Bank of of Ireland net loss falls

 
City A.M. Reporter
Bank of Ireland defied expectations for another huge net loss in Irish banking but high funding costs and a spluttering local economy underlined the challenges facing the country's largest lender.

In an industry decimated by reckless lending, Bank of Ireland will be one of only two big banks left under government plans to shrink a once crowded sector.

Its books had the strongest performance under recent stress tests that put a 70 billion euro price tag on the country's banking crisis and the lender is confident it can rebound.

"It's a clean story to understand," chief executive Richie Boucher said. "We have moved from survival to stabilisation."

But the group, with a pedigree that stretches back to 1783, is facing the likelihood of majority state control after the central bank said it needed 5.2 billion euros in extra capital to bulletproof itself from future economic shocks.

The company, in which the state already holds a 36 percent stake, has said it will update the market in coming weeks about its capital-raising plans, and some of its subordinated bonds have risen on speculation it will offer a debt for equity swap.

The rest of the domestic banking sector has been effectively nationalised, with Allied Irish Banks, the other pillar bank and Bank of Ireland's main rival, unveiling a jaw-dropping €10.4bn loss earlier this week.

The shortfall was capped by a gain of Bank of Ireland (BKIR.I) defied expectations on Thursday for another blow-out net loss in Irish banking but high funding costs and a spluttering local economy underlined the challenges facing the country's largest lender.

In an industry decimated by reckless lending, Bank of Ireland will be one of only two big banks left under government plans to shrink a once crowded sector.

Its books had the strongest performance under recent stress tests that put a 70 billion euro price tag on the country's banking crisis and the lender is confident it can rebound.

"It's a clean story to understand," Chief Executive Richie Boucher told reporters. "We have moved from survival to stabilisation."

But the group, with a pedigree that stretches back to 1783, is facing the likelihood of majority state control after the central bank said it needed €5.2bn in extra capital to bulletproof itself from future economic shocks.

The company, in which the state already holds a 36 percent stake, has said it will update the market in coming weeks about its capital-raising plans, and some of its subordinated bonds have risen on speculation it will offer a debt for equity swap.

The rest of the domestic banking sector has been effectively nationalised, with Allied Irish Banks (ALBK.I), the other pillar bank and Bank of Ireland's main rival, unveiling a jaw-dropping 10.4 billion-euro loss earlier this week.

The shortfall was capped by a gain of €1.4bn from swapping debt at a discount during the year and a slide in impairment charges by over a third to €1.887bn.