BoI ‘should raise €300m’ as a buffer

Even though Bank of Ireland will probably not need new capital as a result of the Balance Sheet Assessment or the EU-wide stress tests next year, it should raise €300m to shore up its capital position, according to Deutsche Bank.

In a new research paper on the Irish banking system, Deutsche Bank said Bank of Ireland is in the best position among the domestic banks to return to profitability. However, it faces three main challenges: the looming BSA and asset quality review into its loan book; what to do with the €1.8bn in preference shares; and, a potential solution to the tracker mortgage problem.

“It would take a major (and probably worse than the stress scenario of the original PCAR) discovery of poor loan classification/provisioning/risk weighting or a very high Basel 2.5 hurdle rate to cause problems for either.