Bank Of Ireland Cuts 2nd Half Forecast, Sees Underlying Loss
February 12 2009 - 2:39AM
Dow Jones News
Bank of Ireland PLC (IRE) on Thursday lowered its earnings
forecast for the second half, saying it now expects to post an
underlying loss after previously guiding for "marginally better
than break-even," as the deepening economic crisis has increased
loan losses.
Underlying earnings exclude several items, including the impact
of non-core items and goodwill impairment. BoI said it expects to
post an underlying profit for the full year.
Ireland's second-largest bank issued the surprise trading update
in the wake of its EUR3.5 billion re-capitalization by the
government late Wednesday.
"There has been a further sharp and widespread deterioration in
global economic and financial conditions," BoI said. "Our core
markets are in recession with rising unemployment, reduced levels
of economic activity and falling asset prices."
It added that equity markets remain weak and volatile, while
global inter-bank and wholesale funding markets remain
stressed.
BoI expects a loan impairment charge of around EUR1.4 billion
for the 12 months to March 31, 2009.
Around 45% of the increase in the loan impairment charge in the
second half arises from the bank's property and construction
portfolios.
The bank also revised upwards loan impairment charges for the
three years to March 2011 to EUR4.5 billion from EUR3.8
billion.
"Uncertainty regarding the future results in risk to this
estimate," the bank said. "As key economic indicators deteriorate
there is a downside risk to this estimate which may result in an
additional loan impairment charge of up to EUR1.5 billion for the
three years to March 2011."
Total income is expected to be "mid-single digit percentage
points lower" for the year to March 31, 2009 versus the prior
year.
It sees operating expenses to be "low single-digit" percentage
points lower compared to the prior year.
Chief Financial Officer John O'Donovan told a media conference
call that there were no current plans to raise capital in the
markets, but added, "One can never say never."
At Wednesday's close, BoI shares were down 13% at EUR0.61 on the
Irish Stock Exchange. At that price it's capitalized at EUR612
million. The stock has plummeted from EUR9.49 from this time last
year.
Company website: http://www.bankofireland.com
-By Quentin Fottrell, Dow Jones Newswires; 353-1-676-2189;
quentin.fottrell@dowjones.com