Bank of Ireland Group trading update

Bank of Ireland has issued a trading update in advance of its close period for the half year ended September 30 2005.

The bank says that it has continued to perform strongly in the half year to September 30 2004, and its interim results are expected to feature continuing strong growth in its Irish franchise and positive progress towards its growth objectives in its UK and international business.

It also announces it has made significant progress in the initial phase of its Strategic Transformation Programme announced in March 2005.

The positive performance for the six months has taken place against generally favourable economic conditions and also reflects excellent asset quality.

The bank expects basic earnings per share to grow by close to 30%. Its results for the six months to end September 2004 included exceptional gains totalling 38 million.

In the half-year to end September 2005 its results will include a gain on the disposal of its interest in the Bristol & West branch network (120m) together with implementation costs associated with its Strategic Transformation Programme.

Excluding the effect of these items from both periods, together with any volatility that might arise under IFRS in relation to hedge ineffectiveness, it expects underlying EPS to grow by circa 9%.

Brian Goggin, group CEO of Bank of Ireland, says: “We expect a strong Group performance for the half year. The continuing strength of our Irish businesses, together with the emerging benefits of investment in the UK, and niche international businesses focused on high growth sectors, and the delivery of the Strategic Transformation Programme, provides us with a foundation for sustained growth.”

The Irish economic environment continues to be very favourable with GDP growth this year expected to be circa 5%. The banks Retail Financial Services business is building on excellent momentum with strong volume and profit growth across the division. Profit before tax is expected to grow by circa 16%.

Its leading distribution position, well-established relationship management approach to personal and business customers coupled with a strong and responsible sales culture are the main drivers underpinning this performance. Strong growth in volumes in key product areas underlines the attractiveness of its customer proposition.

Loans to customers are expected to grow by circa 23% compared to the same period last year with mortgages and business banking up by circa 26% and 24% respectively. Resources are expected to increase by circa 13%.

Bank of Ireland Life business continues to grow underpinned by strong product demand and rising investment markets. The environment for the Life business is particularly positive with favourable demographics and rising prosperity contributing to a significant rise in new business sales, which are expected to grow by circa 20% for the six months to September 30 2005 compared with the same period last year.

While the transition to IFRS is making reporting of financial performance for this business more complex, operating profits (before policy-holder tax gross-up, investment variance and discount rate change) are expected to increase by circa 30% driven by strong sales growth and tight cost control.

Profit before tax in Wholesale Financial Services is expected to grow by circa 10%, a strong performance as the core businesses in this division invest for future growth.

In Corporate Banking loans to customers are expected to increase by circa 22%, compared to the same period last year, while the new business pipeline remains buoyant. The banks is building an international growth platform with a network of specialist teams focusing on niche opportunities in high growth sectors. It is also maintaining excellent asset quality.

Its Global Markets business is also adding specialist teams in key markets and it is increasingly adding value for customers through integrated banking and risk management propositions through Global Markets, Corporate Banking, Business Banking and its UK Financial Services operations. The other businesses within the division are expected to perform strongly.

The results to end September 2004 included the benefit of a technical loan loss provision release of 10m, and excluding the benefit of this the bank expects the profit before tax outturn to September 2005 to be broadly in line with last year.

It concluded the sale of the Bristol & West branch network on September 21 2005 for a consideration of 150m. The branch network is expected to incur a small loss in the six months to end September 2005.

The bank says it now has a tighter business portfolio in the UK, focused on growing in key market segments. Personal Lending UK is a well-established mortgage business focusing on higher margin specialist sectors.

The mortgage book is expected to grow by circa 14% with excellent asset quality being maintained. The mortgage business in the UK is expected to deliver profit growth of circa 10% in the half year to September 2005 compared with the same period last year.

Excluding the benefit of the technical loan loss provision release in the corresponding period last year, Bank of Ireland expects business banking profits to be flat, where strong growth in lending volumes of circa 30% compared to the same period last year are offset by the investment in strengthening its Business Banking team, which is nearing conclusion.

Tight cost control is being maintained with the Business Improvement Programme on target to deliver its objectives for the current year.

Performance of UK Post Office Financial Services, which is progressing well through its development phase, is in line with expectations.

The bank says it is on track to achieve its customer recruitment target of 400,000 by year-end and it continues to add to the product portfolio.