Interim Results

14th Nov 2007 07:01

Bank of Ireland(Governor&Co)14 November 2007 Bank of Ireland Group Interim Statement for the half-year to 30 September 2007 Wednesday 14 November 2007 Performance Highlights Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % Restated*Group Profitability (• Million)Profit before tax (PBT) 1,091 879 24 Non-core items:Deduct: • Gain on disposal of business assets (33) (40) • Gross-up for policyholder tax in the Life business (9) (15) • Investment return on treasury shares held for policyholders (105) 8 Add: • Hedge ineffectiveness on 3 1 transition to IFRS • Cost of restructuring programme 4 19 ----------------------------- Underlying profit before tax 951 852 12 Per Unit of €0.64 Ordinary Stock (• cent)Basic earnings per share 95.8 75.9 26Underlying earnings per share 80.1 73.0 10Dividend 24.2 21.0 15 Divisional PBT Performance (• Million)**Retail Republic of Ireland 381 339 12Bank of Ireland Life 72 67 7Capital Markets*** 309 286 8UK Financial Services 257 222 16Group Centre (68) (62) (10) ------------------------------Underlying profit before tax 951 852 12 Group Performance (underlying)**Net interest margin (%) 1.77 1.73Cost / income ratio (%) 51 53Cost / income jaws (%) 5 9Annualised impaired loan loss charge 12bps 9bpsReturn on equity (%) 22 25 Balance SheetTotal stockholders' equity (• 7,189 5,701 26Million)Total assets (• Billion) 200 178 12Total lending (• Billion) 137 120 14Total customer accounts (• Billion) 76 71 8 CapitalTier 1 ratio (%) 7.6 7.7Total capital ratio (%) 11.1 10.9Risk-weighted assets (• Billion) 122.2 109.3 12 * Restated for change in accounting policy - see page 24** Based on underlying performance, which excludes the impact of non-core items above*** Capital Markets PBT +19% excluding impact of disposal of our 90.444% stake in J&E Davy Holdings Limited ("Davy") on 31 October 2006 "We have delivered a strong performance in the first-half of our financial year.Looking forward we are strongly positioned in our core markets and confident ofour ability to maximise growth opportunities, albeit in an environment ofmoderating growth." Brian Goggin, Bank of Ireland Group Chief Executive, commented Group Performance Highlights (Underlying)* • Strong business trends resulting in Group profit before tax growth of 12% (15% excluding disposal**) • Investment strategies continue to deliver excellent growth • Group income growth of 9% driven by strong lending and resources growth • Excellent underlying cost / income jaws + 5% • Further improvement in efficiency ratio (cost / income ratio down 2 percentage points to 51% due to firm cost management) • Asset quality remains excellent - annualised impairment charge 12bps • Robust funding position underpinned by diversified programmes - well-spread by product, geography, maturity and investor type • Strong Capital ratios - Total Capital and Tier 1 ratios at 11.1% and 7.6% respectively Divisional Highlights (Underlying)* • In Retail Republic of Ireland: PBT + 12% o Leading franchise continuing to deliver strong volume growth o Firm cost management driving significant efficiency gains • In Bank of Ireland Life: Operating profit + 17% o Excellent sales volume growth and effective cost-control driving performance o PBT + 7% reflecting the negative impact of weaker stock markets and change in discount rate • In Capital Markets: PBT + 8% (+19% excluding Davy**) o Corporate Banking and Global Markets driving strong profit performance o Strong lending volumes in Corporate Banking - well-spread across segments and geographies - continuing excellent asset quality o Customer Business contributing to excellent profit growth in Global Markets - a strong performance in volatile markets • In UK Financial Services: PBT + 16% o Investment strategies delivering strong profit performance o Business Banking delivering very strong lending and resource growth - strong asset quality o Maintaining excellent asset quality in our Mortgage Business while continuing to optimise returns in a challenging market o Our joint ventures with the UK Post Office are performing strongly - excellent customer acquisition, sales growth and profit trends. * Underlying performance which excludes the impact of non-core items outlined on page 2 of this document ** On 31 October 2006 we disposed of our 90.444% stake in Davy Forward-Looking Statement This document contains certain forward-looking statements within the meaning ofSection 21E of the US Securities Exchange Act of 1934 and Section 27A of the USSecurities Act of 1933 with respect to certain of the Bank of Ireland Group's("the Group") plans and its current goals and expectations relating to itsfuture financial condition and performance and the markets in which it operates.These forward-looking statements can be identified by the fact that they do notrelate only to historical or current facts. Forward-looking statements sometimesuse words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend','plan', 'goal', 'believe', or other words of similar meaning. Examples offorward-looking statements include among others, statements regarding theGroup's future financial position, income growth, business strategy, projectedcosts, estimates of capital expenditures, and plans and objectives for futureoperations. Because such statements are inherently subject to risks anduncertainties, actual results may differ materially from those expressed orimplied by such forward-looking statements. Such risks and uncertaintiesinclude, but are not limited to, risks and uncertainties relating toprofitability targets, prevailing interest rates, the performance of the Irishand the UK economies and the international capital markets, the expected levelof credit defaults, the Group's ability to expand certain of its activities,development and implementation of the Group's strategy, including the ability toachieve estimated cost reductions, competition, the Group's ability to addressinformation technology issues and the availability of funding sources. Anyforward-looking statements speak only as of the date they were made. The Groupdoes not undertake to release publicly any revision to these forward-lookingstatements to reflect events, circumstances or unanticipated events occurringafter the date hereof. The reader should however, consult any additionaldisclosures that the Group has made or may make in documents it has filed orsubmitted or may file or submit to the US Securities and Exchange Commission. For further information please contact: John O'Donovan Liam McLoughlin Geraldine Deighan Dan LoughreyGroup Chief Director of Head of Group Head of Group CorporateFinancial Officer Group Finance Investor Relations CommunicationsTel: +353 1 632 2054 Tel: +353 1 604 4027 Tel: +353 1 604 3501 Tel: +353 1 604 3833 Bank of Ireland will host a results presentation at 9.00am today, 14 November2007 at the following venues: Bank of Ireland Head Office, Lower Baggot Street, Dublin 2 UBS Investment Bank, 1 Finsbury Avenue, London EC2M 2PP This presentation will be simultaneously webcast on our website:www.bankofireland.com/investor This document constitutes the Interim Management Report required by Regulation 6of the Transparency (Directive 2004/109/EC) Regulations 2007. It can also befound at our website: www.bankofireland.com/investor INTERIM MANAGEMENT REPORT Overview Bank of Ireland Group has delivered a strong performance for the half-year to 30September 2007. Group profit before tax (PBT) is up 24% to €1,091 million andbasic earnings per share (EPS) up 26% to 95.8c. Excluding non-core items(outlined on page 17 of this document), Group underlying PBT is up 12%(1) to€951 million and underlying EPS is up 10% to 80.1c. This performance is broadlybased across the Group with our investment strategies continuing to deliverstrong volume growth across all Divisions. Our efficiency drive continues todeliver excellent results with our cost / income ratio down a further 2percentage points to 51% and a positive cost / income jaws of 5%. Loan lossesremain low and asset quality continues to be excellent. This strong Group performance was delivered in an increasingly challengingenvironment. Since August global financial markets have been experiencing one of the mostsignificant dislocations in recent decades. Financial institutions are facinghigher funding costs, more