Bank of Ireland shareholders were told today that the bank is adequately capitalised and would not be resorting to a rights issue to shore up its funding position.
“We have achieved robust capital ratios through prudent management,” said chairman Richard Burrows at the bank’s annual general meeting today. “We are comfortable with our capital ratios and we expect further improvement in them over the next few years and we do not intend to revert to shareholders to achieve those objectives.”
However, chief executive Brian Goggin said that slowing economic growth in the bank’s main markets together with global market dislocation continue to adversely affect economic earnings.
Uncertainty in its markets made it difficult to provide guidance on a profit forecast for the year, shareholders were told.
“Profits will be adversely affected in this year and that’s as far as we can go at this stage,” said Mr Burrows. “In terms of prudent guidance, this is as far as we want to go.”
However, loan loss provisions are going to increase in the present economic circumstances, he said.
Mr Goggin told shareholders that loan loss provisions had been unsustainably low over the past number of years and that the bank's loan loss charge, as a percentage of average loans, would be around 25-28 basis points in the current year, up from 17 basis points in the year just ended.
"I think our provision is realistic as we look at the world today," he said, adding that the bank's arrears are holding up well and that it had just one repossession in its current financial year and no repossessions last year.
Responding to questions about the bank's exposure to property-related lending in Ireland and the UK, Mr Goggin said the bank had been prudent in its lending at that it had an "excellent" residential business in both countries.
Speaking after the meeting, Mr Goggin said he was as disappointed with the share price as the shareholders are “but unfortunately the market determines the share price and, while we have a fantastic business in Bank of Ireland, we are very much caught up in the whole global turmoil that is currently persisting,” he said.
Mr Goggin said that perception and sentiment were driving share prices.“It is very difficult to change perception,” he said.
“The quality of our loan book, the quality of our residential mortgage book in particular, is very strong. Some people clearly are going to get into difficulties, that happens in good times and bad times and our general experience is that Irish borrowers are generally responsible and as long as we don’t experience a significant increase in unemployment and a significant increase in interest rates, I think we will ride out this storm.”