Release Date: February 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of Ireland Group PLC (BKRIF, Financial) reported strong financial performance in 2024, with robust loan and deposit growth, and a significant increase in assets under management (AUM) by 19%.
- The company achieved a return on tangible equity (RoTE) of 16.8% for 2024, with expectations to exceed 17% by 2027.
- The bank's business model is outperforming its peer group, with higher capital generation and total shareholder returns, supported by a EUR1.2 billion total distribution, marking the group's largest ever.
- The Irish economy is growing and outperforming the euro area, providing a favorable environment for Bank of Ireland Group PLC (BKRIF) to grow its mortgage and corporate lending businesses.
- The Wealth and Insurance division showed strong performance, with AUM growth of 55% for Davy and increased protection policy sales by New Ireland Insurance, contributing to a diversified income stream.
Negative Points
- The company faces heightened uncertainty due to evolving international trade policies, which could impact its operations and growth prospects.
- Non-core charges in 2024 were higher than expected, primarily due to a EUR172 million provision related to UK motor finance and a EUR108 million charge for software intangibles impairment.
- Net interest income (NII) was 2% lower on a like-for-like basis in 2024, reflecting higher funding costs and liquid asset income.
- The bank's cost base is expected to grow by circa 3% in 2025, with ongoing investments required to drive future efficiencies.
- The provision for UK motor finance remains a concern, with potential for further adjustments depending on regulatory outcomes and remediation schemes.
Q & A Highlights
Q: Could you talk about the outlook for net interest income and the path to the greater than 17% ROTE target by 2027?
A: Myles O'Grady, CEO, explained that the focus is on maintaining cost control to ensure sustainability of returns. Mark Spain, CFO, added that NII is expected to be greater than EUR 3.25 billion in 2025, with growth anticipated in 2026 and 2027, driven by balance sheet growth and structural hedge benefits.
Q: What are the areas of expected balance sheet growth in the coming years?
A: Myles O'Grady, CEO, highlighted strong growth in the Irish loan book, particularly in mortgages and business banking. He expects continued growth in these areas, supported by increased housing completions and renewed business confidence.
Q: Can you discuss the potential impact of US tariffs on the Irish growth story?
A: Myles O'Grady, CEO, acknowledged the risk of trade dislocation but emphasized the strength of Ireland's export sector, particularly in pharmaceuticals and technology. He noted that Ireland's fiscal position provides a buffer against potential challenges.
Q: How do you plan to keep costs flat despite inflation and wage growth?
A: Myles O'Grady, CEO, stated that the bank aims to be more efficient and leaner, with initiatives to reduce FTE levels and consolidate third-party providers. Investments in technology and process improvements are expected to drive efficiencies.
Q: What is the outlook for the Wealth and Insurance business, and are there associated costs with AUM growth?
A: Myles O'Grady, CEO, expressed confidence in the growth of AUM, expecting it to outpace economic growth. The cost base required to support this strategy is included in the bank's overall cost management plans.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
