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€419m half year underlying pre-tax profit reported by Bank of Ireland
Bank of Ireland has reported an underlying profit before tax of €419 million for the first six months of 2022.
It was down on the €465 million reported at the same time last year.
Net profit of €279 million was down from €341 million for the same period last year.
The bank recorded an impairment charge for expected bad loans for the first six months of the year of €47 million reflecting what it called an ‘uncertain environment’.
Its proportion of non-performing loans now stands at 5.4% of its total loan book.
Total income and interest income were marginally higher in the first six months but operating costs were also higher reflecting acquisitions.
Bank of Ireland completed the acquisition of stockbroker Davy in June.
The bank said had the acquisition been completed at the start of the year, an underlying profit of €12 million would have arisen in the first six months reflecting income of around €86 million and costs of €74 million.
It said a similar performance for Davy was expected in the second half of the year.
Customer loan volumes stood at €74.6 billion at the end of June, down €1.7 billion on the position at the end of December.
New lending was up 7% in compared to the first six months of last year.
Deposits of €94.1 billion increased €1.3 billion since December.
Business income – excluding Davy – was up 16% compared to the first six months of 2021 which it said reflected improving momentum.
The bank said it was ‘positively geared’ to higher interest rates.
Like its counterparts, Bank of Ireland opted not to pass the recent ECB 0.5% interest rate hike onto variable or fixed rate mortgage products.
The bank confirmed that it was ending its policy of charging negative interest rates on deposits exceeding €1 million to reflect the decision by the ECB to bring its deposit rate back to zero.
“We delivered a strong business performance in the first half of 2022, while continuing to make clear progress on our National Champion Bank strategy,” Bank of Ireland, Group CEO Francesca McDonagh said.
“Notwithstanding global uncertainty, the step change we’ve delivered in our business model makes Bank of Ireland well positioned to capitalise on the significant opportunities we face, further supported by a rising interest rate environment,” she added.
Ms McDonagh announced in April that she would be standing down as Chief Executive of the bank in September to take up a role with Credit Suisse.
“The Board is well advanced on the process to appoint a full-time successor,” Patrick Kennedy, Bank of Ireland Group Chairman said.
He added that the bank expected to appoint an interim CEO to cover the period from Francesca McDonagh’s departure until a new CEO is appointed.
“The focus of the Board remains on the execution and delivery of the significant commercial opportunities available to the Group,” Mr Kennedy said.
The outgoing Bank of Ireland CEO told Morning Ireland that the bank had no plans to make any of its branches cashless.
AIB recently rowed back on a decision to make 70 of its 170 branches cashless saying it had gone ‘too far, too fast.’
Ms McDonagh said the bank saw branches, contact centres and digital as essential ways to serve customers.
“It’s never been all of one and none of the other,” she said.
“Even though cash usage is reducing, there is still around €12 billion of cash in the Irish economy that’s been transacted and that’s why we continue to have branches that have cash,” she added.
Asked if the bank had plans to close any more branches in addition to the 88 branches it had shut in the last year, Ms McDonagh said there were no such plans but said it was ‘”impossible to be definitive about the future.”
“We adapt to customers’ changing behaviours,” she said.
Bank of Ireland operates close to 170 branches around the country.
Last month, the European Central Bank raised interest rates by 0.5%.
When asked if Bank of Ireland will be passing on this or further increases in rates to variable and new fixed customers, Ms McDonagh said they have made no announcement or changes to fixed or variable rates since the ECB announcement.
“Obviously we keep all of our rates under ongoing review,” she said.
“It is not appropriate for me to make price indications for the future, but what I can say is that any changes to rates will always be communicated clearly and in a timely manner to our customers,” she said.
Today’s figures show that Bank of Ireland has opened over 110,000 current accounts in the first six months of the year, up over 100% on the same time last year.
It comes as customers continue to switch banks ahead of the withdrawal of Ulster Bank and KBC from the Irish market.
When asked if Bank of Ireland has enough staff to deal with the influx of new customers, Ms McDonagh said, “absolutely, yes.”
“Part of our results today reflect a €30 million total investment we will make in 2022 to invest in switching.
“We have 650 people in total supporting customers and ensuring that our service levels for existing customers are protected,” she said.
Back in April, it was confirmed that Ms McDonagh will take up the role of CEO of the Europe, Middle East and Africa region of Credit Suisse by October.
Speaking on Morning Ireland, Ms McDonagh who receives a salary of around €960,000 with Bank of Ireland, said a number of factors played into her decision to leave the bank.
When asked if the Irish banker pay cap was one of those factors, she said it wasn’t a “main factor”.
“I have done five years at Bank of Ireland, it has been a personal and professional privilege.
“Pay is a factor – it is not the only factor, but more broadly I would have been lobbying the Irish Government to lift remuneration restrictions,” she said.
“This is about the restrictions all 9,000 of our colleagues face in terms of benefits, any degree of variable pay that helps incentivise and reward colleagues for doing exceptional things for our customers and for our shareholders,” she said.
Ms McDonagh said she will continue to lobby for change in this regard until her last day at the bank.
She said she believes these restrictions are a competitive disadvantage for Bank of Ireland, which is on the cusp of private ownership, yet still carries the restrictions.
Bank of Ireland currently has a number of senior level vacancies to fill.
When asked if a salary of €500,000, which is within the pay cap, is not enough to attract in talent to the Irish banking landscape, Ms McDonagh said she understands that a salary of half a million euro is a “huge amount of money”.
“This is not about people not finding a salary of half a million euro attractive enough, it is about 9,000 colleagues who don’t have benefits like private healthcare, or the ability to have a degree of variability depending on their results.
“I would love to be able to differentiate a branch manager who provides superb service to our customers everyday and I can’t do that and every other bank in Ireland that is non-Irish can – and we would see that as a competitive disadvantage,” she said.
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