(Alliance News) - Bank of Ireland Group PLC on Monday said it swung to a loss in 2020 after a sizeable impairment as well as reduced operating income and announced a large number of branch closures amid a deal with An Post.
Shares in Bank of Ireland were up 2.6% at EUR3.49 in London on Monday.
The Irish financial services group posted a EUR776 million pretax loss for 2020, swinging from a EUR639 million profit the year before.
This in large part resulted from EUR1.13 billion of net impairment losses on financial instruments, multiplied from EUR214 million of losses the year before.
Further, total operating income fell to EUR4.3 million from EUR5.6 million as interest income fell to EUR2.57 billion from EUR2.76 billion and life assurance investment income dropped to EUR270 million from EUR1.31 billion.
The company explained that "Lower operating income and the increased net impairment losses are the key drivers of the underlying loss before tax for the year of EUR390 million compared to an underlying profit before tax of EUR752 million in 2019."
Common equity tier 1 ratio falls to 13.4% from 15.0% the prior year. The bank expects its 2021 CET1 ratios to remain broadly in line with December 2020 levels.
No dividend was paid in 2020. Looking ahead, Bank of Ireland expects "distributions to recommence on a prudent and progressive basis based on performance and capital position."
Also in 2021, total income is expected to be broadly in line with 2020, reflecting a decline in net interest income. Business income is expected to increase thanks to its Wealth & Insurance business and a lower charge for valuation items.
Costs are expects to fall in 2021 to less than EUR1.64 billion with a new 2023 cost target of EUR1.5 billion.
"On asset quality, subject to no further deterioration in the economic conditions or outlook, the majority of the credit impairment risk associated with Covid-19 has been captured and we expect the 2021 impairment charge to be materially lower than 2020," the company added.
Chief Executive Francesca McDonagh said: "For many years, the trend to digital banking has been evident, with customers using branches less and less. Covid-19 has accelerated this changing behaviour, and we've seen a seismic shift towards digital banking over the past 12 months. We've now reached a tipping point in customer preferences between online and offline banking. That's why we've also announced changes to our branch network in Ireland and Northern Ireland today, while protecting access to local banking services though a new arrangement with An Post."
The bank is to shut 88 outlets in the Republic, reducing its network to 169 from 257, while in Northern Ireland the network will be reduced to 13 from 28.
It follows a deal with An Post to offer customers access to banking services at more than 900 locations. An Post is the Republic of Ireland's state-owned postal services provider.
Bank of Ireland said the majority of the branches that are closing are self-service locations which do not offer a counter service.
By Anna Farley; annafarley@alliancenews.com
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Bank Of Ireland (BIRG)