Bank of Ireland’s ‘green shoots’ lift shares despite loss


Bank of Ireland’s (BIRG.I) shares rose by 10% on Wednesday as some signs of recovery from the coronavirus crisis outweighed a first-half pre-tax loss of 669 million euros (603.79 million pounds).

Ireland’s largest bank by assets put aside 937 million euros mainly to cover likely losses from 105,000 loan repayment breaks for customers hit by the crisis, making up the bulk of a “prudent” 1.1-1.3 billion euro charge expected during 2020.

Davy Stockbrokers analysts said that although the impairments were much higher than forecast they appeared to be front-loaded and pointed to a 2020 income outlook that was better than indicated in the first quarter.

“We’re cautiously optimistic that we’re beginning to see green shoots,” Chief Financial Officer Myles O’Grady told Reuters by telephone, pointing to a 25% year-on-year jump in Irish mortgage applications in July and a 6% month-on-month rise in business loan volumes.

“It’s all premised on there not being another lockdown but it does seem like things are picking up for a recovery as we get towards the end of the year and into 2021.”

The bank’s shares were 10.5% higher at 0800 GMT, versus a 1.1% rise in the wider market .ISEQ. Allied Irish Banks (AIBG.I) rose 3.7% ahead of its interim results on Thursday.

Bank of Ireland put 63,000 payment breaks in place in the United Kingdom, where it is the biggest Irish lender and where it announced further restructuring to shrink its balance sheet.

Most UK breaks were for smaller consumer loans and O’Grady said 33% of impacted mortgage customers had extended the initial three-month holiday.

In Ireland, 54% of affected mortgage customers sought to extend the break to six months. Smaller rivals permanent tsb (IL0A.I) and NatWest Group’s NWG.L Ulster Bank have reported a similar level.

The bank, which made a pretax profit of 376 million euros in the same period last year, said its core Tier 1 capital ratio, a key measure of financial strength, rose to 13.6% from 13.5% at the end of March, above the minimum requirement of 9.27%.

It also cut costs by 3% year-on-year and announced a voluntary redundancy programme for staff.