Bank of Ireland has reported €1.2 billion in underlying profit before tax for the year to the end of December as it grew its customer base by over 11%.
The bank's underlying profits were down 12% on last year as it took an impairment charge of €187m to account for potential loan losses arising from higher mortgage costs and cost of living squeeze.
Underlying profit was still 3% higher than a consensus estimate in a company poll of analysts.
During the year the bank completed what it called the "transformational acquisitions" of Davy Stockbrokers and the €7.8 billion KBC Bank Ireland portfolios.
The bank said its total new lending for 2022 rose by 10% to €15.6 billion.
Its customer deposits rose by €6 billion to €99 billion, mainly due to growth in its Retail Ireland division of €11 billion on the back of higher household and SME volumes as well as customers moving from Ulster Bank and KBC Bank Ireland as the two banks leave the Irish market.
This was partially offset by lower Retail UK deposits arising from deleveraging in line with strategy, it added.
Bank of Ireland said today that it plans to return €350m to shareholders this year through dividends and buybacks, up from €104m last year, with plans for substantial further growth.
The country's largest lender by assets set out new targets for the next three years as it delivered an above-target return on tangible equity (ROTE) of 10.6%.
Over the next three years the bank is targeting ROTE of 15% and aims to build up to an annual ordinary dividend of about 40% of statutory profit, compared with 25% last year.
It also said it is considering further distributions via annual buybacks.
The lender said its net interest income for the year grew by 12%, which it said reflected higher customer balances, higher interest rates and business momentum.
Bank of Ireland's non-performing loans ratio reduced by 190 basis points year on year to 3.6%, reflecting the successful completion of a number of management actions.
It said its expects 2023 net interest income to be more than 12% higher than the €3 billion annualised level implied by a strong fourth quarter, reflecting "business momentum, interest rate expectations and the KBC acquisition".
Myles O'Grady, Bank of Ireland Group chief executive, said the bank had an "excellent performance" in 2022.
"This caps out four years of delivery by the team at Bank of Ireland and gives us a great place to build from," the CEO said.
"In 2022 we made two stand out acquisitions and grew our customer base by over 11%. We met or exceeded key financial targets, and ended the year with a very strong capital position. This allows us to propose a c.250% increase in distributions," Mr O'Grady said.
"We also returned to full private ownership, a unique position in Ireland amongst domestic retail peers. In all, we became a better bank for our customers, our colleagues, and our shareholders," he added.
Myles O'Grady said he sees real opportunity for the future.
"The strength and depth of our Irish franchise is unique, and enhanced by the transformational acquisitions of Davy and the KBC portfolios. This is complemented by great international businesses in the UK, continental Europe and the United States," he said.
"Notwithstanding global uncertainty, Ireland's economic backdrop remains supportive. This all informs our refreshed strategy which is built on three pillars - stronger relationships, simpler business, and sustainable company," he added.
Today marks the first set of results for Bank of Ireland's new CEO Myles O'Grady and the first since the bank exited state ownership.
The Government had been gradually selling down the taxpayers' interest in the bank which had stood at around 14% after the state bailout in the wake of the property crash.
It is a good time for banking globally as they benefit on the whole from rising interest rates driving interest income and their share prices higher.
Although banks here generally have not passed the full extent of rate increases on to their mortgage products, pricing is getting more expensive.
New rate environment a 'big adjustment'
Bank of Ireland CEO Myles O'Grady told Morning Ireland that the 2022 performance was driven by all parts of the group as well as the two recent major acquisitions of Davy and parts of exiting bank KBC's portfolio.
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Reporting a 12% increase in net interest income, he acknowledged that the emergence from years of very low rates to a higher interest rate environment was a 'big adjustment for customers'.
While mortgage rates are moving higher, banks on the whole have not increased their deposit rates, despite the ECB rate moving from negative territory to 3% now.
Mr O'Grady said the bank recognised that it was important to reward deposit holders and noted that it had increased deposit rates by 0.5% recently.
He said the bank kept rates "under active review" but was being thoughtful on both the lending and deposit sides of the business.
Mr O'Grady said the reported impairment charge of €187m reflected the "uncertain macroeconomic outlook" last year as well as some loans losses on particular portfolios.
"As I look at the data, particularly our mortgage customers, they are holding up quite well, notwithstanding the inflationary environment and I think we are seeing, to my mind, the positivity of the macroprudential rules that have been in place for almost seven years," he said.
However, the CEO did point to the evolving situation in the commercial property market, where rising interest rates and the move to hybrid working is hitting demand and therefore valuations, as being of some concern.
He also said housing output and the impact of inflation were also a concern.
Asked about the recent controversy around the debt writedown given to a well-known figure by another bank, Mr O'Grady would not be drawn on the proportion of debt resolutions at Bank of Ireland that amounted to a writedown of more than 90% of a borrower's debt.
"Debt writedown for Bank of Ireland is not a policy. Debt forgiveness is not a policy. We always seek to work with customers who are in difficulty to try and get the best outcome for them in the context of their difficulties but also to ensure the appropriate outcome for the bank," he explained.
"We work this through on a case by case basis."
He said the bank did not have special policies in place for well known individuals.
"We treat all customers equally and fairly," Mr O'Grady said.
On the recent reintroduction of limited bonuses at banks, the Bank of Ireland CEO said the mandated limit applied to all staff at the bank.
"That scheme, which is capped at €20,000, is applicable to everyone across the group," he said.
Regarding the place of branches and cash services in the group under the new three year strategy, Mr O'Grady said the plan does involve retaining both at current levels.
Asked about the soon to be enacted laws introducing a senior executive accountability regime, Mr O'Grady said he sees the development as a positive as being clear on accountability can only be a good thing.
Shares in Bank of Ireland were higher in Dublin trade today.
