BANK OF Ireland does not expect to seek further cash injections from the State according to the five-year restructuring plan submitted to the EU, but expects the Government to remain a substantial shareholder after the reorganisation is completed.
Richie Boucher, the bank’s chief executive, told the Oireachtas finance committee that EU conditions on restructuring plans for lenders across Europe do not necessarily have a “read through” for how it might treat Bank of Ireland.
The bank would meet regulatory capital requirements, he said, and satisfy capital levels expected by the bank funding markets after incurring losses on €15.5 billion in loans moving to Nama.
“We believe we can manage but we will be looking to other sources to enhance our capital,” he said.
Expecting higher capital regulatory demands, the bank would look for additional sources of capital, said Mr Boucher.
He told reporters after the committee hearing that it was “highly unlikely we would be able to pull off a rights issue” to repay some of the State’s €3.5 billion investment.
Mr Boucher told the committee he could not say what the discounted price to be paid by the State for the Nama loans would be due to uncertainty in the process.
The bank’s shares closed up 2 per cent, or four cent, at €1.70.
Pat Molloy, governor of Bank of Ireland, said the bank would reduce its reliance on the State bank guarantee within the five-year restructuring plan and repay the Government’s investment.
The bank disclosed that it had drawn €7 billion in funding from the European Central Bank and was planning to run down loans of €37 billion to shrink its business.
Bank of Ireland admitted to the committee that cash flow for businesses remained a problem and that small and medium-sized enterprises (SMEs) faced tough trading.
Des Crowley, head of the bank’s retail division, said the lender was assisting borrowers in difficulty with moratoriums, interest-only periods on their loans and reductions in their repayments. He said the bank was renegotiating loans with 600 borrowers a month.
The bank said it was approving almost 4,800 of 6,000 loan applications from SMEs every month, and had advanced €2.1 billion over the first nine months of the year. “Our objective is to support viable businesses,” said Mr Crowley.
The bank said it was sanctioning more than 350 mortgages every week, lending more than €1.5 billion over the same period.
Fine Gael finance spokesman Richard Bruton said there was “intense cynicism” about the level of lending disclosed by the banks and the quantity of credit available. “You are presenting such a positive spin – it is just not credible,” Mr Bruton told the bank.
Mr Molloy acknowledged that there was a “mismatch” between the perception of available credit and the disclosures by the banks.
“We have a huge task to get across convincingly what we are doing,” he said. Mr Boucher said the bank had not been effective in communicating how it made money and why it needed to do so.
Mr Crowley said that the next 12 to 18 months would be “seminal” for the bank in rebuilding trust after the banking crisis. Responding to criticism from Independent Senator Shane Ross about the appointment of an internal management team, Mr Molloy, a former chief executive of the bank, said he thought the bank had “the right team in place”.
The bank said the “fierce competition” in the deposit market, which was squeezing net interest margins and profitability, would be alleviated by the €54 billion liquidity from Nama’s bonds.
Nama will have “a positive impact” on the bank’s ability to support the economy, said Mr Boucher, and the agency would have no effect on good loans over which it was taking control.
