Bank of Ireland shares climb 7% on profits boost; Government starts to sell down shareholding

Bank of Ireland group chief executive Francesca McDonagh said Irish banking was modernising and added that profits had recovered to levels posted before the pandemic. 

Bank of Ireland shares climbed by over 7% as the lender rebounded back to the black, a recovery that suggests the big Irish banks can look forward to further gains as rivals Ulster Bank and KBC prepare to close their doors. 

The bank -- which along with AIB already dominates Irish bank lending -- posted an operating profit of €465m in the six months to the end of June compared with a loss of €669m a year earlier. Bank of Ireland also set aside a tiny impairment charge of €1m, a further sign the Irish economic recovery from the Covid-19 crisis is well underway, and its new lending rose 12%. 

The Government also started out on its pre-announced plan to sell down its 14% stake, telling the market it now owns around 13% of Bank of Ireland. The remaining stake is worth around €675m. 

Bank of Ireland and AIB are set to strengthen their grip over the Irish banking market as Ulster and KBC accelerate their plans to exit banking altogether in the Republic. 

AIB has an agreement to take €4.2bn in corporate loans from Ulster Bank, part of the carve up of the NatWest-owned lender that involves Permanent TSB. Bank of Ireland plans to scoop up €9bn in mortgage loans and €5bn in deposits from KBC. It is also set to buy Davy Stockbrokers, while it plans to close a significant part of its branch network by the end of the year.             

Talking to reporters, Bank of Ireland chief executive Francesca McDonagh hailed the proposed transaction with KBC as boosting the bank's revenues and balance sheet. Along with Davy, the purchases would help "further enhance the group’s Irish franchise and support increased profitable growth", the bank said.

Asked to reassure bank customers that they will not lose out, Ms McDonagh said Irish banking was modernising and added that profits had recovered to levels posted before the pandemic. 

On competitiveness, she said the lender competes around the clock. "We feel it [mortgages] is a competitive market and one that we want to give customers more choice and more compelling reasons to stay or to come with us," she said.       

Neil McDonnell, chief executive at business group Isme, said the remaining Irish lenders need to improve their customer service, as longstanding issues persist. "We are delighted to see them back in profitability and we would hope to see an in investment in customer service levels," he said.