Bank of Ireland has reported profits of €1 billion before tax for the first half of this year, benefiting from interest rate hikes and the expansion of its loan book through the acquisition of mortgages from KBC Bank. This represents a significant increase from the €351 million in profits recorded at the same stage last year. Net interest income also saw a substantial rise, reaching €1.8 billion compared to almost €1.1 billion in 2022. However, the bank’s net credit impairment charge rose sharply to €158 million from €47 million the previous year.
Bank of Ireland expects its income to be “modestly higher” in the second half of the year. CEO Myles O’Grady attributed the bank’s strong performance to strategic decisions and execution in recent years, as well as commercial delivery across all business lines. O’Grady took over as CEO this year following the departure of Francesca McDonagh.
Bank of Ireland is the second of the two major lenders in the market to report its half-year earnings. AIB recently announced an operating profit of €1.2 billion, benefiting from higher interest rates and the exit of Ulster Bank and KBC Bank from the Irish banking sector. Bank of Ireland acquired €8 billion in mortgage loans from KBC, while AIB and Permanent TSB divided the Ulster Bank mortgage and commercial loan books between them. Additionally, Bank of Ireland acquired scandal-hit broker Davy a year ago.
Deposits at Bank of Ireland increased to €102 billion from €99 billion, reflecting the transfer of KBC accounts to the bank. O’Grady stated that the bank’s results also demonstrate the strength of the Irish economy, despite global economic uncertainty caused by inflation. Looking ahead, the bank anticipates that net interest income in the second half of the year will be slightly higher than the first half, while operating costs are expected to remain in line with previous forecasts.
Irish bank shares have experienced significant gains since the European Central Bank began raising interest rates last summer. The lenders’ increased control over mortgage and business lending in Ireland has further fueled these gains. The relatively low rates Irish banks offer their deposit savers, in comparison to the rates charged to mortgage borrowers, have also come under scrutiny. O’Grady stated that the bank has struck a balance between ECB rate increases and the interests of its depositors, and expects more customers to opt for higher rate deposit products.
Bank of Ireland shares have risen by 4.5% since the beginning of this year and have surged by 67% compared to the same period last year. This increase has valued the bank at over €9.8 billion. It is worth noting that the Irish government no longer holds any shares in Bank of Ireland.