Bank of Ireland's has reported a better than expected results for 2010 as gains from bond exchanges offset property loan losses.
The bank reported a pretax loss of €950 million for 2010, down from €1.8 billion in 2009.
The bank’s net loss of €609 million last year undershot the average €1.9 billion shortfall expected by analysts.
The shortfall was capped by a gain of €1.4 billion from swapping debt at a discount during the year and a reduction in impairment charges by over a third to €1.887 billion.
At 9am shares in Bank of Ireland were 2 per cent lower at 27 cent in Dublin. However, the bank's shares held their own over the day, closing at €0.279.
"It's a clean story to understand," chief executive Richie Boucher said today. "The loan losses, we are comfortable, are coming down. We have had the stress test of all time."
The bank, which is 36 per cent State-owned, said trading conditions for the first months of 2011 "remain challenging due to higher funding costs, in particular the cost of customer deposits and the continuing difficult liquidity environment". It also said it expects to announce capital-raising plans "in the coming weeks".
Mr Boucher said the lender may hire Deutsche Bank AG, UBS AG and Credit Suisse AG to advise on the company's plans to raise €5.2 billion of capital.
He said the bank is considering the contribution that subordinated bondholders may make to the recapitalisation.
He said that regulators put Irish banks through the "stress test of all time" before they were ordered on March 31st to raise an additional €24 billion of capital.
Bank of Ireland made a loss of €2.24 billion last year on loans it sold to the National Asset Management Agency, and took a further €1.89 billion impairment charge on loans to customers, it said.
Customer deposits fell to €65 billion at the end of December from €85 billion a year earlier, the bank said. "We don't have to generate a huge amount of deposit growth to get there; we are expecting some deposit growth, but it is primarily through the asset deleveraging," he added.
The bank said that 4.2 per cent of its Irish mortgages were at least three months in arrears at the end of December, up from 2.76 per cent a year earlier.
"The trajectory of arrears is stabilising, it's still going up but it's stabilising," said Mr Boucher. He said he didn't foresee another "spike" in arrears.
Mr Boucher also appeared to rule out any write off of debts for some mortgage holders who cannot repay their loans, as was mooted by AIB when it published its annual results on Tuesday.
He said the bank deals with customers on an individual basis. Since January 2009, some 9,500 customers have gone through the bank’s modification process, designed to help those who feel they may be getting into difficulty with their mortgage. Of those, 4,700 are still in the process, while 4,400 have returned to their normal mortgage arrangements. The balance have gone into the bank’s arrears programme.
Reuters/Bloomberg
