TIDMBKIR
RNS Number : 7068N
Bank of Ireland(Governor&Co)
28 October 2016
The Governor and Company of the Bank of Ireland (the
"Group")
Interim Management Statement - Q3 2016 update
28 October 2016
Trading
The Group continues to trade in line with expectations.
Economic activity in Ireland has continued to expand while in
the UK, where our businesses are primarily focussed on the domestic
consumer sector, economic activity has thus far remained resilient
post the result of the UK's EU referendum.
Sterling weakness vis a vis the euro impacts the Group's
reported balance sheet assets and liabilities as well as the euro
equivalent of our sterling profits. Our regulatory capital ratios
continue to be substantially hedged from currency translation
impacts. The actual and anticipated Monetary Authority response to
the result of the UK's EU referendum has reduced swap rates and
bond yields, impacting the IAS 19 accounting standard reporting of
our defined benefit pension costs and deficit and certain elements
of our earnings.
Our net interest income has performed in line with expectations.
Our net interest margin for the 9 months to September 2016 was
2.15% compared to a net interest margin of 2.11% for the first half
of 2016, reflecting the impact of a Convertible Contingent Capital
Note maturity in early August as well as our management of funding
costs and our evolving asset mix.
Business income has remained in line with the first half of
2016. The Group has continued to maintain tight control over our
cost base, while making appropriate investments in our businesses,
infrastructure and people. Following the publication of the 2016
Finance Bill, it is expected that the Group's annual banking levy
will reduce from EUR38 million in 2016 to c.EUR30 million in 2017
and 2018.
Asset Quality
Asset quality trends have continued to improve. Non-performing
loan volumes have reduced by EUR0.8 billion since June 2016 to
EUR9.1 billion at the end of September 2016. With reductions
continuing across all asset classes, defaulted loans reduced by
EUR0.6 billion during the same period to EUR8.1 billion. These
reductions reflect our ongoing progress with resolution strategies
that include appropriate and sustainable support to customers who
are in financial difficulty, the economic environment and the
ongoing recovery in collateral values. We expect the level of
non-performing loans to continue to reduce.
Balance Sheet
New lending volumes for the 9 months to September 2016 were
EUR10.0 billion compared to EUR9.0 billion for the same period in
2015 on a constant currency basis. We are maintaining appropriate
caution on risk appetite and commercial discipline on pricing.
Sterling translation impacts during the quarter accounted for a
EUR1.3 billion reduction in customer loan volumes to EUR78 billion
at the end of September 2016, with our core loan books (i.e.
excluding non-performing loans, Irish tracker mortgages and legacy
run-down books) continuing to grow during the quarter. Customer
deposits were EUR75 billion while wholesale funding was EUR13
billion at the end of September 2016.
Capital
At 30 September 2016, the Group's fully loaded CET 1 ratio was
10.5%. The Group generated organic capital of c.30bps during the
third quarter.
This was offset by an increase of c.EUR0.25 billion in the IAS
19 accounting standard defined benefit pension deficit from EUR1.2
billion at June 2016. The accounting deficit increase was primarily
due to a decrease in the ROI and UK IAS 19 accounting required
discount rates to 1.40% and 2.30% respectively, partly offset by a
decrease in the ROI inflation rate assumption and an actual
increase in asset valuations. During the month of October 2016 to
date, the IAS 19 accounting standard required discount rates have
increased from the levels at 30 September 2016.
The Group expects to receive a dividend from its New Ireland
subsidiary during the fourth quarter of 2016 which will increase
the Group's fully loaded CET1 ratio by c.20bps.
At the end of September 2016, the Group's transitional CET 1
ratio was 13.0% and the Group's Total Capital ratio was 17.4%.
