Bank of Ireland chief ‘deeply regrets’ bank’s role in financial crash

Bank of Ireland CEO Richie Boucher said he “deeply regrets” the role the bank played in the financial crisis and that it needed support from the taxpayer.

Speaking to reporters following the announcement that Bank of Ireland made a €921m profit last year, Mr Boucher, said that he “can’t predict what I will be asked” when he appears before the banking inquiry on May 6.

The bank has so far released 6,000 documents to the Oireachtas banking inquiry.

Mr Boucher was part of the management team that was responsible for widespread failures, including not having enough capital facing into the economic downturn and not having adequate risk management systems in place during the boom years, he said.

Bank of Ireland was the only one of the domestic banks to escape majority State ownership over the past five years. Moreover, it has now repaid over €6bn to the Government for an original €4.8bn investment. The State retains 14%.

Last year was the bank’s first full-year profit since 2010. The total income was €2,974m compared with €2,646m in 2013.

However, €516m of last year’s €921m profit was achieved through a writeback of loan loss provisions and gains made through changes to its bond holdings, as well as an increase in value in its subordinated Nama bonds.

These are unlikely to be repeated this year, said Mr Boucher. The net interest margin, a key indicator of profitability, increased from 1.84% at the end of 2013 to 2.11% at the end of last year.

However, the pace of increase in the net interest margin will moderate during this year, said chief financial officer Andrew Keating. The bank said it is “prioritising the capital we are generating” to redeeming the €1.3bn in outstanding preference shares between January and July next year.

Mr Boucher said there was no change to the bank’s policy that it does not include debt writeoffs as part of its restructuring agreements with customers in arrears. He acknowledged that it was not a “popular policy” but it is consistent compared with the arbitrary approach to debt writeoffs adopted by the other banks. The bank’s core tier one capital is 14.8%.

Mr Boucher said the bank had a ‘meaningful buffer’ above the capital requirement stipulated by the ECB as part of EU banking union. The ECB has applied different capital requirements for all eurozone banks, although none of these will be disclosed. This has caused a backlash among investors on the grounds that it lacks transparency.

Impairment charges fell from €1,665m at the end of 2013 to €542m at the end of last December. Overall, defaulted loans decreased by €2.8bn to €14.3bn over the 12-month period. Defaulted loans are now €4bn below the peak reached in July 2013. Total new lending reached €10bn in 2014, which is a 50% increase on 2013.

However, during the year, there was roughly €14bn of redemptions, leaving a net customer loanbook of €82.1bn at the end of 2014.

Bank of Ireland made a submission to the Central Bank over the new loan-to-value and the loan-to-income rules introduced last month.

Mr Boucher said he favoured a phasing in of the 20% deposit. The Central Bank introduced the new rules immediately although modified the 20% deposit rule for first-time buyers to enable this cohort to borrow up to 90% for the first €220,000 of the value.