BoI sees profits jump 6% to €713m

BANK OF IRELAND reported another strong performance with few surprises yesterday, as first-half profits edged up 6% to €713 million.

The bank had buoyant economic conditions in its two main markets, Ireland and Britain, to thank for the results, which delivered impressive growth across its main business units and matched market expectations.

Chief executive Brian Goggin said the bank had a “clear and compelling” strategy for the future.

Mr Goggin set out his main targets that he said would be “the hallmark of his tenure,” which included a greater emphasis on efficiency and stripping out unnecessary costs.

The corporate, treasury and asset management businesses were at the leading edge of competitiveness by international standards, he said, but more work was needed to streamline the retail division and centralise administrative functions and operations in Britain.

The core retail banking division delivered profits of €243 million, a 20% increase, as mortgages, personal lending and business banking all performed well.

Mortgage lending surged 28%, while business banking grew by 22% and personal loans 16%.

Profits at wholesale financial services, which includes corporate banking and treasury activity, climbed 14% to €216 million.

Corporate banking raised profits from €71 million to €101 million, thanks to higher lending volumes, but treasury income fell 18% to €64 million in “difficult” market conditions.

The life and pensions business bumped up its market share from 21% to 24%, fuelling a 26% hike in operating profits.

But the division’s bottom line fell from €73 million to €59 million, due to the absence of a €30 million once-off gain from last year.

The bank had no further bad news on the net interest margin, a measure of the gap between the interest rates charged to borrowers and paid to depositors, after warning the market of a continuing squeeze in a trading statement last month. The margin fell from 2.2% to 2.07% as the bank failed to grow its deposit base at the same pace as its lending activity.

This forced it to pay more for money by borrowing at market rates rather than using deposits from business and personal customers.

Chief financial officer John O’Donovan said the margin would bottom out at 2% for the full year and that the pace at which it was falling had slowed.