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Julien Behal/PA Wire
Bank of Ireland

Bank of Ireland reports half-year loss of €1.25 billion

Bank CEO says H1 2012 has been a difficult environment to operate in, given ongoing eurozone difficulties and challenges to the Irish economy.

BANK OF IRELAND has released interim results for the six months to 30 June 2012 which show a €1.255 billion pre-tax loss.

The bank’s underlying operating loss hit €907 million compared with €722 million last year.

The report shows that the bank has set more money aside for loan impairment charges in H1 2012 than in the same period of last year – up from €842 million to €941 million.

Of this €941 million, the bank has set aside €387m for property and construction loan losses, €310m on residential mortgages and €216m on non-property SME and corporate loans. The number of customers falling into arrears continues to increase, according to BOI, though the rate of those going into arrears dropped during H1 2012 “and we expect this trend to continue”.

BOI’s net interest margin has fallen from 1.33 per cent last year to 1.2 per cent in the first half of this year. This rate marks the difference between what it costs the bank to raise funds and what it charges its customers for lending that money out.

Richie Boucher, BOI Group chief executive, said that H1 2012 “has been a very difficult environment in which to operate”, adding the the bank’s half-year results were impacted by wider eurozone uncertainties and very low interest rates.

“Whilst we have been able to reduce the rates we pay for deposits and the quantum covered by ELG as well as improving asset pricing, the very low level of official interest rates has adversely impacted on our earnings rates and therefore on income.”

“While the Irish economy remains challenged and our impairment charges remain elevated, we expect the impairment charges to reduce from this level, trending to a more normalised level as the Irish economy recovers,” he added. “The pace of the reduction will be particularly dependent on the future performance of our Irish residential mortgage book and commercial property markets, as well as our own credit management initiatives.”

However, Boucher also noted that as the BOI Group restructures, it will cut staff numbers.

“Our voluntary redundancy programmes to facilitate the measured and controlled departure of staff in line with the Group’s revised requirements has recommenced.”

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