LONDON (Alliance News) - Bank of Ireland, the Dublin-based lender, on Thursday said the weakening of sterling against its euro reporting currency in the first quarter of 2016 "impacted" its balance sheet assets and liabilities, as well as items in its profit and loss account, amid uncertainty ahead of the United Kingdom's June 23 vote on whether to remain in the European Union or leave.
The impact came as sterling lost 7% of its value against the euro in the three months ended March 31, Bank of Ireland said, even though its regulatory capital ratios are "substantially hedged" from currency translation impacts.
Overall, the macroeconomic environments in its key markets have remained favourable, the bank said, with expansion of Ireland's export sector and "improving" labour market conditions boosting consumer spending. The bank said it's trading in line with expectations.
The UK saw its gross domestic product growth slow to 0.4% in the three months ended March 31, from 0.6% in the three months ended December 31, according to the Office for National Statistics said on Wednesday. Bank of Ireland said the growth came "notwithstanding some uncertainty" relating to the UK's referendum on EU membership.
Bank of Ireland's balance sheet was hit by the translation impact of sterling assets and liabilities, with customer loan volumes reducing to EUR81 billion in euro reported terms at the end of March 2016 and customer deposits to EUR79 billion, resulting in a loan to deposit ratio of 104%.
The decrease in the value of sterling accounted for about EUR3 billion of the movement in customer loan volumes, Bank of Ireland said.
Loan book dynamics continue to be broadly in line with the bank's expectations.
Its fully loaded common equity tier one ratio - a measure of a bank's financial strength - stood at 11.2% at the end of March. At the end of 2015, the fully loaded CET1 ratio was 11.3%.
Shares in Bank of Ireland were up 1.9% at EUR0.26 on Thursday morning.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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