Bank of Ireland has said it is now stabilising after being in 'survival mode' six months ago. Chief executive Richie Boucher told analysts NAMA was an imaginative and well-thought out plan which would provide liquidity and ease concerns on asset quality in Irish banks.
He was speaking after BoI issued a statement which said it expected the discount paid for the loans it will transfer to NAMA to be less than the average 30% indicated by Finance Minister Brian Lenihan in the Dáil today. Market sources expect that the actual figure is just under 20%.
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The bank earlier raised the possibility of generating fresh funds by issuing new shares. It said today the transfer of its loans to NAMA may result in a need for additional capital. It said it could also generate some of that money internally by buying back existing debts.
The Finance Minister yesterday said BoI was expected to transfer €16 billion in loans to NAMA. The bank said the writedown on the value of the NAMA loans would be €1.2 billion to €1.4 billion. But it said the impact on its financial position would be determined by the timing of the transfer of the loans.
This afternoon, Mr Boucher refused to disclose the proportion of non-performing loans in the land and development book which it is transferring to NAMA.
Yesterday, AIB also said it expected the discount to be paid for its loans be less than 30%. The bank said that, based on a 30% discount, it would have to write down €3.7 billion off the value of loans, but a smaller discount would mean a smaller writedown.
BoI Irish profits to be 'significantly lower'
Bank of Ireland also issued a trading update for the six months to the end of September, in which it said trading conditions had been 'difficult', particularly in Ireland.
It said it would be setting aside €1.6 billion to €1.8 billion for impaired loans in the period, compared with €267m in the same period last year. Underlying profits before these charges would be lower than in the same period last year, the bank said, with profits in the Irish retail banking arm 'significantly' lower and BoI Life profits 'well behind' a year earlier.
Earlier this year, Bank of Ireland said it expected total charges of €6 billion for loan losses for the three years to March 2011, but today it said this figure would be higher by a 'mid-teens' percentage, which indicates that the figure could be closer to €7 billion. This does not include any impact from the transfer of loans to NAMA.
BoI said total lending in the six months would be around 2% lower than in the same period last year, with demand for loans 'muted', while deposits would be 5% lower year-on-year.
See how Bank of Ireland shares are reacting here
