Bank of Ireland has today followed rival AIB in upgrading its net interest income guidance for 2022, reflecting the faster pace of European Central Bank interest rate increases.
The country's largest bank by assets said it expects net interest income to increase by around 6% to 7% year-on-year compared to its previous guidance that it would be modestly higher than 2021.
AIB, the country's largest mortgage lender, forecast last month that its net interest income would increase by more than 15% compared to the 10% expected previously.
AIB is the only Irish bank so far to increase non-tracker mortgage interest rates since the ECB began to hike rates at its fastest pace on record.
Bank of Ireland and Permanent have still yet to move.
Bank of Ireland said its 3% interest income growth year-to-date was driven by the bank no longer being charged negative rates by the ECB for excess deposits.
It also said it expects to repay all of its ultra cheap ECB funding this month, boosting income by another €30m.
Bank of Ireland said its new lending was up 13% so far this year compared to 2021, comprising of a 30% jump in Irish retail, 23% increase in corporate and markets and a 19% fall in the UK, where it continued to focus on value rather than volume.
It opened 245,000 new current and deposit accounts so far this year, up about 90% on the same time in 2021, as Ulster Bank and KBC Bank Ireland customers switch to new banks.
Bank of Ireland said its business income was 14% higher in the nine months to September compared to the same time in 2021 - in line with expectations and supported by growth across the businesses.
Bank of Ireland said its Davy business continued to attract net new funds during the period, but overall funds under management and capital markets activity have been impacted by external market conditions.
The lender completed the acquisition of stockbroker Davy in June.
In today's trading update, Bank of Ireland said that customer loan volumes were €73.5 billion at the end of September, €2.8 billion lower compared to December 2021.
It recorded net lending of €1.9 billion in its Retail Ireland and Corporate & Markets divisions.
Meanwhile, new lending increased 13% in the nine month period on the same time last year.
Retail Ireland increased lending by 30% with strong growth across mortgage, business banking and consumer portfolios and growth of about 40%.
The bank said its Corporate & Markets division increased 23% lending with growth diversified across all portfolios.
But its Retail UK decreased 19%, mainly driven by a reduction in mortgages, which the bank said reflected pricing discipline and its strategic focus on value over volume.
Bank of Ireland said that customer deposits stood at €96.7 billion at the end of September, €3.9 billion higher compared to December 2021.
€800m worth of Irish loans were sold to CarVal Investors, while €600m worth of UK loans were offloaded through the securitisation of the portfolio.
The two sales will lead to Bank of Ireland's non-performing exposures being cut from 5.4% to around 3.7%, well below the threshold of 5% sought by regulators.
Gavin Kelly, Bank of Ireland Group Interim chief executive, said the bank saw a strong business performance in the third quarter.
"Underpinning this were strong capital and funding positions, focussed cost discipline, and growing income," he said.
"All of this has allowed us to continue to deliver on our strategic priorities. We grew lending in our Retail Ireland and Corporate and Markets divisions. We continued to execute our strategy of value over volume in the UK. And the KBC transaction is going through final approvals and expected to close by the end of the first quarter of 2023," he added.
Mr Kelly said that overall business momentum is positive for the lender.
"We are upgrading our net interest income guidance for 2022 to reflect the interest rate outlook. The strength of our business model means we are firmly on track to deliver sustainable RoTE (Return on tangible equity) of greater than 10% in the near term," he added.
Shares in the bank were lower in Dublin trade today.
