BoI expect double digit pre-tax profits growth

Conor Keane, Business Correspondent

Bank of Ireland, the State's second-biggest Irish bank by market value, issued a pre-close period statement yesterday in advance of issuing annual results to the year ending March 31 on May 15 next.

The company said as a group pretax profit before goodwill and exceptional items in the 12 months ending March 31 will increase by a "mid single digit" percentage.

Bank of Ireland derives roughly 55% of its profits from the Irish economy, which is forecast to grow by about 3.5% this year, nearly three times most European Union average expectations. "Retail Republic of Ireland is expected to report a strong performance, with a mid-teen percentage pre-tax profit growth.

"Against the background of a more subdued business environment, this is a satisfactory outcome and reflects good income growth, a modest increase in costs and continuing sound asset quality," the bank said.

Merrion Stockbrokers said the rate of profit growth in the state by the bank is well of their forecasts.

In a conference call after the issuing the pre-close statement the bank's chief financial officer John O'Donovan said he expects earnings per share of about 106c for the year to end March 2004. This is close to 3% below Merrion's expectations.

The market reacted poorly to the Bank of Ireland statement and Bank of Ireland shares fell 3.05% to 9.87, the worst one-day decline in three months, valuing the company at less than 10 billion.

Chief executive Michael Soden, who took over the top job a year ago, said: "We expect to report strong results for the year which combine excellent asset quality and an improving cost story and capital structure.

"This will demonstrate clearly the Group's strength and resilience through difficult conditions."

Bank of Ireland's life business will be impacted by a negative unit linked management fee variance of 40m, (H1 2002/3: 32m), while the group expects to write-back 35m of its non designated specific provision.

NCB Stockbroker analysts John Kelly and David Odlum in a note to investors described the statement as "solid", adding:

"It's a mirror image of the actual first half performance across each division, except for the effect of stock market declines on some divisions."

Goodbody stockbrokers, owned by arch rival AIB Ban, noted that BoI gave no update on capital management.

Merrion analysts Seamus Murphy and Elaine Brownlee noted: "The company has stated unequivocally that the recent £350m Tier I debt issue was driven by capital management considerations and not by the desire to build a war chest for acquisitions. It currently has no acquisitions in the pipeline."