The Bank of Ireland group published their half year results for the first half of 2020 today. The Bank of Ireland group stated in their report that they would have a loss of €669 million as a result of setting €937 million aside for impairment charges. This large change was taken as a result of Stage 1 and 2 performing loans. Breaking down this loss reveals that there was an €184 million adjustment to account for payment breaks, €321 million adjustment to account for loan loss, and €432 million from the impact the impairment charges will have impairment models according to the bank’s financial outlooks. The amount of impairment coverage increased from 1.6% to 2.7% in December 2019. This percent change is what lead to an impairment loss allowance of €2.1 billion on their balance sheets as of June 2020.
The loan book of the bank decreased by €2.8 billion during the first half of 2020. Using a constant currency basis, the bank’s loan book decreased by €0.5 billion. The bank also had a net lending growth amounting to €0.2 billion, which includes revolving credit facility (RCF_ drawdowns totaling €1.3 billion. The bank’s mortgage market share did increase in Ireland to 25%. The amount of net lending the bank engaged in during the first half of 2020 was unfortunately offset by foreign exchange as well as other movements of €2.1 billion in addition to the costs incurred by impairment charges. Excluding RCF activity, the total new lending volumes (€5.8 billion) were 19% lower than in the first half of 2019. These changes reflect the significantly reduced activity in fundamental financial markets as a result of COVID-19.
The net interest income of the bank amounted to €1.1 billion, which was in line with the results obtained from 2019. The net interest margin for the first half of 2020 was 2.02%. The bank’s net interest income shows the long-term benefits of loan book growth that the group engaged in since 2017.
The fees as well as other income come as a result of a wide array of business activities such as wealth, Forex, and transactional banking fees. The income that results from fees and other income includes business income of €266 million. The amount of business income the bank obtained from the first half of 2020 was 14% below then the same time period back in 2019 as a result of COVID-19. The income amount from wealth and insurance decreased by 16% as opposed to the same time period in 2019 as a result of lower new business sales and reduced income from existing businesses.
This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.