10 thoughts on “Bank of Ireland Results”

  1. Markets hate uncertainty. Perhaps, rightly or wrongly, the view is that the uncertainty in now gone.

    Better still there may be a perception that the worst case is now known, i.e. the conversion of all or part of the govt’s €3.5bn prefs into ordinaries would get BOI to the regulator’s 7+1% capital target, with room to spare.

    I for one, think this “worst-case” scenario may need to be re-visited. Why? Read the BOI report, starting page 71. It’s all about the “Asset Quality”.

    Here are the stats:
    * March-09, Assets of €136bn, provisions of €2bn, Loans that were past-due-date/ impaired of €11bn.
    * Dec-09, Assets of €135bn, provisions of €6bn, Loans that were past-due-date/ impaired of €19bn.
    * “Challenged loans” up to €26 bn from €16bn.

    Only time will tell if the €6bn provision is sufficient for the €26bn of challenged loans. Given €15bn are not NAMA loans, and (page 75) €6bn are past-due-date but not impaired, I fear that we shall see additional provisions as time goes on. Perhaps these shall not push BOI into reporting future losses but if they do, the capital base could be impacted.

    But for now, the market is happy. Long may it last.

    SEE: http://www.bankofireland.com/includes/investor/pdfs/prelim_statement_310310.pdf

  2. AIB +3% today, BOI +29%. AIB closed 10% lower in US last night, though it was up 8% too at one stage.

  3. @Joseph
    AIB went down about overnight in NYSE.
    BoI went up overnight about 10-15% on NYSE.

  4. Where are all the good loans?

    For BOI
    €7,394 are either impaired, low quality or in arrears out of an estimate of total of just over €12bn. 61% of very poor quality.

    For AIB
    €12,825 are either impaired or past due out of a total of €23bn or so. 56% of very poor quality.

  5. @Dreaded_Estate

    I couldn’t find the €7,394m figure for BOI. What page is that on? How did you calc that? Is this post-NAMA transfer?

    Separately, the math shows that BOI could have another big writedown and still be about the 8% target.

    Stats:
    * Page 71 of BOI shows €135bn of Assets. On page 86, this translates to €98bn of Risk-Weighted Assets. With Core Tier 1 of €9bn the ratio is 8.9%.
    * Assuming the €12bn heading to NAMA has now been fully provisioned and the is a 1-for-1 decline in the Risk-Weighted-Assets, new RWA would be €86bn and Core Tier 1 ratio would rise to 10.2%.

    Calc:
    * So BOI could theoretically take another €2bn hit, to both RWA and Core Tier1, to get to RWA of €84bn and Core Tier 1 of €7bn
    * And still be above the 8% target.

  6. @London_Reader

    €575m + €255m + €6,564m = €7,394 that are either impaired, low quality or in arrears.
    Page 71

    “Assuming the €12bn heading to NAMA has now been fully provisioned and the is a 1-for-1 decline in the Risk-Weighted-Assets, new RWA would be €86bn and Core Tier 1 ratio would rise to 10.2%.”

    Unfortunately that assumption isn’t true. BOI has provisions of just 22.7% on its NAMA bound loans. Page 20

  7. @Dreaded_Estate

    See what you mean.

    Further provisions/write-downs at BOI look likely, as far as I can see it.

    How exciting NAMA transfer phase 2, will be.

  8. @London_Reader

    Plus you are ignoring the write down that will come from the rest of their loan book.

    Post NAMA, BOI will still have a property and construction loan book of €23.5bn and they only have impairments of 13.5% on these loans.

    Conservatively there is at least another 15% to 20% of write downs needed on this book of business.
    So maybe another €4bn of write down before you even look at the mortgage, SME or consumer lending books.

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