Bank of Ireland profits meet market forecasts

WHILE profits at Bank of Ireland met market forecasts, the shares fell 5% to €10.86 in early trading.

By mid afternoon, they had recovered somewhat, but still ended the day down 20 cent at €11.20.

Results for the half-year to September 30 show profits on ordinary activities before exceptional items rose 9.7% to €602 million for the period, and they were ahead by a more modest 8.8% to €580m when the exceptionals are deducted.

Domestic business performed well in a much softer economic environment, where the group said it continued to maintain market share in key areas, such as mortgages.

Bank of Ireland Life turned in a satisfactory performance, according to the bank, despite difficult investment conditions.

Wholesale financial services at home and overseas are returning two years of strong growth, 30% last year and 25% in 2002.

Overall, profits reflect a 13% increase in retail banking in the Irish Republic and 14% growth in profits in the UK financial services division that includes Bristol & West, Banking GB and Northern Ireland. The latter performance was achieved at a time when UK bank profits are under pressure.

Some concerns about the bank’s lending policy have emerged among analysts and one brokerage says the shares would do well to make €12 in the coming months.

Bank of Ireland boss Mike Soden does not regard the share price scepticism as a major issue. Judging from his comments (see other story), he is not too concerned about his or the bank’s perceived failure to deliver either the AIB merger or the takeover of Abbey National since he took charge of the group.

Meanwhile, in the period under review, the bank felt the impact of a downturn in global stock markets.

As a result, the bank’s assets under fund management fell by a stunning €16 billion between March 31 and September 30.

Total group lending increased by 6% during the period, while lending in the home market was up 11%.

In the UK, strong growth in non-standard residential mortgages and in commercial lending outweighed the decline in standard mortgage lending.

Bad debt provisions have been increased only modestly from €43m to €56m, reflecting the solid state of the bank’s lending book.

Net margins fell slightly over the six months, while costs increased by 6% in the half-year.

Group chairman Laurence Crowley warned that prospects for the rest of the year remain challenging, but he anticipates a satisfactory outcome.