Bank of Ireland chief executive Francesca McDonagh has signalled her confidence that Irish banking won’t face a raft of new regulations under the next government, potentially including loan sales, cash-back mortgages, and the industry’s elevated interest rates.
Ms McDonagh said the bank will work with whoever forms the next government and will remind investors party manifestos do not always coincide with programmes for government.
Talking to reporters after Bank of Ireland unveiled its 2019 earnings, she said she interpreted the election result as showing voters wanted “things done on housing” and she said the bank has a role to play in helping home construction and home buyers.
She reiterated previous banking industry opposition to Sinn Féin’s ‘no consent, no sale’ bill covering disposals of mortgage loans by banks as “bad for the Irish economy”.
Cashback mortgages are popular, while the elevated level of Irish bank interest rates in the eurozone is to do with regulatory charges and other factors that applied to Irish lenders, said Ms McDonagh.
Whatever government forms I would want us to have a constructive relationship with them.
Cashback mortgages and loan sales have long been criticised by consumer and debt advocates.
To further reduce its €3.5bn pile of soured loans, the bank confirmed its plan to prepare for a transaction involving mortgages, but whether that involves market securitisation or through an outright sale remains to be decided.
The bank wouldn’t say what it had in mind this year to further cut its 4.4% level of bad loans, but said rules about the definition of loan defaults could slow the pace of reduction.
Asked whether the bank would be tempted to get any loan transaction done before a new government is formed, Ms McDonagh said it is acting in the best interests of shareholders and isn’t reacting to political events.
The bank posted an increase in operating profit of 10% to €934m in 2019, but net profit, after loan provisions, other charges, and taxes, fell to €448m from €675m in 2018. It also pushed out a key earnings goal, saying the lower-for-longer interest rate regime in Europe and Brexit uncertainty had held it back.
It is, however, looking at a more ambitious cost-cutting schedule, but one which wouldn’t automatically be linked to staff cuts.
Citing loan growth; an increased mortgage market share; reduced costs; lower exposure to non-performing loans; and investments in IT, Ms McDonagh described the 2019 performance as a “good year over hard ground”.
On the bank’s part in the industry-wide tracker mortgage scandal, it said over 10,000 of the lender’s accounts had been identified and almost all compensated.
Bank of Ireland had accounted for total tracker costs of €269m, including compensation costs and a potential fine, but refused to reveal its estimate for the size of the Central Bank fine.
The delayed rollout of its mobile app will extend through 2020 and improvements will be added, it said.
Shares in Bank of Ireland closed 5% lower, one of the sharpest declines on the Irish market, and they have slid 25% in the past year.
Ms McDonagh said the volatility facing Irish bank shares reflects many factors that are outside its control.