Bank of Ireland plans to return to paying dividends next year for the first time since the financial crisis after profit at the nationâ€™s largest lender by assets rose 30 percent in 2015.
Underlying pretax profit, excluding items such as restructuring costs, rose to 1.2 billion euros ($1.33 billion) from 921 million euros a year earlier, the bank said in a statement Monday. That was in line with the 1.24 billion-euro average estimate of 15 analysts compiled by Bloomberg. The loan book returned to growth, rising 3 percent to about 85 billion euros.
â€œSubject to anything else being considered, we will be declaring a dividend in the first half of next year based on the 2016 result,â€ Chief Executive Officer Richie Boucher said in a phone interview. â€œWe will start at a modest level and move progressivelyâ€ to a dividend ratio of 50 percent, he said.
Boucher, who took over as CEO seven years ago, cleared a milestone in his plans to resume shareholder payouts when the bank last month redeemed 1.3 billion euros of preferred shares issued during the financial crisis to shore up capital. The bank hasnâ€™t paid a dividend since 2008, when the nationâ€™s real estate market
â€œIts ambition to recommence dividend payments with full- year 2016 results and outlining its dividend policy demonstrate managementâ€™s confidence in the strength of its business as it approaches normality,â€ Diarmaid Sheridan, an analyst with Dublin-based securities firm Davy, said in a note. He rates the stock outperform.
Bank of Ireland shares rose as much as 4 percent and were 2.4 percent higher at 25.3 euro cents at 8.56 a.m. in London. They have fallen about 25 percent so far this year. Earnings growth was driven by a 45 percent fall in loan- loss charges to 296 million euros and from gains of 173 million euros from the sale of sovereign bonds. The bankâ€™s net interest margin expanded by 8 basis points to 2.19 percent while the level of loans in default fell 26 percent to 10.6 billion euros last year as it restructured soured loans and the economy improved.
Boucher said financial risk from the prospect of the U.K. exiting the European Union is low, even though about 40 percent of the groupâ€™s loan book is based in Irelandâ€™s nearest neighbor. The bankâ€™s â€œinvestment in infrastructure is relatively low in Britain,â€ as it provides financial services mainly through the U.K. Post Office and AA Plc. The U.K. unitâ€™s capital and funding are based in sterling, he said.
â€œWe run our businesses where we look at severe stress scenarios and our businesses are resilient,â€ Boucher said.