Bank of Ireland still struggling with Irish property hangover

BANK of Ireland, the country’s only un-nationalised bank, has warned that “tough funding conditions” and persistently bad credit quality have hit its profits, but said there should be an improvement later this year.

Despite taking nearly €5bn (£4.1bn) in three-year funding from the European Central Bank, BoI said that the cost of bank debt is still a strain.

But it said that although more customers fell behind on repaying their mortgages in the first quarter of this year, it expects to cut losses from bad credit quality below the €1.9bn recorded during 2011. The bank said that the situation is not helped, however, by continuing falls in property prices and high unemployment.

And in defiance of data showing mass capital flight from Ireland, BoI has managed to hang onto most of the gains in deposits it made last year: they fell only €1bn to €70bn after rising €8bn in the second half of last year.