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BOI will repay preference shares
03 Sep 2015 19:07
Bank of Ireland will look to repay €1.3bn of preference shares early next year to enable it to resume dividend payments, according to Chief Executive Richie Boucher.
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The country’s largest lender by assets has led a sector-wide revival as the economy grows faster than any other in Europe and is set to be the first Irish bank to resume dividend payments since the 2008 financial crisis.
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It must first stop counting the preference shares as capital and after generating fresh capital at a significant pace this year, analysts predict it will redeem the shares at the earliest point of a guided January to July 2016 range.
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"The prefs are costing us €300,000 a day so there's a large financial incentive," Mr Boucher said, referring to the shares that carry a coupon of 10.24%.
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"I wouldn't disagree with the market's anticipation that we want to do it as quickly as we can," he added.
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Mr Boucher, who described as "immensely frightening" the days in 2010 before the country signed up to an international bailout, wants Bank of Ireland to become a predictable income stock, which to his mind means ultimately targeting a payout ratio in excess of 50% of attributable profits after tax.
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The bank is expected by analysts to declare a dividend in the second half of 2016 or first half of 2017.
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"It certainly wouldn't be in the first half of next year. I think some of the market is thinking 2016 and some are saying they'll probably wait until 2017," Mr Boucher said.
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"I think it's a bit premature for us to form an absolute view on that," he added.
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