BoI figures not as bad as expected

BANK of Ireland’s first-half losses were not as bad as some analysts forecast, and that in itself is good news for the group that has been slowly clawing its way back from the abyss.

Initially when the banking crisis broke in September 2009 it was thought that BoI was in a much more perilous state than its arch-rival, AIB.

That has turned out not to be the case and the bank is well on the way to fully meeting its new capital requirements having secured €2.9 billion from the markets in recent months to get its capital base back into shape. It was interesting too that, while AIB and Anglo bosses have called for the retention of the state guarantee on the banks for another 12 months, Richie Boucher, chief executive of BoI, went in the opposite direction.

In his formal statement with the accounts for the first half of 2010 Mr Boucher said he and his senior executive team would be pursuing a policy of “prudent” disengagement from the guarantee.

This presumably was done not to give his counterparts in Anglo or AIB one in the eye, but is meant to carry a clear message to the markets that the bank is managing its way through this crisis and is confident of being able to survive in the real world of finance without being hand-held by the state for much longer.

Provided the markets hold and inter-bank lending normalises in the period ahead, Boucher’s wish to cut its ties from the state will happen sooner rather than later.

BoI’s loan transfers to NAMA at over €12bn compare favourably with AIB whose adventures into property have been much more costly.

Comparisons with Anglo, given its awful state, make no sense.

BoI still has to sell key assets under EU instructions. It is to sell New Ireland Assurance, its life and pensions business; Bank of Ireland Asset Management; and its lesser known ICS Building Society.

Mr Boucher confirmed that the bank has had expressions of interest for BIAM, that could be sold before the year’s end.

BoI has done the groundwork, but it is plonked in the middle of an economy still in deep crisis, a crisis this bank contributed to in a big way. There may be light at the end of the tunnel. However, bankers’ forecasts about their own financial health come with serious health warnings at this stage.