limited access to funding and concerns regardingexposures to US sub-prime mortgages. Bank of Ireland has managed its funding effectively through this period ofvolatility, its asset quality remains excellent, and the negative impact on ourprofit of the higher funding environment is modest in this half-year reportingperiod. Funding costs, while improved somewhat from their extreme positions inearly August, remain at significantly higher levels and will likely negativelyimpact our rate of profit growth in the second half of our financial year. In Ireland the recent very high rate of economic growth is moderating, primarilyreflecting the anticipated housing market correction which in turn is having anegative impact on consumer and business sentiment. This slowing level ofeconomic growth, which still remains well above the eurozone average, isexpected to prevail into next year and will likely result in a lower growth indemand in the second half of our financial year to March 2008. Outlook Looking to the second half of our financial year underlying momentum in ourbusiness remains positive but is moderating in line with reduced economic growthin our main markets. Against this less favourable global economic backdrop, and the continuingvolatility in financial markets, we are guiding high single digit underlying EPSgrowth for the year to 31 March 2008 (from a base of 144.6c for the year to 31March 2007). Review of Group Performance Group Income Statement------------------------ Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m Restated* •m Net interest income 1,532 1,287 19Other income 515 594 (13) ----------- ----------- ---------Total operating income (net of insuranceclaims) 2,047 1,881 9Operating expenses (1,050) (1,010) 4Impairment losses on loans and advances (79) (48) 65Share of associates and joint ventures(post-tax) 33 29 14 ----------- ----------- ---------Underlying profit before tax 951 852 12Non-core items:Add: • Gain on disposal of business 33 40 assets • Gross-up for policyholder tax in the Life business 9 15 • Investment return on treasury shares held for policyholders 105 (8) Deduct: • Hedge ineffectiveness on (3) (1) transition to IFRS • Cost of restructuring programme (4) (19) ----------- ----------- ---------Profit before tax 1,091 879 24 Taxation (164) (154) 6Minority interest (1) 2Dividends to other equity interests (7) (7) ----------- ----------- ---------Profit attributable to ordinary 919 720 28stockholders ----------- ----------- ---------Basic EPS cents per share 95.8 75.9 26Underlying EPS cents per share** 80.1 73.0 10 ----------- ----------- --------- * Restated for change in accounting policy - see page 24 ** Excludes the impact of non-core items after tax €129m (September 2006: €8m) The following commentary is based on the Group's performance excluding theimpact of non-core items. A reconciliation of the impact of these non-core itemson the income statement line items is shown on pages 17 and 18 of this document. Income Total income increased by 9% to €2,047 million driven by strong volume increasesin both lending and resources across the Group, together with the excellentperformance from our fee-earning activities. Total income after adjusting forthe impact of the Davy disposal increased by 13% half-year on half-year. Total Income-------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •mTotal operating income 2,047 1,881 9Trading impact of disposal - (77) ----------- ----------- --------Total income excluding trading impact ofdisposal 2,047 1,804 13 ----------- ----------- -------- Net Interest Income and Other Income growth is distorted by the trading impactof the Davy disposal together with the classification of certain interestexpense under IAS 39. Excluding both of these factors, Net Interest Income grewby 14% to €1,421 million and Other Income by 13% to €626 million. Net Interest Income--------------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •mNet interest income 1,532 1,287 19Trading impact of disposal - (1)IAS 39 impact (111) (36) ----------- ----------- --------Net interest income excluding tradingimpact of disposal & IAS 39 1,421 1,250 14 ----------- ----------- -------- The strong performance in net interest income was driven by the continued stronggrowth in loans and resources across the Group. Loans to customers increased by14% and resources grew by 8%. A number of drivers contributed to this volumegrowth: the strength of our franchise in Ireland; supported by the scale of ourmulti-channel distribution network; the further delivery from our investment inour UK Business Banking and international Corporate Banking teams. Net Interest Margin--------------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 Average interest earning assets (• Billion) 173 149 16% Net Interest Margin (%) 1.77 1.73 4bps IAS impact on Net Interest Margin (%)---------------------------------------Net interest margin excluding impact ofIAS of disposal & IAS 39 1.64 1.68 (4bps)IAS 39 impact 0.13 0.05 8bps ---------- ----------- --------Net Interest Margin 1.77 1.73 4bps ---------- ----------- -------- Net interest margin increased by 4bps to 1.77% for the half-year to 30 September2007 from 1.73% for the half-year to 30 September 2006. Net interest margin isincreased by the classification of certain interest expense under IAS 39 whichrelates to the designation of certain financial instruments under the fair valueoption, excluding this impact in the current and prior period, margin attritionwas 4bps. The primary drivers of margin attrition are balance sheet structure with loangrowth outpacing resource growth, competition in pricing for lending products,partly offset by improved resource margins. Other Income-------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •m Other income 515 594 (13)Trading impact of disposal - (76)IAS 39 impact 111 36 ----------- ----------- --------Other income excluding trading impact ofdisposal & IAS 39 626 554 13 ----------- ----------- -------- Other income growth drivers include: strong sales growth in our Life business;higher arrangement fees in Corporate Banking; increased sales of insuranceproducts in Post Office Financial Services (POFS); increased fees from our broadproduct range in Retail Republic of Ireland. Operating Expenses Total Operating Expenses increased by 4% in the half-year to 30 September 2007or by 9% excluding the impact of the Davy disposal. Efficiency improvementsremain a core focus and we continue to make significant progress in this regard.Our cost / income ratio continues to improve with a further reduction of 2percentage points from 53% in the half-year to September 2006 to 51% in thehalf-year to September 2007. Total Operating Expenses-------------------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •m Operating expenses 1,050 1,010 4Trading impact of disposal - (51) -------- --------- --------Operating expenses excluding tradingimpact of disposal 1,050 959 9 -------- --------- -------- The main drivers of the increase in total operating expenses (excluding thetrading impact of disposal) were: • Investment costs of 2% relating to the continuing international development of our Global Markets and Corporate Banking activities together with the costs associated with the launch of new products in UKFS. • Business as usual cost growth of 9% where 4% is due to volume growth and performance related compensation and 5% is due to inflation. • Cost savings of (2%) arising from the continued successful implementation of the Strategic Transformation Programme in the current period. We have continued to make excellent progress in the implementation of theStrategic Transformation Programme and are confident of delivering annualisedsavings of €140 million by March 2008 and thus complete the Programme at thatdate, one year ahead of schedule and delivering savings in excess of ouroriginal target of €120 million. Impairment of Loans and Advances Asset quality remains excellent. The impairment charge for the half-year to 30 September 2007 amounts to €79million or 12bps, when expressed as an annualised percentage of average loans,3bps higher than the half-year to September 2006. We continue to maintain asatisfactory level of provisions against impaired loans, with a coverage ratioof 44%. We are comfortable with this coverage ratio, particularly as