Irish banks set to post profits haul of over €4.5bn, putting focus on lack of competition 

The three main Irish banks are set to report a combined annual profit of over €4.5bn.

The three main Irish banks are set to report a combined annual profit of over €4.5bn, a bumper haul that will put the focus back on local regulators and the lack of competition in the Irish banking market. 

Bank of Ireland and AIB will account for the lion's share of record pre-tax profits when they unveil their 2023 results next week, according to analysts' forecasts, reflecting a year when the lenders benefitted hugely from the hikes in interest rates by the European Central Bank even as they were able to pay out relatively low levels to deposit customers for their savings. PTSB, which reports the following week, is also expected to report a healthy level of profits its annual results.   

Like many European lenders, shares in the Irish banks have gained hugely from the ECB rate increases that have helped lenders boost their top line net interest income.    

But unlike elsewhere in Europe, the three Irish lenders have consolidated an already grip over both home mortgages and for commercial lending, following the departure three years ago of once fierce rivals, the NatWest-owned Ulster Bank and the Belgium-based lender KBC Bank.     

The shares of AIB and Bank of Ireland have since soared. AIB shares have gained 10% since the start of the year, but trade at well over twice their level in February 2021 when Ulster Bank confirmed plans to exit banking in the Republic. AIB, in which the Government now owns a minority stake, is valued on stock markets at at €11.26bn. Bank of Ireland shares, which have gained 7.5% since this year, have also soared since February 2021, to value the lender at €9.35bn.  

Analysts estimate all three banks will post significant levels of annual profits when they report in the coming weeks.

Goodbody forecasts Bank of Ireland will post an underlying pre-tax profit of €2.15bn for 2023 when it unveils its results on Monday. The broker predicts AIB on Wednesday will post an underlying pre-tax profit of €2.48bn for 2023 following "a strong finish" to the year for the lender. Goodbody also estimates that PTSB, the much smaller lender of the group of three, will post an underlying pre-tax profit of €163m for 2023 when it issues its 2023 results on March 7, and forecasts a continuing "material upside" for its shares.   

Davy forecasts Bank of Ireland will post an underlying pre-tax profit of €2.1bn, and estimates AIB will report an underlying pre-tax of €2.3bn. And for PTSB, the broker estimates the lender will post a pre-tax profit of €87m. Both brokers also expect Bank of Ireland and AIB to pay out significant amounts to shareholders in share buy-backs and in cash.    

Concerns about competition following the exits of Ulster Bank and KBC Bank persist. Leading industry broker Michael Dowling said that effectively only three small mortgage banks - Avant Money, Finance Ireland and ICS - operate outside the orbit of the three major lenders. And AIB, Bank of Ireland, and PTSB had a 90% share of the €12.5n in new mortgage lending advanced last year, while AIB and Bank of Ireland control a huge share of all current accounts. The lack of competition is illustrated by the fact that there are 20 lenders competing in banking in the North, he said.