Bank of Ireland yesterday said it has set its sights on resuming paying dividends early next year — its first payout since the banking crash, as top directors faced searching questions at its agm over a wilting share price and directors’ shareholdings.
The bank’s net interest margin — NIM — a key profitability gauge that measures the difference between the cost of its own funds and what it earns in interest from customers — slipped to 2.11% during the first three months of the year, while its capital ratio, was steady at a “fully-loaded” 11.2%, despite facing a €900m hole in its defined benefit pension scheme.
The bank expected to make progress on increasing its NIM, despite the low-interest rates across Europe which tend to work against lenders earning bumper margins.
Non-performing loans had fallen since the end of the year by around €1bn to €11.1bn, while new loan volumes were higher than a year ago — despite the uncertainty over whether the UK will vote in June to leave the EU. Its venture with the UK post office and the fall in sterling potentially expose Bank of Ireland to a Brexit vote.
Chairman Archie Kane told up to 200 shareholders attending its agm yesterday that the bank’s “next objective” was to progress to paying out a dividend.
However, despite some praise, many speakers from the floor at the UCD venue yesterday heavily criticised the bank’s share price performance and questioned the reasons for Mr Kane and key directors for their holding low levels of shares in their own bank.
One shareholder said it appeared the bank’s profitability was improving while the shares were “going in the opposite direction”. Mr Kane said that the bank had returned to profitability and had paid back Irish taxpayers the emergency cash injected into the lender during the banking crisis, in full. Shares of many financial companies had been “volatile”, he said.
Bank of Ireland’s shares rose 1.5% yesterday to 27 cent but remain 19.5% down since the start of the year. They had traded as high as 39 cent last August.
Darren McKinley, analyst at Merrion Capital, said Bank of Ireland shares had underperformed the European bank shares index — which has dropped 13% this year — because the bank is exposed to British loans and had faced investors’ concerns about its NIM and regulatory costs.
However, Mr McKinley said he had recommended investors buy Bank of Ireland when the shares had slumped to as low as 24 cent, and the broker was still “very positive” on the shares.
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