residentialmortgages represent 46% of our total lending. Total balance sheet provisionswere €482 million at September 2007, compared with €398 million in September2006. Impairment provisions as a percentage of actual loans are 36bps, the ratiobeing 3bps for the Group mortgage book and 64bps for non-mortgage lending. Asset Quality--------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 Loans and advances to customers (net ofprovisions) (• Billion) 133 114 17%Total average customer advances (• Billion) 132 109 21%Impaired loans (• Million) 1,101 844 30%Impaired loans as a percentage of loans andadvances (bps) 82 74 8Impairment provision (• Million) 482 398 21%Coverage ratio (%) 44 47Impairment losses on loans and advances (•Million) 79 48 65%Impairment losses on loans and advances(annualised bps) 12 9 3 Share of Associates and Joint Ventures Profit after tax from associated undertakings and joint ventures, which mainlyrelates to First Rate Exchange Services, increased from €29 million in thehalf-year to 30 September 2006 to €33 million in the half-year to 30 September2007, supported by robust margin performance and increased overseas travel. Balance Sheet - Capital and Funding Total assets increased by 12% from €178 billion to €200 billion in the year to30 September 2007. The rate of growth of customer lending and total resourcesmoderated compared to the prior period, with increases of 14% and 8%respectively. Pre-securitisation risk weighted assets grew by 16% (18% on a constant currencybasis). Post-securitisation risk weighted assets grew by 12% from €109 billionto €122 billion. % Growth September 2007 over September 2006 --------------------------------------------- Risk Weighted Customer Resources Assets Lending Retail Republic of Ireland 21 18 4Capital Markets 15 23 4UK Financial Services (Sterling) 15 16 31 ---------- -------------- --------------Group 16 14 8 ---------- -------------- -------------- Capital The Group has strong capital resources and our proactive approach to capitalmanagement ensures that we have adequate capital to support our business plans. 30 Sept 2007 30 Sept 2006 Risk Weighted Assets (• Billion) 122.2 109.3Total Capital Ratio (%) 11.1 10.9Tier 1 Ratio (%) 7.6 7.7Equity Tier 1 Ratio (%) 4.9 4.5 During the reporting period the Group implemented a number of capital managementinitiatives. We raised US$600 million (€422 million) of Lower Tier 2 Capital. Inaddition, the Group completed the sale and leaseback of a second tranche of 30retail branches in Ireland. In October 2007, we completed a €400 million embedded value securities issue,which references the future cash flows from our life assurance business. Hadthis transaction been completed at the end of September 2007, this would haveincreased the September 2007 Tier 1 and Equity Tier 1 ratios from 7.6% and 4.9%to 8.0% and 5.3% respectively. Funding Wholesale funding at 46% of the total balance sheet (excluding Bank of IrelandLife assets held on behalf of policyholders) compares to 46% at 31 March 2007and 44% at 30 September 2006. Balance Sheet Funding 30 Sept 2007 30 Sept 2006 % % --------------- ---------------Deposits by banks 10 18CP / CDs 14 12Securitisations 6 -Senior Debt / ACS 16 14 --------------- ---------------Wholesale Funding 46 44Customer Deposits 41 43Capital / Subordinated Debt 8 8Other 5 5 --------------- ---------------Total 100 100 --------------- --------------- Wholesale funding is managed to ensure optimum diversification across maturity,investor type and geography and to minimise the concentration of funding withineach particular market segment. Having significantly lengthened the maturityprofile of wholesale funding in recent years, including the two mortgagesecuritisations undertaken in March 2007, the Group was very well placed whenthe current market turmoil commenced. Over 80% of our loan book at September2007 was funded by customer deposits and term funding with a maturity profilegreater than one year. The Group's position was further underpinned by theintroduction of the new liquidity regime for Irish banks in July 2007, whichmoved from a stock to a maturity mismatch approach. During the half-year to 30September 2007 the Group issued its third US Extendible Note Transaction raisingUS$1.75 billion. The Group remains well placed to access wholesale funding sources. The Group'sfunding strategy remains to grow core customer deposits and to access wholesalefunding in a prudent, diversified and efficient manner. The Group is confidentthat our funding strategy continues to support both our immediate business needsand our planned growth over the medium term. Effective Tax Rate The taxation charge for the Group was €164 million in the half-year to 30September 2007 compared to €154 million in the half-year to 30 September 2006. Excluding the effect of non-core items, the effective tax rate for the half-yearto 30 September 2007 was 16.0% compared to 15.8% (restated) for the half-yearending 30 September 2006. Dividend In accordance with Group policy, the Interim Dividend is set at 40% of the prioryear total distribution per unit of Ordinary Stock. The Court has thereforedeclared an Interim Dividend of 24.2 cent per unit of Ordinary Stock, (circa€233 million); which results in an increase of 15% over the corresponding periodlast year. This dividend will be paid on or after 15 January 2008 toStockholders who are registered as holding Ordinary Stock at the close ofbusiness on 23 November 2007. Return on Equity Return on equity, excluding the impact of non-core items (set out on pages 17and 18) was 22% for the half-year to 30 September 2007, compared to 25% for thehalf-year to 30 September 2006 and 23% for the year to March 2007. Divisional Performance Divisional Profit Before Tax------------------------------ Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •m Retail Republic of Ireland 381 339 12Bank of Ireland Life 72 67 7Capital Markets 309 286 8UK Financial Services 257 222 16Group Centre (68) (62) (10) ---------- ---------- ----------Underlying profit before tax 951 852 12Non-core items* 140 27 ---------- ---------- ----------Profit before tax 1,091 879 24 ---------- ---------- ---------- * Restated for change in accounting policy - see page 24 Retail Republic of Ireland Retail Republic of Ireland delivered a strong performance for the half-year to30 September 2007 with profit before tax growth of 12% to €381 million. Totaloperating income grew by 14% and operating expenses rose by 10%, a 4% positivecost / income jaws. While markets were generally less buoyant, the continuedstrength of our leading franchise in Ireland underpinned the strong performance- broad distribution platform, comprehensive suite of retail and businessproducts and services, commitment to service excellence and operatingefficiency. Retail Republic of Ireland: Income Statement---------------------------------------------- Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •m Net interest income 708 632 12Other income* 226 189 20 ----------- ----------- --------Total operating income 934 821 14Total operating expenses (496) (449) 10 ----------- ----------- --------Operating profit before impairment losses 438 372 18Impairment losses on loans and advances (57) (33) 73 ----------- ----------- --------Profit before tax 381 339 12 ----------- ----------- -------- * Includes share of associates / joint ventures (September 2007 •nil; September 2006 €0.9m) The impact of rising interest rates in the past eighteen months and poorerconsumer and business sentiment has had a moderating impact on lending anddeposit growth with lending and resources volumes at the end of September 2007up by 18% and 4% respectively. Growth in our mortgage book slowed to 16% whilethe Business Banking loan book grew by 22%. A lower net interest margin resultedfrom loans growing faster than deposits, more rapid growth in lower marginlending business and residential mortgage competition, partly offset by improvedresource margins. Other income increased by 20% driven mainly by an excellent performance in ourPrivate Banking business and strong growth in Credit Card activity together withthe benefit from the disposal of Mastercard shares which accounted for 5percentage points of this increase. Costs grew by 10%. This was driven broadly in equal measure by salary / generalinflation and by business