As well as the cost of funding, the key loss-making driver was the rise in the bank’s impairment charge — basically, the amount it uses to cover bad debts. This charge went from €32m to €553m last year, covering 1.79% of its loan book and relating mainly to loans to property developers on the group’s business banking side. However, customer deposits were also down by 32% on the previous year, to €6.6bn
Commenting on the results, outgoing group chief executive, Mark Duffy called 2008 “a very challenging year” and said: “The severe deterioration in the Irish economy has led to rising arrears and falling asset values which, in turn, has resulted in a significant increase in impairments.”
However, Mr Duffy — who is set to leave the bank at the end of March — said the company is in good shape and is “very strongly positioned to reap the benefits” when the economy recovers. He said that Halifax — the bank’s retail banking arm here — continued to perform well, attracting two-in-every five new credit card customers last year and consolidated its position as the first choice for those considering switching current accounts.
The bank has 215,000 current accounts on its books and caters for around one-in-10 of the country’s banking population.
Mr Duffy added that the Irish division of the group is not planning any job cuts and that management would not be benefiting from any pay increases or, indeed, bonus payments until the bank is profitable again. He said that no bonuses were paid out in 2008 and the same scenario would probably be the case for the current year. Mr Duffy was slightly more coy about his own future, yesterday, than was the case when the formal announcement of his pending resignation from the group was made last week.
Then, he confirmed that he would make a return to the banking sector within three months of leaving BoS at the end of March. He had been tipped to take over from Brian Goggin as chief executive of Bank of Ireland, but that role was filled this week by the bank’s Irish retail division head, Richie Boucher.
Meanwhile Bank of Scotland’s (Ireland) parent company, Lloyds Banking Group — which recently completed its acquisition of the Halifax Bank of Scotland (HBoS) group, yesterday said that HBoS made losses of £10.8 billion (€12.17bn) last year.