* Underlying operating profit 242 mln eur vs 413 mln in 2011
* Impairments fall 11 pct, mortgage arrears seen stabilising
* In talks on pension deficit
By Padraic Halpin
DUBLIN, March 4 Bank of Ireland said
the momentum from a relatively stronger second half of 2012 had
continued into this year after it posted a better-than-expected
40 percent drop in underlying profit for the year as a whole.
The only Irish lender to escape nationalisation after an
unprecedented property crash, the bank saw underlying profit dip
by two-thirds in the first half but ended the slump as job cuts
and mortgage rate hikes fed through in the second half.
Those actions would continue to aid the gradual recovery of
Ireland's largest bank this year, chief executive Richie Boucher
said on Monday, not least because the Irish economy is also
"I think there are definitely signs that the economy is
starting to grow again and definite signs that for the bank
itself, all the work we've been putting in is starting to come
through in the financial numbers," Boucher told reporters.
"If we look at our deposit books, there is cash in the
economy. People are still cautious about spending, however we
are certainly seeing them starting to spend on smaller ticket
Ireland's bailed-out economy is forecast to grow for the
third year in a row this year and Boucher said that while
customers were still deferring bigger purchases like cars, the
demand for mortgages was increasing on the back of "very clear
signs of stabilisation" in the housing market.
However a wider recovery is unlikely to come soon enough for
the bank to meet its own target of increasing its net interest
margin - the gap between what it charges for loans and pays to
borrow - to 2 percent by 2014 after it rose to just 1.25 percent
from 1.20 percent six months earlier.
The half-year figure represented a trough, Boucher said, but
the 2014 target would not be met unless there was a dramatic
change in the cycle of central bank interest rates.
Operating profit before provisions fell to 242 million euros
($314 million) on high funding costs, a limited appetite for new
credit and a fall in higher-earning assets. Five analysts polled
by Reuters had expected a slightly sharper fall to 237 million.
Including impairments of 1.72 billion euros, a drop from the
1.94 billion provided for a year ago, underlying pretax loss
fell two percent to 1.49 billion euros.
Alongside the momentum seen filtering through to 2013, in
particular from a 9 percent cut in the workforce in the second
half of 2012, the bank's path to profitability will also be
aided by the removal later this month of a state guarantee on
bank deposits that cost 388 million euros last year.
A stabilisation in house prices, which have halved since
their peak in 2007, and in unemployment, down to 14.2 percent,
also helped the rate of growth in problem mortgages slow with
the proportion of the bank's owner occupier mortgages in arrears
for more than 90 days up just a touch to 9.9 percent.
The level of arrears among properties bought by investors to
rent out was 23.4 percent, up from 20.8 percent at half-year.
"There are no negative surprises, which gives confidence
that the positive momentum witnessed in the second half of the
year will continue and lead to a much improved 2013 result,"
said Stephen Lyons, credit analyst at Davy Stockbrokers.
"Deposit re-pricing, the exit of the guarantee, further cost
action as evidenced through increased restructuring provisions
should all combine to protect the bank's capital position, which
remained high at 14.4 percent at year-end."
The bank also said it had begun talks on reducing its
pension deficit that trebled to 1.2 billion euros at end-2012.