growth, with further efficiency gains reducing thecost / income ratio from 55% to 53%. While impairment losses on loans and advances increased from €33 million to €57million (16bps to 23bps annualised of the average loan book) the charge remainslow by historical standards and asset quality continues to be strong. Bank of Ireland Life Bank of Ireland Life, the Group's life assurance business, continues to performstrongly with impressive sales growth and effective cost control the maindrivers of performance. The Life business achieved excellent growth in new sales volumes in thehalf-year to 30 September 2007 with a 27% increase to €254 million on an annualpremium equivalent basis. New sales of regular premium and single premiuminvestment products have been particularly strong in the period, driven in partby the maturity of the government SSIA contracts. The business has benefitedfrom economies of scale following investment in its life administrationplatforms and is now investing to enhance processing capability for individualpensions. Improved efficiencies led to the cost / income ratio falling from 41%in the prior comparable period last year to 39% in the half-year to 30 September2007. Bank of Ireland Life has a leading position in the Irish market resulting fromthe combination of our multi-channel distribution platform and industry leadingbancassurance sales model. This combination leaves the Life business wellpositioned to compete in a market place that remains very attractive over themedium term. IFRS Performance Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •mOperating income 137 121 13Operating costs (54) (50) 8 ----------- ----------- ----------Operating profit 83 71 17Investment variance (5) (4)Discount rate change (6) - ----------- ----------- ----------Profit before tax 72 67 7 ----------- ----------- ---------- Operating profit grew by 17% to €83 million. Profit before tax at €72 millionwas 7% higher than the half-year to September 2006. Investment markets werevolatile in the period and the business recorded a negative investment varianceof €5 million. Continuing investment market volatility will impact both investorsentiment and revenues in the second half of our financial year. Consistent withincreases in the long-term bond yields, the discount rate applied to futurecashflows was increased by 0.5% to 8.0% in the period. This was significantlyoffset by an increase of 0.75% to 6.25% in the future growth rate assumption onunit linked assets resulting in a net cost of €6 million. Embedded Value Performance The alternative method of presenting the performance of our Life business is onan Embedded Value basis. This method is widely used in the life assuranceindustry and also shows a very strong performance with operating profits up 23%to €100 million. New business profit has grown strongly in line with strongsales growth and existing business profits have also performed well as a resultof a rapidly growing portfolio, continuing favourable experience variances andsome changes to the actuarial assumptions in line with experience. Profit before tax grew by 23%, which included a higher negative investmentvariance in the half-year to 30 September 2007 compared to the half-year to 30September 2006. Under the Embedded Value methodology, the negative impact ofincreasing the discount rate by 0.5% to 8.0% is offset by an increase of 0.75%to 6.25% in the future growth rate assumption on unit linked assets. Embedded Value Performance Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % •m •m New business profits 56 45 24Existing business profits - Expected return 47 39 - Experience variance 8 8 - Assumption changes 6 4Inter-company payments (17) (15) ------------ ------------ ------------Operating profit 100 81 23Investment variance (18) (15)Discount rate change (1) - ------------ ------------ ------------Profit before tax 81 66 23 ------------ ------------ ------------ The key assumptions used in the Embedded Value methodology are a discount rateof 8.0% (September 2006: 7.5%), future growth rate on unit linked assets of6.25% (September 2006: 5.5%) and the rate of tax assumed to be levied onshareholder profits of 12.5% (September 2006: 12.5%). Actuarial assumptions arealso required in relation to mortality, morbidity and persistency rates andthese have been derived from the company's experience. Capital Markets Capital Markets Division comprises Corporate Banking, Global Markets, AssetManagement Services and IBI Corporate Finance. Profit before tax increased by 8%to €309 million for the half-year to 30 September 2007. The Divisionalperformance for the half-year to 30 September 2007 is not directly comparablewith the half-year to 30 September 2006 as the disposal of Davy in October 2006impacts the half-year on half-year analysis of profit, income and cost growth.Excluding the impact of this disposal, profit before tax increased by 19%. Capital Markets: Income Statement Change % Half-Year Half-Year Change excluding 30 Sept 2007 30 Sept 2006 % impact of IAS •m •m 39 & disposal Net interest income 419 285 47 26Other income 100 229 (56) 8 ---------- ---------- ---------- ------------Total operating income 519 514 1 18Total operating expenses (199) (224) (11) 14 ---------- ---------- ---------- ------------Operating profit beforeimpairment losses 320 290 10 21Impairment losses onloans and advances (11) (4) 175 175 ---------- ---------- ---------- ------------Profit before tax 309 286 8 19 ---------- ---------- ---------- ------------ Total operating income was 1% higher in the half-year to 30 September 2007against the prior year comparable period. Excluding the trading impact of theDavy disposal, total operating income increased by 18% driven by an excellentperformance in Global Markets and strong lending volume growth in CorporateBanking. The growth in net interest income and other income is distorted by the tradingimpact of the disposal as outlined above, together with the classification ofcertain interest expense under IAS 39 which relates to the designation ofcertain financial instruments under the fair value option. Excluding both ofthese factors, net interest income increased by 26% and other income increasedby 8%. The 26% growth in net interest income was driven by strong volume growth andimproved margins reflecting the mix of the loan book. Other income growth of 8%has been impacted by lower assets under management in Asset Management Services. Total operating expenses decreased by 11% to €199 million. Excluding the tradingimpact of the Davy disposal, total operating expenses increased by 14%. Therewere three main drivers of operating expenses within the Division: investmentcosts (5%), volume related growth (4%) and inflation (5%). Operating income has continued to exceed cost growth notwithstanding significantinvestment being made in the ongoing expansion of our product and distributioncapabilities in our Corporate Banking and Global Markets businesses. Credit quality remains strong with impairment losses on loans and advances of€11 million or 8bps annualised compared to 4bps in the half-year to September2006. Capital Markets: Business Unit Profit before tax------------------------------------------------ Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % Corporate Banking 187 158 18Global Markets 93 71 31Asset Management Services 33 33 -Division Centre (4) 24 (117) --------- ---------- --------Profit before tax 309 286 8 --------- ---------- -------- Corporate Banking has maintained its strong momentum with profit growth of 18%for the half-year to 30 September 2007. The loan book increased by 23% across abroad range of portfolios to September 2007 compared to September 2006. Wecontinue to closely manage our asset quality and continue to see goodopportunities for growth in both Europe and the US. We are beginning to see atrend towards improved pricing and risk structures across our business segmentswhich augers well for the growth outlook for our portfolios. Global Markets delivers a comprehensive range of risk management products to theGroup's customer base and acts as Treasurer for the Group. Profit for thehalf-year to 30 September 2007 increased by 31%. The performance of our markets/ trading teams has been very strong in volatile market conditions and ourcustomer businesses globally have delivered an excellent performance. Asset