Bank of Ireland braced for €14m levy

In a trading update yesterday, Bank of Ireland chief executive Mike Soden said the bank has seen strong growth in all of its divisions.

But the Government’s levy on Irish banks will shave around €14 million of its first half profits.

“The underlying half year outturn would have been at the high end of the single digit spectrum but for the bank levy in the Republic of Ireland ... which did not apply last year, and the impact of the strengthening of the euro against sterling,” BoI said in a statement.

Despite the expected increase in profits for the six months to end September, the bank’s shares were down 3.1%, or 35c, at €10.85 on the Irish stock market.

In Ireland, BoI expects to report an increase in market share and low single digit profit growth. It said lending volumes would be ahead of last year’s figure by, while mortgage lending would rise by more than 20%.

The resilience of the Irish mortgage market over the past two years has benefited all financial institutions, brokers said with some banks posting 30% rises in mortgage lending. Other lending from its retail banking division would also be ahead.

The bank added: “The net interest margin is expected to contract due to the historically low level of interest rates and faster growth in lower margin assets. Mid single digit growth is expected in net interest income.”

At Bank of Ireland Life pre-tax profits will be “significantly higher than the corresponding period last year”, boosted by the strong recovery in world equity markets.

It added the upturn in equity market since the start of the year will be seen in first half results. Equity values impact directly on around 10% of group revenues, principally from the life assurance and asset management activities.

The level of new business at the life arm will be lower, mainly due to SSIAs boosting 2002 figures, resulting in operating profits dropping by “low to mid twenties percentage”. Excluding SSIAs, new business volumes increased by a low single digit percentage.

Corporate banking is expected to report a mid to high single digit percentage loan growth and a strong trading performance in Treasury and International will result in increased profits from there.

Bank of Ireland Securities Services, the custody and fund administration business, continues to perform well.

The bank added that in the period BOISS completed the sale of its share of the alliance operated with asset management firm State Street. Profit on the sale will be shown as an exceptional item and excluded from earnings per share.