Bank of Ireland reins back lending

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    Date: Tuesday 08 Jul 2008

    LONDON (ShareCast) - Bank of Ireland has cautioned that a rapid economic slowdown in Ireland together with global market dislocation continues to adversely impact its earnings, prompting it to rein back lending.

    "The slowdown in the overall level of activity and volume growth is most pronounced in our retail businesses in Ireland," it said.

    "Growth in lending in our UK and international Corporate Banking businesses in the second half of our prior financial year has continued in the first quarter of this financial year, though we expect this to moderate in the second half of the year," it added.

    The bank expects to increase customer lending in the current year, but it is taking a "selective approach". Reports this morning suggested it had told some British customers it has shut its doors to new business for three months.

    Residential mortgage portfolios are proving resilient but there has been some credit grade slippage over the past quarter, in particular in the Business Banking portfolios, the statement said.

    “We have spoken to management this morning and they acknowledge that the environment has changed considerably since the full-year results in May,” said Scott Rankin, an analyst at Irish brokerage Davy.

    “There is an obvious potential read-across for the other banks too, particularly Allied Irish Banks,” he added.

    Allied Irish, Anglo Irish and Bank of Ireland were all posting heavy losses today.

    Davy said it will need to cut its forecasts, 139c and 134c for March 2009 and 2010 respectively, again by at least 5%.

    “The slowdown is most pronounced in Ireland and while momentum is stronger in the UK and international businesses, the bank talks of only increasing its loan book this year,” said Rankin.

    “In May, Bank of Ireland was targeting double-digit growth. A combination of deteriorating macro conditions and funding considerations is behind this more selective approach and we believe that the target for the year has slipped into high-single-digit territory,” he added.

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