Management Services profit before tax for the half-year to 30 September2007 was €33 million, which is in line with the comparable period last year.Assets under Management in BIAM are €39 billion at September 2007, compared to€43 billion at September 2006. Division centre includes central management costs for the Division, togetherwith IBI Corporate Finance (and Davy in the half-year to 30 September 2006). IBICorporate Finance continues to perform well. UK Financial Services (Sterling) The UK Financial Services Division (UKFS), which incorporates Business Banking,our Mortgage business and our joint ventures with the UK Post Office, delivereda strong performance during the half-year to 30 September 2007 building on theexcellent momentum shown in the comparable period last year. Profit before taxincreased by 15% to £175 million (16% on a euro equivalent basis). UKFS: Income Statement (Sterling)--------------------------------- Half-Year Half-Year Change Change 30 Sept 2007 30 Sept 2006 % % excluding impact of IAS £m £m 39 Net interest income 287 255 13 12Other income* 77 70 10 14 --------- --------- --------- ----------Total operating income 364 325 12 12Total operating expenses (181) (165) 10 10 --------- --------- --------- ----------Operating profit beforeimpairment losses 183 160 14 14Impairment losses onloans and advances (8) (8) - - --------- --------- --------- ----------Profit before tax 175 152 15 15 --------- --------- --------- ---------- * Includes share of associates / joint ventures (September 2007 £23m; September 2006 £19m) Total operating income rose by 12% to £364 million for the half-year to 30September 2007. The growth in net interest income and other income is distortedby the classification of certain interest expense under IAS 39. Excluding this,net interest income grew by 12% and other income by 14%. Net interest incomegrowth was due to excellent volume growth for both lending (+16%), and resources(+31%). Other income grew on the back of a strong performance in our jointventures with the Post Office, notably increasing fee income from the sales ofinsurance products in Post Office Financial Services (POFS) and higher profitsin First Rate Exchange Services (FRES). Operating expenses increased by 10% to £181 million for the half-year to 30September 2007, due to higher regulatory, restructuring and compliance costs andvolume related expenses across the Division. Further efficiency gains reducedthe cost / income ratio from 51% to 50%. Asset quality remains excellent with impairment losses on loans and advances of4bps annualised compared to 5bps in the half-year to 30 September 2006. UKFS: Business Unit Profit before tax (Sterling) Half-Year Half-Year Change 30 Sept 2007 30 Sept 2006 % £m £m Business Banking 93 70 33Mortgages 72 74 (3)Consumer Financial Services: 24 13 85 ----------- ----------- • POFS - (8) • FRES (post tax) 23 19 • Other 1 2 ----------- -----------Division Centre (14) (5) (180) ----------- ----------- -----------Total 175 152 15 ----------- ----------- ----------- The performance of Business Banking is a particular highlight, with profitbefore tax increasing by 33% to £93 million. Our continued investment inbuilding a high-performing team of business bankers is delivering very strongresults. Volume growth is strong with loan book growth of 28% and resourcegrowth of 21% compared to 30 September 2006. Margins remain stable and assetquality is strong. The Mortgage business delivered a profit of £72 million, similar to theperformance in the second half of our 2006 / 2007 financial year and marginallylower than the comparable prior period. There are a number of factorsinfluencing this outcome: the impact of the rising yield curve and base rateincreases, the cost of securitisation and funding, and the impact of competitionon both new business and margins. In this environment, we have sought tooptimise returns and this has kept margin attrition to 7bps but has impactedvolumes. The residential mortgage book increased by 9% to £25 billion with goodgrowth in the buy-to-let specialist portfolio being offset by a slowdown inself-certified and standard business. Credit performance remains excellent withour arrears levels significantly below the industry average and the loan losscharge for mortgages showed no change from September 2006. Our Consumer Financial Services businesses which are run on a joint venturebasis with the UK Post Office delivered a strong performance with profits almostdoubling. POFS has made good progress with customer numbers increasing to 1.2million at 30 September 2007 with the business continuing to add approximately50,000 new customers every month. We are still growing market share in insuranceproducts and continued to experience strong volume growth in Instant Saveraccounts. Total resources in POFS were £2.5 billion at 30 September 2007. Policyrenewals on insurance products and retentions after the initial incentive periodon savings accounts are both at industry leading levels. FRES, our second jointventure with the UK Post Office for the provision of personal foreign exchangeservices, delivered profit growth of 21%, as a result of robust marginperformance and increased overseas travel. Division centre reported a net loss of £14 million compared to £5 million in theprior comparable period. This increase reflects a number of items including thecosts associated with the corporate restructuring of Bristol & West to obtainthe optimum capital and funding treatment for the Group under Basel II. Group Centre Group Centre, which comprises earnings on surplus capital, unallocated supportcosts and some smaller business units, had a net loss of €68 million in thehalf-year to 30 September 2007, compared to €62 million in the half-year to 30September 2006. The key driver behind the higher net loss is increased fundingcosts of additional capital raised between September 2006 and September 2007. Income Statement 30 September 2007 - Business Segments Half-year ended 30 September 2007 Net Insurance Other Total Insurance Total Operating Impairment Share of Profit interest net income income claims income expenses losses on income before income premium net of loans & from tax income insurance advances associates claims and joint ventures (post-tax) •m •m •m •m •m •m •m •m •m •m Retail Republic ofIreland 708 - 226 934 - 934 (496) (57) - 381Bank of Ireland Life (3) 1053 (10) 1040 (914) 126 (54) - - 72Capital Markets 419 - 100 519 - 519 (199) (11) - 309UK Financial Services 420 - 80 500 - 500 (265) (11) 33 257Group Centre (12) 26 (38) (24) (8) (32) (36) - - (68) ------- --------- ------- ------ ------- ------- -------- -------- ------- -------Group - underlying 1,532 1,079 358 2,969 (922) 2,047 (1,050) (79) 33 951 Gain on disposal ofbusiness assets - - 33 33 - 33 - - - 33Gross-up ofpolicyholdertax in theLife business - - 9 9 - 9 - - - 9Investment return on treasuryshares heldfor policyholders - - 105 105 - 105 - - - 105Hedge ineffectiveness on transition toIFRS - - (3) (3) - (3) - - - (3)Cost of restructuringprogramme - - - - - - (4) - - (4) ------- --------- ------- ------ ------- ------- -------- -------- ------- -------Group total 1,532 1,079 502 3,113 (922) 2,191 (1,054) (79) 33 1,091 ======= ========= ======= ====== ======= ======= ======== ======== ======= ======= The reconciliation shows the Group and Divisional underlying income statementswith a reconciliation of the impact of the non-core items in arriving at theGroup total income statement. Income Statement 30 September 2006 (Restated*) -Business Segments Half-year ended 30 September 2006 Net Insurance Other Total Insurance Total Operating Impairment Share of Profit interest net income income claims income expenses losses on income before income premium net of loans & from tax income insurance advances associates claims and joint ventures (post-tax) •m •m •m •m •m •m •m •m •m •mRetail Republic ofIreland 632 - 188 820 - 820 (449) (33) 1 339Bank ofIreland Life 4 920 51 975 (858) 117 (50) - - 67Capital Markets 285 - 229 514 - 514 (224) (4) - 286UK FinancialServices 372 - 74 446 - 446 (241) (11) 28 222Group Centre (6) 16 (22) (12) (4) (16) (46) - - (62) ------- --------- ------- ------ ------- ------- -------- -------- ------- -------Group -underlying 1,287 936 520 2,743 (862) 1,881 (1,010) (48) 29 852 Gain ondisposal ofbusinessassets - - 