Bank of Ireland’s Chief Executive, Myles O’Grady, has expressed confidence in the bank’s mortgage lending, stating that arrears are not increasing significantly despite the rapid rise in interest rates since last summer. O’Grady highlighted that many mortgage borrowers with fixed-rate loans will be protected from the sharp increase in interest rates as their rates will not be up for refinancing for another two years. He emphasized that the bank’s balanced approach towards mortgage borrowers and depositors has been successful for both the bank and its customers.
O’Grady assured reporters that there is no rate rise crisis, as there are no major early signs of increased debt arrears at this stage. He mentioned that the bank has not passed on the full extent of European Central Bank rate increases to borrowers, while savers will eventually switch to higher-yielding deposit products. These remarks came after Bank of Ireland unveiled €1bn in pre-tax profits in the first half of the year, benefiting from interest rate hikes and the expansion of its loan book through the acquisition of mortgages from KBC Bank.
While Bank of Ireland reported strong earnings, questions have been raised about the relatively low rates they pay savers compared to the rates they charge borrowers. However, O’Grady assured that almost three-quarters of the bank’s fixed-rate mortgages will not mature before 2025, offering protection from the current rate cycle. He also stated that the bank remains committed to financing housebuilders but is cautious about other areas of commercial property, such as retail and office lending.
Regarding competition, O’Grady acknowledged the consolidation in retail banking following the withdrawal of Ulster Bank and KBC from the market. However, he maintained that competition is still “alive and well” in the broader financial services sector, which involves 20 firms. Bank of Ireland acquired €8bn in mortgage loans from KBC and also acquired the scandal-hit broker Davy a year ago.
When discussing the British market, O’Grady noted that the bank has shifted to higher-margin mortgages and has been cautious about personal loans, providing flexibility to weather any economic weakness in the UK. He characterized the outlook for the British market as “moderating” and expressed optimism about new economic forecasts delivering better news than previously anticipated.
The bank’s half-year earnings showed a significant increase in profits, rising to €1bn from €351m at the same stage last year, with net interest income also increasing. However, there was a sharp rise in the net credit impairment charge.