(1888PressRelease)
May 19, 2009 - In a surprise move accompanying its results, the bank announced tender offers relating to six Tier 1 securities with a nominal value of around €3 billion. The indicated maximum size of the tenders is a nominal €1.4 billion.
Bank of Ireland said the bonds have been trading at significant discounts to par value and it is buying them back in order to generate a profit.
Separately, bank governor Richard Burrows announced his retirement from the annual general court in July 2009. "Accountability for these losses must be taken at the top," Mr. Burrows said.
Bank of Ireland said it sees loan impairments rising to €6 billion from €4.5 billion in the three years to March 2011, citing a change in the economic forecasts in Ireland, where 50% of the credit risk on the bank's lending portfolio is based.
"This is based on existing economic forecasts," Chief Executive Officer Richie Boucher said. "Based on further stress testing, we believe we will be adequately capitalized."
Total loan impairment charges rose to €1.44 billion in the 12 months to March 31 from €102 million a year earlier. In Ireland, the impairment charge rose to 1.29 percentage points compared with 0.28 points. Of the increase in the charge to €708 million from €129 million, 10% relates to residential mortgages, 12% to consumer lending and 78% to property and construction.
Mr. Boucher said the bank faces "another difficult financial year" in the fiscal year to March 31, 2010.
Bank of Ireland posted a net profit of €59 million in the year ended March 31, 2009, down from a net profit of €1.68 billion a year earlier. Operating income fell 5% to €3.91 billion from €4.12 billion, while underlying earnings per share fell 80% to 30.2 cents from 150.3 cents.
It swung to a pretax loss of €7 million from a profit of €1.93 billion after several charges, including €304 million in impairment of goodwill and other intangible assets, and €83 million in restructuring charges. Before the charges, pretax profit fell 81% to €332 million from €1.79 billion.
Bank of Ireland is part of the government's €440 billion industry deposit guarantee and received €3.5 billion in capital from the government in return for a 25% stake.
Ireland in April was the first nation in the euro zone to use an industrywide, government-sponsored "bad bank" to remove so-called "toxic assets" from the banking system. The new National Asset Management Agency will house all land and development loans of Ireland's major banks.
Bank of Ireland's Mr. Boucher said at least €12.2 billion of land-bank and commercial-property development loans will be covered under NAMA, but added it isn't clear whether all those loans will be transferred or managed by NAMA.
The government has said it will take a controlling stake in Bank of Ireland or Allied Irish Banks PLC if necessary. However, Bank of Ireland Financial Officer John O'Donovan said it was "dramatic" to assume that the government will take a majority stake in the bank after assets have been transferred to NAMA.
Mr. Boucher added that the bank's engagement with the government has been "positive, realistic, pragmatic and sensible." But he said the bank's property assets may come under further due diligence by the government.
http://www.bankofireland.com
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