The bank — which is 14% owned by taxpayers — said it had benefited from the disposal of bonds and its work to restructure bad loans from the crash.
Underlying pre-tax profit more than doubled to €743m for the first six months of the year, much more than analysts had expected. Impairment charges fell to €168m from €444m a year earlier. Net profit soared to €617m from €343m a year earlier.
Chief executive Richie Boucher told a media briefing that the bank was well down the road to returning to full health. As profits increased, it had boosted its “vital” capital levels and he reiterated that the lender had more than paid back the billions of euro taxpayers had injected into the lender during the crisis.
With unemployment falling and analysts forecasting strong growth, Mr Boucher said the bank was also taping into the upswing in the economy: “As important for us is employment increasing. We are thinking that employment is increased by 2.5%.”
He said the bank had been “generally supportive” of the new restrictions the Central Bank had introduced earlier this year on mortgage lending.
He said the bank expected house prices to increase broadly in line with growth of the economy, but it had not seen a significant rise in home prices in the first part of the year. And although supply issues were impacting, he said he believed the housing market was “normalising”.
However, he indicated the bank would not be significantly lowering its mortgage rates any time soon. He said it offered competitive fixed-rate mortgages. Critics have said Irish banks charge some of the highest mortgage interest rates in the eurozone.
Mr Boucher defended the BoI rates, saying the costs of funds were more expensive than other eurozone banks were able to tap.
“We have had some mortgage write backs, but our loss experience in Irish mortgages has been very different from a European experience, and you have to take those factors into consideration.
“So, one must be careful about the use of selective facts. The facts are the cost of money to this bank, in this market, and our own loss experience and what that actually translates into a net margin for ourselves” has to be taken into play, he said.
“Our strategy is based on what we think is a sensible strategy for the bank.”
David Holohan, head of research at Merrion Capital, said BoI is doing well “but ultimately will be reluctant” to take steps that might affect its recovery by lowering standard variable rates.
The bank said it expected that staff numbers would stabilise around the current pay-roll count of 11,000 people.
Bank of Ireland figures showed that impaired loans accounted for 14% of the total loan book, down from 15% at the end of last year. The lender said it was on track to resume paying dividends, but only after it redeems some €1.3bn in preference shares in the first half of 2016.
Mr Holohan said he expected the bank “at the very earliest” to consider paying a dividend in late 2016, but more than likely some time after that date.