40 40 - 40 - - - 40Gross-up ofpolicyholdertax in theLife business - - 15 15 - 15 - - - 15Investmentreturn ontreasuryshares heldfor policyholders - - (8) (8) - (8) - - - (8)Hedgeineffectivenesson transition toIFRS - - (1) (1) - (1) - - - (1)Cost ofrestructuringprogramme - - - - - - (19) - - (19) ------- --------- ------- ------ ------- ------- -------- -------- ------- -------Group total 1,287 936 566 2,789 (862) 1,927 (1,029) (48) 29 879 ======= ========= ======= ====== ======= ======= ======== ======== ======= ======= Restated for change in accounting policy - see page 24 The reconciliation shows the Group and Divisional underlying income statementswith a reconciliation of the impact of the non-core items in arriving at theGroup total income statement. Statement of Directors' Responsibilities The Directors are responsible for preparing the Interim Statement in accordancewith International Accounting Standard 34 (IAS 34) and the Transparency(Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the IrishFinancial Services Regulatory Authority. The Directors confirm that the condensed set of financial statements have beenprepared in accordance with IAS 34 and that they give a true and fair view ofthe assets, liabilities, financial position and profit of the Group and that asrequired by the Transparency (Directive 2004/109/EC) Regulations 2007, theInterim Statement includes a fair review of: • important events that have occurred during the first six months of the year; • the impact of those events on the condensed financial statements; • a description of the principal risks and uncertainties for the remaining six months of the financial year (see page 5); and • details of any related party transactions that have materially affected the Group's financial position or performance in the half-year to 30 September 2007. Richard Burrows George Magan Brian J Goggin John B CliffordGovernor Deputy Governor Group Chief Executive Secretary CONSOLIDATED INCOME STATEMENT (unaudited) Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 Restated* Notes •m •m •m ------ --------- --------- -------- INTEREST INCOME 5,022 3,698 8,137 INTEREST EXPENSE (3,490) (2,411) (5,380) --------- --------- -------- NET INTEREST INCOME 4 1,532 1,287 2,757 Insurance net premium income 1,079 936 2,188Fees and commissions income 439 490 898Fees and commissions expense (89) (91) (160)Net trading (expense) / income 5 (94) 2 (70)Life assurance investmentincome and gains 36 40 247Other operating income 6 171 117 199Profit on disposal ofbusiness activities - 8 243Profit on sale of property 39 - 87 --------- --------- -------- TOTAL OPERATING INCOME 3,113 2,789 6,389Increase in insurancecontract liabilities andclaims paid (922) (862) (2,213) --------- --------- -------- TOTAL OPERATING INCOME, NETOF INSURANCE CLAIMS 2,191 1,927 4,176 TOTAL OPERATING EXPENSES 7 (1,054) (1,029) (2,159) --------- --------- -------- OPERATING PROFIT BEFOREIMPAIRMENT LOSSES 1,137 898 2,017Impairment losses 12 (79) (48) (103) --------- --------- -------- OPERATING PROFIT 1,058 850 1,914Share of profit of associatedundertakings and joint ventures 33 29 44 --------- --------- -------- PROFIT BEFORE TAXATION 1,091 879 1,958Taxation 9 (164) (154) (306) --------- --------- -------- PROFIT FOR THE PERIOD 927 725 1,652 --------- --------- -------- Attributable to minority interests 1 (2) 1Attributable to stockholders 926 727 1,651 --------- --------- -------- PROFIT FOR THE PERIOD 927 725 1,652 --------- --------- -------- Earnings per unit of €0.64ordinary stock 10 95.8c 75.9c 172.2c --------- --------- -------- Diluted earnings per unit of€0.64 ordinary stock 10 95.4c 75.4c 171.0c --------- --------- -------- * Restated for change in accounting policy - see page 24 CONSOLIDATED BALANCE SHEET (unaudited) 30 Sept 2007 30 Sept 2006 31 March 2007 Restated* Notes •m •m •m -------- -------- -------- --------ASSETSCash and balances atcentral banks 416 322 362Items in the course ofcollection from other banks 792 839 811Central government andother eligible bills 11 9 11Trading securities 13 1,031 477 520Derivative financialinstruments 3,713 2,295 2,849Other financial assets atfair value through P/L 13 12,904 10,846 12,707Loans and advances to banks 8,556 8,769 7,210Available-for-salefinancial assets 13 33,453 32,515 33,449Loans and advances tocustomers 11 133,078 114,356 125,048Interests in associatedundertakings 29 25 26Interest in joint ventures 103 131 73Intangible assets - Goodwill 328 361 347Intangible assets - Other 581 597 596Retirement benefit asset 21 - -Investment property 1,393 1,042 1,142Property, plant & equipment 655 716 665Assets classified as heldfor sale 14 45 1,849 83Deferred tax asset 30 27 25Other assets 2,782 2,529 2,889 -------- -------- --------Total assets 199,921 177,705 188,813 -------- -------- -------- EQUITY AND LIABILITIESDeposits by banks 18,856 28,593 20,405Customer accounts 15 76,348 70,791 72,277Items in the course oftransmission to other banks 274 304 243Derivative financialinstruments 3,757 2,060 2,935Liabilities to customersunder investment contracts 6,602 6,380 6,736Debt securities in issue 66,018 43,940 59,523Insurance contractliabilities 7,684 6,122 7,190Other liabilities 4,346 3,816 3,983Deferred tax liabilities 266 226 278Provisions 59 114 87Retirement benefitobligations 372 851 590Subordinated liabilities 16 8,116 7,223 7,808Disposal Group classifiedas held for sale 14 - 1,551 - -------- -------- --------Total liabilities 192,698 171,971 182,055 -------- -------- --------EquityShare capital 18 663 663 663Share premium account 19 775 767 771Retained profit 19 5,456 3,531 4,672Other reserves 19 588 993 905Own shares held for thebenefit of life assurancepolicyholders (293) (253) (287) -------- -------- --------Stockholders equity 7,189 5,701 6,724Minority interests 34 33 34 -------- -------- --------Total equity 7,223 5,734 6,758 -------- -------- --------Total equity and liabilities 199,921 177,705 188,813 -------- -------- --------* Restated for change inaccounting policy - seepage 24 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) Half-Year Half-Year Year 31 30 Sept 2007 30 Sept 2006 March 2007 Restated* •m •m •m -------- -------- ------- Net gain on propertyrevaluation 1 - 18Net change in cash flowhedge reserve (57) 34 135Net change in available-for-sale reserve (142) 1 (49)Net actuarial gains / lossesin defined benefit pensionschemes 167 (30) 190Foreign exchangetranslations (135) 84 49 -------- -------- ------- (Expense) / incomerecognised in equity (166) 89 343Profit for the period 927 725 1,652 -------- -------- ------- Total recognised income for the period 761 814 1,995 -------- -------- ------- Attributable to:Equity holders of the parent 760 816 1,994Minority interests 1 (2) 1 -------- -------- ------- 761 814 1,995 -------- -------- ------- * Restated for change in accounting policy - see page 24 CONSOLIDATED CONDENSED CASH FLOW STATEMENT (UNAUDITED) Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 Restated* •m •m •m --------- --------- ---------Operating activities: Profit before taxation 1,091 879 1,958 Adjust for non cash items: (33) (29) (44)Share of profit of associatedundertakings and joint venturesProfit on disposal of businessactivities - (8) (243)Depreciation and amortisation 69 76 151Impairment losses 79 48 103Movement on share based payments reserve 6 6 12Profit on sale of property (39) - (87)Interest on subordinated liabilities 227 173 381Other non cash items 147 (51) (162) --------- --------- ---------Net cash flow from trading activities 1,547 1,094 2,069 Changes in operating assets andliabilities: 1,506 5,170 1,383 --------- --------- ---------Net cash flow from operatingactivities before tax and dividend 3,053 6,264 3,452Taxation paid (48) (34) (272) --------- --------- ---------Net cash flow from operating activities 3,005 6,230 3,180 --------- --------- --------- Investing activities: Dividend received from Joint Venture - - 68Acquisitions / disposals of businesses (3) (18) 157Net increase in financial investments (582) (4,294) (5,865)Purchase of property, plant, equipment, investment property and intangible assets (297) (391) (439)Proceeds from disposals of property, plant and equipment, investment property and intangible assets 128 55 287 --------- --------- ---------Net cash flow from investing activities (754) (4,648) (5,792) --------- --------- --------- Financing activities:Interest paid on subordinated liabilities (120) (73) (361)Proceeds from issue of subordinated liabilities 422 733 1,479Proceeds from issue of ordinary stock 100 44 133Equity dividends paid (377) (324) (524)Dividends paid to minority interests (1) (3) (3)Dividends paid on other equity interests (7) (7) (15) --------- --------- ---------Net cash flow from financing activities 17 370 709 --------- --------- ---------Net increase / (decrease) incash and cash equivalents 2,268 1,952 (1,903) Cash and cash equivalents at start of period 4,297 6,162 6,162Exchange movements (39) 41 38 --------- --------- ---------Cash and cash equivalents at endof period 6,256 8,155 4,297 --------- --------- --------- * Restated for change in accounting policy - see page 24 1 ACCOUNTING POLICIES AND PRESENTATION OF FINANCIAL INFORMATION The accounting policies applied by the Group in the preparation of the interimfinancial statements for the half-year ended 30 September 2007 are in accordancewith the recognition and measurements principles of International FinancialReporting Standards as adopted by the EU and are the same as those set out inthe Annual Report and Accounts for the year ended 31 March 2007. The followingstandards / amendments to standards have been adopted by the Group from 1 April2007: IFRIC 9 - Reassessment of Embedded Derivatives. This interpretation requires anentity to assess whether a contract contains an embedded derivative at the datean entity first becomes party to a contract and prohibits reassessment unlessthere is a change to the contract that significantly modifies the cash flows.The adoption of this interpretation has not had a material impact on the Group. IFRIC 10 - Interim Financial Reporting and Impairment. This interpretationclarifies that any impairment losses on goodwill and equity instrumentsrecognised in an interim period may not be reversed in subsequent interimperiods. This does not have a material impact on the Group. Amendment to IAS 1 - Capital Disclosures. This amendment requires disclosure,both quantitative and qualitative, of an entity's objectives, policies andprocesses for managing capital. The financial statements for the year ended 31March 2008 will include some additional disclosures as required by thisstandard. IFRS 7 - Financial Instruments: Disclosures. This standard updates and augmentsthe disclosure requirements of IAS 30, IAS 32 and IFRS 4 and requires additionalqualitative and quantitative disclosures relating to risk management policiesand processes. These additional disclosures will be included in the financialstatements for the year ended 31 March 2008. The full IFRS 7 disclosures and the Capital disclosures required by theamendment to IAS 1 will be given in the Group's Annual Report and Accounts. These interim financial statements comply with IAS 34 'Interim FinancialReporting'. The Group has adopted IAS 34 during this period as part of itsadoption of the EU Transparency Directive. These interim financial statements do not comprise statutory accounts within themeaning of Section 19 of the Companies (Amendment) Act 1986. The statutoryaccounts for the financial year ended 31 March 2007 were approved by the Courtof Directors on 30 May 2007 and contained an unqualified audit report and havebeen filed with the Companies Office on 14 August 2007. Following a change in the Group's method of assessing materiality, the incomestatement for the half-year to 30 September 2006 and the balance sheet as at 30September 2006 have been restated. Further detail on this change in method ofassessing materiality is set out on page 86 of the Group's Annual Report andAccounts for the year ended 31 March 2007. The impact of this restatement on thehalf-year to 30 September 2006 has been as follows: Life assurance investmentincome and gains has been reduced by €4 million from €44 million, as previouslyreported in September 2006, to €40 million. Other operating income has beenreduced by €4 million from €121 million, as previously reported, to €117million. This results in a total restatement of profit before tax for September2006 from €887 million to €879 million. Basic earnings per share for September2006 have been reduced from 76.7c to 75.9c. Assets at fair value through p / las at 30 September 2006 have been reduced by €138 million from €10,984 millionto €10,846 million, with a corresponding reduction in retained profits from€3,669 million to €3,531 million as at that date. 2 ACQUISITIONS AND DISPOSALS To 30 September 2007 There were no acquisitions or disposals in the half-year to 30 September 2007. To 30 September 2006 Paul Capital Investments: On 20 June 2006 the Bank entered into a joint venture partnership with PaulCapital Partners, a leading US private equity specialist, establishing PaulCapital Investments LLC providing private equity fund of funds products andadvisory services to institutional and other investors worldwide. Theconsideration at the time of acquisition was US$25 million. The acquisition iscurrently being accounted for as a joint venture using the equity method ofaccounting. Guggenheim Advisors: On 20 January 2006 the Bank acquired a 71.5% interest in Guggenheim Advisors.The final cash consideration for the transaction was US$148 million. Profit on Disposal On 21 April 2006 the Bank completed the sale of Enterprise Finance Europe GmbHfor a consideration of €10 million giving rise to a profit on disposal of €8million. To 31 March 2007 On 31 October 2006 the Bank completed the sale of its 90.444% equity stake inDavy Stockbrokers to the management and staff of J&E Davy Holdings Limited. Theprofit on disposal was €229 million. In addition, €6 million was written back to the Group income statement inrelation to costs provided, at 31 March 2006, against anticipated expenses inexiting certain contracts relating to the disposal of the Bristol & West branchnetwork. 3 SEGMENTAL ANALYSIS The segmental analysis of the Group's results and financial position is set outbelow by business class and by geographic segment. For the geographic analysisIreland (excluding Northern Ireland) includes profits generated in theInternational Financial Services Centre. Revenue is defined as gross interestincome, non interest income, insurance net premium income, net of insuranceclaims and income from associates and joint ventures. The Group has fivebusiness classes detailed in the table below. In October 2006, the WholesaleFinancial Services and Asset Management Services divisions were combined to formthe Capital Markets Division. Prior period results have been adjusted to reflectthis change. These segments reflect the internal financial and managementreporting structure. The analysis of results by business class is based onmanagement accounts information. Transactions between the business segments areon normal commercial terms and conditions. Internal charges and transfer pricingadjustments have been reflected in the performance of each business. Revenuesharing agreements are used to allocate external customer revenues to a businesssegment on a reasonable basis. 3 SEGMENTAL ANALYSIS (continued) BUSINESS SEGMENTS Half-Year ended Retail Bank of Capital UK Republic Ireland Markets Financial Group Eliminations Group30 September 2007 of Ireland Life Services Centre •m •m •m •m •m •m •m ---------------- -------- ------ -------- ------- ------ -------- ------Net interest income 708 (3) 419 420 (12) - 1,532Insurance netpremium income - 1,053 - - 26 - 1,079Other income 226 (1) 99 75 64 - 463Gain on disposal ofproperty 33 - 1 5 - - 39 -------- ------ -------- ------- ------ -------- ------Total operatingincome 967 1,049 519 500 78 - 3,113Insurance claims - (914) - - (8) - (922) -------- ------ -------- ------- ------ -------- ------Total operatingincome, net ofinsurance claims 967 135 519 500 70 - 2,191Operating expenses (460) (52) (193) (246) (34) - (985)Depreciation andamortisation (36) (2) (6) (19) (6) - (69)Impairment losses (57) - (11) (11) - - (79)Share of profit ofassociated undertakingsand joint ventures - - - 33 - - 33 -------- ------ -------- ------- ------ -------- ------Profit before taxation 414 81 309 257 30 - 1,091Gain on disposal ofbusiness assets (33) - - - - - (33)Gross-up of policyholdertax in the Life business - (9) - - - - (9)Investment return ontreasury shares heldfor policyholders - - - - (105) - (105)Hedge ineffectiveness on transition to IFRS - - - - 3 - 3Cost of restructuringprogramme - - - - 4 - 4 -------- ------ -------- ------- ------ -------- ------Group profit before taxexcluding the impact ofabove items 381 72 309 257 (68) - 951 -------- ------ -------- ------- ------ -------- ------ Total assets 113,068 15,193 179,605 77,577 33,974 (219,496) 199,921 -------- ------ -------- ------- ------ -------- ------Total liabilities 110,888 15,031 177,962 74,859 33,454 (219,496) 192,698 -------- ------ -------- ------- ------ -------- ------Capital expenditure(i) 22 7 6 23 3 - 61 -------- ------ -------- ------- ------ -------- ------ (i) Capital expenditure comprises additions to property and equipment andintangible assets including additions resulting from acquisitions throughbusiness combinations. 