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(Alliance News) - Bank of Ireland Group PLC on Monday reported a sharp drop in profit in 2019, on increased impairment charges, and has guided for further interest margin pressure in 2020.
The lender did, however, up its total dividend by 9% in 2019 to 17.5 euro cents.
Shares in the Irish lender were down 5.2% in London on Monday morning at EUR3.78 each.
Pretax profit was EUR645 million in 2019, down 23% from EUR835 million in 2018.
The bank made a net impairment charge of EUR215 million in 2019, swung from a EUR42 million net gain in 2018.
"This primarily reflects a more normalised level of impairments and also losses on a small number of large exposures during 2019," Bank of Ireland said.
Bank of Ireland's net interest income was flat year on year in 2019 at EUR2.15 billion. Total income grew 1.1% to EUR2.84 billion.
The lender's Wealth & Insurance business saw income rise 11% year on year to EUR277 million but its Retail Ireland unit recorded a 4.9% slip in income to EUR254 million.
Operating expenses fell 3.2% to EUR1.79 billion, improving the lender's cost-to-income ratio to 63% from 65%.
Bank of Ireland attributed the lower costs to its improved organisational structure.
"The group has continued to deliver on our strategic priorities throughout 2019," Chief Executive Francesca McDonagh said. "For the second successive year, we have grown our loan book, expanded our Wealth & Insurance business, reduced our cost base and lowered our non-performing exposures. We grew our capital base during 2019 and are reporting an underlying profit before tax of EUR758 million for the period."
Bank of Ireland's loan book ended 2019 at EUR78 billion, up 2.6% from EUR76 billion seen at the end of 2018. The lender's net interest margin slipped to 2.14% in 2019 from 2.20% the year before, in line with internal expectations.
"The group's NIM reflects the positive impact from new lending margins and strong commercial pricing discipline, offset by the sale of our UK credit card portfolio, competitive pressure in the UK mortgage market and growth in liquid assets," Bank of Ireland explained.
The bank's market share for new mortgage lending in Ireland was 24% in 2019, with EUR16.5 billion in total new lending in the period.
Customer deposits grew by EUR5.1 billion over 2019 to EUR84.0 billion.
Bank of Ireland's fully loaded CET1 ratio ended the year at 13.8%, up from 13.2% at the same point the year before.
Looking ahead, the bank said: "The environment in which the group operates has changed materially and is more challenging. Most notably from a financial returns perspective, there has been a change in interest rate expectations with interest rates now expected to remain at the current historically low levels for a number of years."
As a result, Bank of Ireland is lowering its targeted return on tangible equity for 2021 to about 8%, from previous guidance of in excess of 10%. It is still targetting over 10% over in the long term.
Net interest income is guided to be broadly in line with 2019, with continued growth in the Wealth & Insurance unit.
The bank is guiding for EUR2 billion net lending growth in 2020, but expects net interest margin to fall to about 2.05%.
Bank of Ireland said costs will be lower in 2020, and its is lowering its 2021 target to EUR1.65 billion.
By Paul McGowan; paulmcgowan@alliancenews.com
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