UPDATE 4-Bank of Ireland's lending margins under pressure

2009年 07月 3日 22:48 JST
 
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* Maintains loan impairment charge forecast issued in May

* Significant negative impact on net interest margin

* Shares down 0.4 percent

(Adds comments from incoming chairman, updates shares)

By Carmel Crimmins

DUBLIN, July 3 (Reuters) - Bank of Ireland (BKIR.I: 株価, 企業情報, レポート) said on Friday its lending margins were under pressure in a competitive market, weakening its defences against billions of euros of expected losses from soured property loans.

"I have no doubt that we face a difficult and demanding journey over the next few years," said Pat Molloy, who took over as chairman at the group's annual investor meeting. [ID:nLA1003579]

"The challenges we face are very significant."

Ireland's largest lender is in lockdown mode after the global credit crunch and a local property crash plunged the group into the worst crisis in its 226-year history.

Earnings and its share price have been shot to pieces by exposure to over-leveraged property developers, leaving it with an expected bad debt charge for the three years to March 2011 of 6 billion euros ($8.4 billion), nearly four times its market value.

In some comfort for investors, the bank reiterated that provision charge on Friday, but said pressure on margins due to intense competition and lower interest rates could eat into its pre-provision profit, weakening its ability to cushion itself against bad debts.

"The key thing for Irish banks is they need to keep their pre-provision profits as high as possible to absorb the losses coming through on the bad loans and the haircuts they will have to take on the transfers to NAMA (Ireland's bad bank scheme)," said Oliver Gilvarry, head of research at Dolmen Securities.

"If net interest margin starts to fall back that's going to affect the bank's profitability," he said.

The bank's shares were down 0.4 percent at 1.5 euros by 1339 GMT, a fraction of their near 19 euros level in early 2007 at the height of Ireland's property bubble. The broader Irish market .ISEQ was little changed.

But Bank of Ireland outperformed rival financial groups Allied Irish Banks (ALBK.I: 株価, 企業情報, レポート) and Irish Life & Permanent (IPM.I: 株価, 企業情報, レポート) which were down 4.1 percent and 1 percent respectively.

"The main thing people were looking at was that they hadn't increased their bad debt provisions," said one Dublin trader.

"While that might not sound too spectacular it is the first time in the world that Irish banks haven't moved the goalposts when it comes to bad debt provisions. That would be seen as a slight encouragement."

NOT OUT OF THE WOODS YET

Bank of Ireland's shares have recovered sharply since hitting a lifetime low of 12 cents in March as a state capital injection of 3.5 billion euros, which gave it a 25 percent indirect stake, and the group's own debt-buy back programme helped boost its core tier 1 capital.

The government plans to create a "bad bank" to cleanse the financial sector of soured property debts but the setup of the National Asset Management Agency (NAMA) may require the state to inject further capital into Bank of Ireland and Allied Irish Banks (ALBK.I: 株価, 企業情報, レポート).

A source told Reuters on Wednesday the capital impact from the bad bank may not be known until the middle of next year. [ID:nDUB000990]

Ireland's minister for finance and Bank of Ireland itself have said further injections may not be needed for the lender but many institutional and retail investors remain wary.

"I'm still worried about the threat of nationalisation. The share price recently has been encouraging but at the same time they are not out of the woods yet," said Seamus Clarke, a retired engineer and small shareholder. (Additional reporting by Andras Gergely; Editing by Dan Lalor and Erica Billingham) ($1 = 0.7133 euro)

 
 

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