Ends
For further information please contact:
Bank of Ireland
Andrew Keating Group Chief Financial Officer +353 (0)766 23
5141
Alan Hartley Director of Group Investor Relations +353 (0)766 23
4850
Damien Garvey Head of Communications +353 (0)766 24 6716
Forward-Looking Statement
This document contains certain forward-looking statements with
respect to certain of the Bank of Ireland Group's (the 'Group')
plans and its current goals and expectations relating to its future
financial condition and performance, the markets in which it
operates, and its future capital requirements. These
forward-looking statements often can be identified by the fact that
they do not relate only to historical or current facts. Generally,
but not always, words such as 'may,' 'could,' 'should,' 'will,'
'expect,' 'intend,' 'estimate,' 'anticipate,' 'assume,' 'believe,'
'plan,' 'seek,' 'continue,' 'target,' 'goal,' 'would,' or their
negative variations or similar expressions identify forward-looking
statements, but their absence does not mean that a statement is not
forward-looking. Examples of forward-looking statements include
among others, statements regarding the Group's near term and longer
term future capital requirements and ratios, level of ownership by
the Irish Government, loan to deposit ratios, expected impairment
charges, the level of the Group's assets, the Group's financial
position, future income, business strategy, projected costs,
margins, future payment of dividends, the implementation of changes
in respect of certain of the Group's pension schemes, estimates of
capital expenditures, discussions with Irish, United Kingdom,
European and other regulators and plans and objectives for future
operations.
Such forward-looking statements are inherently subject to risks
and uncertainties, and hence actual results may differ materially
from those expressed or implied by such forward-looking statements.
Such risks and uncertainties include, but are not limited to, the
following:
geopolitical risks which could potentially adversely impact the
markets in which the Group operates; uncertainty following the UK
vote to exit the EU as to the nature, timing and impact of a UK
exit, could impact the markets in which the Group operates
including pricing, partner appetite, customer confidence and
demand, and customers' ability to meet their financial obligations
and consequently the Group's financial performance, balance sheet
and capital; concerns on sovereign debt and financial uncertainties
in the EU and the potential effects of those uncertainties on the
financial services industry and on the Group; general and sector
specific economic conditions in Ireland, the United Kingdom and the
other markets in which the Group operates; the ability of the Group
to generate additional liquidity and capital as required; property
market conditions in Ireland and the United Kingdom; the potential
exposure of the Group to credit risk and to various types of market
risks, such as interest rate risk and foreign exchange rate risk;
the impact on lending and other activity arising from the emerging
macro prudential policies; the performance and volatility of
international capital markets; the effects of the Irish
Government's stockholding in the Group (through the Ireland
Strategic Investment Fund) and possible changes in the level of
such stockholding; changes in applicable laws, regulations and
taxes in jurisdictions in which the Group operates particularly
banking regulation by the Irish and United Kingdom Governments
together with the operation of the Single Supervisory Mechanism and
the establishment of the Single Resolution Mechanism; the impact of
the continuing implementation of significant regulatory
developments such as Basel III, Capital Requirements Directive
(CRD) IV, Solvency II and the Recovery and Resolution Directive;
the exercise by regulators of powers of regulation and oversight in
Ireland and the United Kingdom; the introduction of new government
policies or the amendment of existing policies in Ireland or the
United Kingdom; the outcome of any legal claims brought against the
Group by third parties or legal or regulatory proceedings more
generally, that may have implications for the Group; the
development and implementation of the Group's strategy, including
the Group's ability to achieve net interest margin increases and
cost reductions; the inherent risk within the Group's life
assurance business involving claims, as well as market conditions
generally; potential further contributions to the Group sponsored
pension schemes if the value of pension fund assets is not
sufficient to cover potential obligations; the Group's ability to
address weaknesses or failures in its internal processes and
procedures including information technology issues and equipment
failures and other operational risk; the Group's ability to meet
customers' expectations in mobile, social, analytics and cloud
technologies which have enabled a new breed of 'digital first'
propositions, business models and competitors; failure to establish
availability of future taxable profits, or a legislative change in
quantum of deferred tax assets currently recognised; and
difficulties in recruiting and retaining appropriate numbers and
calibre of staff.
Nothing in this document should be considered to be a forecast
of future profitability or financial position and none of the
information in this document is or is intended to be a profit
forecast or profit estimate. Any forward-looking statement speaks
only as at the date it is made. The Group does not undertake to
release publicly any revision to these forward-looking statements
to reflect events, circumstances or unanticipated events occurring
after the date hereof.
The company news service from the London Stock Exchange
END
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