Bank of Ireland PLC (IRE) Friday warned that low interest rates and higher deposit pricing is having a significant negative impact on its net interest margin, but it maintained its impairment charge forecasts.

Chairman Richard Burrows told a packed Annual General Meeting that trading conditions are "difficult" and "challenging" and said the stability of the bank remains the primary management objective.

The bank still sees an impairment charge on loans and advances to customers of around EUR6 billion in the three years to March 2011, which includes a EUR1.4 billion loan impairment charge in the year to March 31, 2009.

It said: "Downside risk to the loan impairment charge estimate arises in the event of a further deterioration in economic conditions or further prolonged low levels of activity in residential and commercial property markets."

NCB Stockbrokers analyst Ciaran Callaghan expects the bank's net interest margin to decline by 8 basis points to 1.66% by March 2010. That forecast assumes pre-provision profits declining by 22% year-on-year to EUR1.36 billion.

Burrows vowed to "rebuild the trust of all stakeholders in the name and reputation of Bank of Ireland" by strengthening the capital position, funding its balance sheet effectively, actively managing its credit risks and "rigorously managing" costs.

The bank expects legislation for the National Asset Management Agency, or NAMA, in the autumn. NAMA will take potential exposure of EUR80 billion to EUR90 billion of commercial property and land loans off the banks' books.

The government nationalized Anglo Irish Bank after a series of scandals at the corporate lender, and has injected EUR3.5 billion each into Bank of Ireland and Allied Irish Banks PLC (AIB) in return for 25% stakes.

Burrows said the government recognizes "the systemic importance of Bank of Ireland."

Last month, the Bank of Ireland announced the successful completion of a debt buy-back program of euro, sterling and U.S. dollar Tier 1 securities. The equity accretion of this initiative is around EUR1 billion.

Burrows said that, following this buy-back, the group's estimated capital ratios on a pro forma basis at March 31, 2009 showed an improvement in Equity Tier 1 to 7.1% from 6.2% and Core Tier 1 to 10.5% from 9.5%.

At 1030 GMT, the bank's shares had fallen 2.2% to EUR1.49 on the Irish Stock Exchange, after falling 8% Thursday ahead of the AGM. Analysts remain concerned over loan losses. The share price has plummeted from EUR5.33 this time last year.

Company Web site: http://www.bankofireland.com

-By Quentin Fottrell, Dow Jones Newswires; 353-1-676-2189; quentin.fottrell@dowjones.com