Bank of Ireland takes small step to return of dividend

Bank of Ireland will redeem €1.3bn of preference shares in early January next year, the lender said yesterday, the final step allowing it to resume dividend payments.

The shares rose over 4% to 35c.

The bank is now the country’s largest lender by assets and has benefited from the huge growth in the economy as it grows faster than any other in Europe, and is set to be the first bank in the country to resume dividend payments since the 2008 financial crisis.

However, it has to first stop counting the preference shares as capital and, after generating fresh capital throughout this year, said it had gained consent from European regulators to redeem the shares.

The bank moved quickly, despite reporting a small quarterly fall in its capital adequacy ratio earlier this month as an increase in its pension deficit offset organic capital growth.

Its Core Tier 1 capital adequacy ratio fell to 10.6% of assets at end-September from 11.1% at the end of June under co-called fully loaded Basel III industry rules and excluding the preference shares.

The bank had guided it would seek to redeem the shares between January and July 2016 and analysts expect it to declare a dividend in the second half of 2016 or first half of 2017.

Richie Boucher, the chief executive, said in September that it would not happen before that. Bank of Ireland aims to become a predictable income stock, ultimately targeting a payout ratio in excess of 50% of attributable profits after tax.

“While the announcement should not come as a surprise, it is nonetheless a further positive sign of the significant progress achieved by Bank of Ireland in strengthening its capital ratios,” said Davy.