Bank of Ireland has today lifted its net interest income guidance for 2024 to reflect its revised expectations that there will be one fewer round of central bank interest rate cuts this year.
The country’s biggest lender said in a trading update that it expects 2024 net interest income to be 3% to 4% lower than the fourth quarter annualised run rate of €3.65 billion compared to guidance in February that it would be 5-6% lower.
That original weaker-than-expected outlook led to a sharp fall in the bank’s share price that has since been recovered. Its share price was 28% higher yesterday than the February 26 low.
Bank of Ireland’s forecast in February was based on the European Central Bank’s key rate falling to 2.75% by year-end from a record high of 4%. Bank of Ireland now expects interest rates in 2024 to be on average 25 basis points (bps) higher than it expected.
Bank of Ireland also said today that net interest income performed in line with both its expectations and the level of the previous quarter in the first three months of the year.
This reflected positive lending momentum combined with continued strong commercial pricing discipline and was partially offset by lower deposit volumes and modestly higher deposit funding costs, it said.
The bank said business income and operating expenses were also in line with expectations and that it generated 40 basis points of net capital in the quarter.
In today’s trading statement, Bank of Ireland said its customer loan balances rose to €80.7 billion at the end of March from €79.7 billion at the end of December.
Net lending at its Retail Ireland business rose by €0.2 billion on the back of continued growth in mortgage lending, while its market share of new lending was 40% of the first two months of 2024.
It noted that green mortgages accounted for 47% of new mortgage lending in the three month period.
Meanwhile, customer deposits for the quarter came to €98.4 billion, €1.8 billion lower than the end of 2023.
Bank of Ireland said its asset quality during the three month period performance in line with expectations and remains strong on theback of the “supportive Irish macroeconomic environment”.
“The group remains on track to continue delivering the financial targets contained in the 2023-2025 strategic cycle,” it stated,
Myles O’Grady, Bank of Ireland Group CEO, said the bank had a strong first quarter, underpinned by loan book growth, higher income and robust capital generation.
“The group is now in the second year of a three-year strategic cycle. We continue to make tangible progress with a focus on building stronger customer relationships, a simpler business, and a more sustainable company,” Myles O’Grady said.
He said the launch of a new green mortgage product was an important development for customers, while the bank also introduced new supports for customers impacted by fraud and continued to invest in technology and the branch network.
“The group also increased its funding commitment for housing development in Ireland and expanded agri-business green lending,” he said.
“We remain on track to deliver our committed financial targets, including the commencement of interim distributions this year. As we approach the mid-way point in our strategic cycle, we continue to generate value from our differentiated business model operating in attractive markets,” the CEO added.
