Pre-tax profits at BoI up 8% to E1.27bn

BANK OF IRELAND met market expectations yesterday when it announced pre-tax profits of E1.27 billion last year, an 8% increase.

The market responded in kind by leaving the share price largely unchanged before gaining 1.5% in late trading.

Chief executive Michael Soden said the results were very strong and marked the 13th year in a row of increased profits. The core retail division brought in E419m in the 12 months to March 2004, 7% more than the previous year.

The bank reported strong growth in mortgages and business banking, both in Ireland and Britain. Mortgage lending in Ireland was up 29% year-on-year, while loans to business customers were ahead by 18%. The bank was now the biggest mortgage provider in Ireland. Over half of the bank’s total loan book of more than E70bn is tied up in home loans, traditionally seen as among the lowest risk forms of lending.

The bank’s net interest margin, which measures the difference between the price paid by the bank for money that it lends to borrowers, fell from 2.38% to 2.21%. This margin stood at 2.6% in 2000. Chief financial officer John O’Donovan said the margin squeeze was down to falling interest rates, lending growing at a faster rate than the bank could source deposits, and the repayment of older mortgages in Britain that had been priced at relatively high rates.

The joint venture to sell financial services through the British post office network was making satisfactory progress, said Mr Soden. The new operation began to offer personal loans in March. Credit cards, motor insurance and mortgages will follow between now and the end of 2005. The bank spent E3 million on start-up costs last year and expects the joint venture to deliver profits within three years. The bank also announced yesterday that it had agreed a similar deal on a pilot basis with the Canadian post office network. Bank of Ireland Life, the group’s life and pensions division, saw profits rise by 69% to E147 million in line with a strong recovery in equity markets. Excluding the once-off effect of the Government’s SSIA scheme, sales were ahead by 19%. Wholesale financial services, which includes the bank’s corporate banking and treasury activities, recorded flat profits of E371 million. The bank’s operations in Britain were ahead by 4% at E373m, but would have been 12% higher if the effects of weaker sterling were stripped out.

Mr Soden was upbeat about future prospects and predicted continued strong growth in mortgages and life and pensions. The bank had signed up 40% of the 16 to 24-year-old market and 40% of third level graduates, which it hoped to turn into profitable customers in future years.