, the bank said that its level of impaired loans fell by €400 million during the third quarter of the year to €5 billion, while new lending for the first nine months of the year rose by 3 per cent on the comparable period in 2016 to €10 billion. The group’s capital reserves position, measured as a common equity Tier 1 ratio rose by 0.3 percentage points to 12.8 per cent in the three months to the end of September. The pace of increase in this keenly-followed gauge of a bank’s financial strength was slowed as bank continued to invest in an overhaul of its technology systems, a “modest increase” in its pension deficit and an unspecified reduction for a potential dividend payment to shareholders early in 2018. The bank had previously set aside a €70 million provision for dividends in the first half of the year.
The bank’s net interest margin – the difference between the average rate at which it funds itself and lends on to customers – for the first nine months of the year was 2.34 per cent, marginally higher than the 2.32 per cent rate reported for the first half. However, the bank said that its recent sale of €750 million of subordinated debt will shave 0.03 percentage points off the margin in the first quarter. “The group continues to trade in line with expectations,” Bank of Ireland said in the statement. “Economic growth in our core markets of Ireland and the UK remained positive, notwithstanding ongoing uncertainties relating to the UK’s decision to leave the European Union. ” “The group has continued to maintain tight control over our cost base, while making appropriate investments in our businesses, infrastructure and people, including our multi-year business transformation investment programme, which continues to make progress.” The update also commented on the bank’s statement on Wednesday in relation to an industry-wide examination of tracker mortgages, confirming that it has identified about 600 customers who were wrongly denied a tracker mortgage and a further 3,700 who were overcharged by an average of 0.15 on a tracker rate of interest. The bank said that all of these customers have been returned to the correct rate and that compensation will start for the 4,300 borrowers from November 10th. It said that it aims to have compensated “all customers, subject to their agreement, by the end of the year.”
Bank of Ireland has known of problems in its tracker portfolio since at least 2010, when it was forced to put 5,100 customers on the wrong rate on the correct one. The bank disclosed that it is carrying out a review to see if “other customers should be included in the compensation process” and that it will issue a further update in the middle of November.
