Bank of Ireland has reported pre-tax profits of €1.025 billion for the six months to the end of June on the back of positive business momentum, higher interest rates and a continued focus on efficiencies.
The bank had reported pre-tax profits of €351m the same time last year when it was still operating in a negative interest rate environment.
The European Central Bank has since lifted borrowing costs by a combined 425 basis points.
Bank of Ireland also today raised its full-year guidance and said it expects net interest income in the second half of the year to be marginally higher than the first half.
The country's biggest lender by assets said its business income for the rest of the year is expected to be broadly in-line with the first half, when it rose 23%.
It also said its full year return on tangible equity (ROTE) - a measure of the bank's profitability - would be similar to the 18.5% posted in the first half.
Bank of Ireland said its new lending in Ireland rose by 20% to €5.2 billion, while its loan book grew by €8.7 billion since December 2022 due to the purchase of KBC Bank Ireland assets and higher Irish net lending.
It also noted that its "green" lending rose by 18% in the six month period while it reported a 76% jump in new mortgage lending here.
The bank said its total operating income in the first half of 2023 rose to €2.2 billion from €1.367 billion the same time last year, while its net interest income grew to €1.8 billion due to higher interest rates, acquisitions and business momentum.
Bank of Ireland's customer deposits rose by €2.5 billion to €101.7 billion, mainly due to growth in its Retail Ireland division of €2.6 billion, including the KBC deposit portfolio.
The bank has made a provision of €158m for potential bad loans, over three times the provision it made this time last year.
Its reported costs were also 12% higher in the six months to June.
The lender said this mainly reflected acquisition impacts, the lifting of variable pay restrictions and additional investment to drive future efficiencies.
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Myles O'Grady, Bank of Ireland Group CEO, said today's "strong" results are underpinned by the strategic decisions and investments the bank has made in recent years, supported by a resilient economy and a favourable rate environment.
"We are mindful of the challenges posed by the inflationary environment and are supporting our customers as they navigate them," Mr O'Grady said.
During the first half, Bank of Ireland took on more than 150,000 KBC Bank Ireland customers after it bought the departing bank's performing loans and its deposit book.
It also established the Davy Stockbrokers business as a "centre of excellence" for its high net worth clients.
'Favourable' rate environment
Bank of Ireland CEO Myles O'Grady said the bank's performance was supported by a resilient economy and a 'favourable' interest rate environment.
"We've taken a balanced approach to increasing rates on loans for mortgages and deposit rates. So far, we've passed on between 1.25% and 1.75% to new mortgages," he told Morning Ireland.
Mr O'Grady defended the bank's stance on deposit rate increases, which haven't reflected the ECB rate increases, but neither have lending rates.
"The role we have is to ensure that we apply the rate environment in a balanced way. I don't believe that there's an automatic assumption that rates will be passed on to loan customers and equally to depositors," he said.
"It's a balanced approach. We are very mindful that we don't want to push loan customers into affordability issues. That's not good for anybody."
Speaking at a press briefing, Mr O'Grady said customers have been slow to move their savings from essentially non-interest bearing to interest bearing rates.
"I expect that to change, and I expect customers will begin to transfer their savings and I would encourage that," Mr O'Grady said.
Addressing the bank's provision of €158 million for potential bad loans, over three times the provision it made this time last year, Mr O'Grady said it was 'generally precautionary'.
"The asset book is proving itself to be remarkably resilient. Our customers are holding up quite well. We expect the overall charge for impairment to be generally in line with expectations and guidance," he explained.
When asked if the bank is seeing an increase in short-term arrears with Irish mortgage holders, Mr O'Grady said the Irish mortgage book is proving to be "quite resilient".
He pointed out that three out of five of the bank's Irish mortgages were written within the macroprudential rules.
"That is proving to be quite helpful in the resilience of those customers," he said.
Mr O'Grady said the bank has focused on a fixed rate mortgage strategy over the last number of years.
"The reason why that is important is because about 73% of our fixed rate mortgages won't mature until 2025 at the earliest - so they are essentially protected from the current rate cycle," he said.
"If you look at where the rate forecasts are, although we think rates will be higher for longer, they are expected to come down over the next number of years," he added.
The Bank of Ireland CEO also said the bank was in a position to take on some of the customers of non-bank lenders who are paying mortgage interest rates of up to 7 or 8%.
Support for customers with financial difficulties
Mr O'Grady said the bank offered a number of options designed to support customers encountering financial difficulties.
"If there are customers who are experiencing loan affordability issues, I would strongly encourage them to contact their provider," he said.
However, he said mortgage holders who have had their loans restructured could still apply to switch their mortgage to Bank of Ireland.
A report by the Central Bank estimated that more than 50,000 borrowers could be in a position to switch from non-bank lenders to mainstream banks offering lower rates.
Bank of Ireland's main rival AIB raised its guidance for the second time in three months on Friday, as the country's two dominant lenders benefited not only from higher rates but the recent exits of KBC and NatWest's Ulster Bank.
That left Ireland with just three retail banks, including the smaller Permanent TSB. All three have added hundreds of thousands of new customers and in Bank of Ireland's case, acquired €7.8 billion of loans from KBC.
The KBC deal helped push Bank of Ireland's share of the Irish mortgage market to 41% from 24% a year ago, moving ahead of AIB.
Shares in Bank of Ireland moved higher in Dublin trade today.
Additional reporting by Gill Stedman
