Bank of Ireland Plc, the nation’s largest bank by assets, said lending margins continued to improve, following a rebound in the second half of 2012.
Costs from the Irish state’s banking guarantee, which was withdrawn last month, “will reduce quickly” and boost income this year, the Dublin-based bank said in a statement today. Bank of Ireland, which paid 388 million euros ($505 million) last year in guarantee fees, said deposits have been unaffected by the government’s move.
Bank of Ireland’s net interest margin, the difference between the rate at which it borrows and lends to customers, widened to 1.34 percent in the second half of last year from 1.20 percent in the previous six months, as the bank cut deposit rates and raised customers’ borrowing costs. Chief Executive Officer Richie Boucher, 54, cut the workforce by 9 percent to about 12,000 last year and shrank the lender’s loan book and central-bank reliance as bad-debt losses decreased.
Bank of Ireland’s “rebuilding of the net interest margin and the in-line performance on impairments is helpful,” Eamonn Hughes, an analyst at Dublin-based Goodbody Stockbrokers, said in a note. Still, the analyst said that stock has jumped 20 percent since he upgraded it to buy on March 6.
Bank of Ireland rose 1.8 percent to 17.4 euro cents at 8:57 a.m. in Dublin, having increased to as high as 17.5 cents. That’s the highest level in almost two years.
The bank said it has shrunk its loan book to 90 billion euros and its loan-to-deposit ratio has fallen to 120 percent ahead of a year-end target set by the central bank. The bank’s loan book contracted 9 percent last year to 92.6 billion euros, as it sold and ran down some non-core loan portfolios.
Bank of Ireland’s loan-loss charge fell to 1.72 billion euros in 2012 from 1.94 billion euros a year earlier, marking a third straight year of decline, it said earlier this month.
Central bank funding has decreased to 11 billion euros, the bank said. It stood at 12 billion euros at the end of 2012.
“Although we expect the bank’s outlook is positive, at current levels, the bank is trading toward the top end of its pricing range in our view,” said Muna Muleya, an analyst at Dublin-based Merrion Capital.