3 SEGMENTAL ANALYSIS (continued) BUSINESS SEGMENTS Retail Bank of Capital UK Year ended Republic Ireland Markets Financial Group Eliminations Group31 March 2007 of Ireland Life Services Centre •m •m •m •m •m •m •m -------- -------- ------- -------- ------- -------- ------Net interest income 1,311 (5) 671 784 (4) - 2,757Insurance net premium income - 2,155 - - 33 - 2,188Other income 377 326 379 129 (93) - 1,118Gain on disposal ofbusiness activities/property 87 - - 6 233 - 326 -------- -------- ------- -------- ------- -------- ------Total operating income 1,775 2,476 1,050 919 169 - 6,389Insurance claims - (2,205) - - (8) - (2,213) -------- -------- ------- -------- ------- -------- ------Total operatingincome, net ofinsurance claims 1,775 271 1,050 919 161 - 4,176Operating expenses (852) (100) (439) (458) (159) - (2,008)Depreciation andamortisation (75) (4) (17) (39) (16) - (151)Impairment losses (63) - (21) (20) 1 - (103)Share of profit ofassociated undertakingsand joint ventures - - (1) 45 - - 44 -------- -------- ------- -------- ------- -------- ------Profit before taxation 785 167 572 447 (13) - 1,958Gain on disposal ofbusiness activities - - - (6) (233) - (239)Gain on disposal ofproperty (87) - - - - - (87)Gross-up of policyholdertax in the Life business - (19) - - - - (19)Investment return ontreasury shares heldfor policyholders - - - - 68 - 68Hedge ineffectiveness ontransition to IFRS - - - - 2 - 2Sale of Head Office - - - - (32) - (32)Cost of restructuringprogramme - - - - 49 - 49 -------- -------- ------- -------- ------- -------- ------Group profit before taxexcluding the impact ofabove items 698 148 572 441 (159) - 1,700 -------- -------- ------- -------- ------- -------- ------ Total assets 98,599 14,908 167,336 73,503 30,801 (196,334) 188,813 -------- -------- ------- -------- ------- -------- ------Total liabilities 96,758 14,769 165,841 71,143 29,878 (196,334) 182,055 -------- -------- ------- ------- ------- -------- ------Capital expenditure 54 7 18 58 29 - 166 -------- -------- ------- ------- ------- -------- ------ 3 SEGMENTAL ANALYSIS (continued) BUSINESS SEGMENTS Half-Year ended Retail Bank of Capital UK Republic of Ireland Markets Financial Group Eliminations Group30 September 2006 of Ireland Life Services Centre Restated* •m •m •m •m •m •m •m--------------- -------- ------ ------- -------- ------ -------- ------Net interest income 632 4 285 372 (6) - 1,287Insurance net premium income - 920 - - 16 - 936Other income 188 66 229 74 1 - 558Gain on disposal ofbusiness activities - - - - 8 - 8 -------- ------ ------- -------- ------ -------- ------Total operatingincome 820 990 514 446 19 - 2,789Insurance claims - (858) - - (4) - (862) -------- ------ ------- -------- ------ -------- ------Total operatingincome, net ofinsurance claims 820 132 514 446 15 - 1,927Operating expenses (411) (48) (215) (222) (57) - (953)Depreciation andamortisation (38) (2) (9) (19) (8) - (76)Impairment losses (33) - (4) (11) - - (48)Share of profit ofassociated undertakingsand joint ventures 1 - - 28 - - 29 -------- ------ ------- -------- ------ -------- ------Profit before taxation 339 82 286 222 (50) - 879Gain on disposal ofbusiness activities - - - - (40) - (40)Gross-up of policyholdertax in the Life business - (15) - - - - (15)Investment return ontreasury shares heldfor policyholders - - - - 8 - 8Hedge ineffectiveness ontransition to IFRS - - - - 1 - 1Cost of restructuringprogramme - - - - 19 - 19 -------- ------ ------- -------- ------ -------- ------Group profit before taxexcluding the impact ofabove items 339 67 286 222 (62) - 852 -------- ------ ------- -------- ------ -------- ------ Total assets 90,438 13,000 153,847 62,647 23,746 (165,973) 177,705 -------- ------ ------- -------- ------ -------- ------Total liabilities 88,603 12,861 152,272 60,323 23,885 (165,973) 171,971 -------- ------ ------- -------- ------ -------- ------Capital expenditure(i) 23 1 8 35 15 - 82 -------- ------ ------- -------- ------ -------- ------ * Restated for change in accounting policy - see page 24 3 SEGMENTAL ANALYSIS (continued) Geographical Segments Half-Year ended 30 September 2007 Ireland United Kingdom Rest of World Inter-segment Total Revenue •m •m •m •m •m Revenue 4,277 3,244 189 (1,907) 5,803 -------- ---------- --------- ----------- ------- Profit before taxation 791 283 17 - 1,091 -------- ---------- --------- ----------- ------- Ireland United Kingdom Rest of World Eliminations Total •m •m •m •m •m Total assets 178,779 90,747 5,802 (75,407) 199,921 -------- ---------- --------- ----------- ------- Capital expenditure(i) 37 23 1 - 61 -------- ---------- --------- ----------- ------- Half-Year ended 30 September 2006 (Restated)* Ireland United Kingdom Rest of World Inter-segment Total Revenue •m •m •m •m •m Revenue 3,310 2,161 141 (1,154) 4,458 -------- ---------- --------- ----------- ------- Profit beforetaxation 700 166 13 - 879 -------- ---------- --------- ----------- ------- Ireland United Kingdom Rest of World Eliminations Total •m •m •m •m •m Total assets 156,561 71,426 4,930 (55,212) 177,705 -------- ---------- --------- ----------- ------- Capitalexpenditure(i) 45 35 2 - 82 -------- ---------- --------- ----------- ------- Year ended 31 March 2007 Ireland United Kingdom Rest of World Inter-segment Total Revenue •m •m •m •m •m Revenue 7,398 4,646 327 (2,611) 9,760 -------- ---------- --------- ----------- ------- Profit beforetaxation 1,603 314 41 - 1,958 -------- ---------- --------- ----------- ------- Ireland United Kingdom Rest of World Eliminations Total •m •m •m •m •m Total assets 168,843 84,268 5,002 (69,300) 188,813 -------- ---------- --------- ----------- ------- Capitalexpenditure(i) 99 58 9 - 166 -------- ---------- --------- ----------- ------- * Restated for change in accounting policy - see page 24 4 NET INTEREST INCOME Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Interest and similar income Loans and advances to banks 179 154 292 Loans and advances to customers 3,987 2,849 6,272 Financial assets available-for-sale 737 604 1,342 Finance leasing 116 85 222 Other 3 6 9 ----------- --------- -------- Total interest income 5,022 3,698 8,137 ----------- --------- -------- Interest expense and similar charges Interest on subordinated liabilities 221 168 370 Other interest payable 3,269 2,243 5,010 ----------- --------- -------- Total interest expense 3,490 2,411 5,380 ----------- --------- -------- 5 NET TRADING (EXPENSE) / INCOME Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Foreign exchange 33 16 53 Securities and interest rate (85) 2 (80) contracts Equities and equity derivative (41) (21) (37) contracts Hedge ineffectiveness (1) 5 (6) ----------- --------- -------- (94) 2 (70) ----------- --------- -------- Certain of the Group's customer liabilities and debt securities issued have beendesignated at fair value. Both the interest expense and the fair value movementrelating to these are included above. The impact of this is to reduce nettrading income by €64 million (2006: (€54 million)) of which interest expenseamounts to €111 million (2006: €36 million). Net trading (expense) / income also includes the profits and losses arising bothon the purchase and sale of trading instruments and from the revaluation tomarket value, together with the interest income earned from these instrumentsand the related funding cost. 6 OTHER OPERATING INCOME Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 Restated* •m •m •m Profit on disposal of financial 11 - 10 assets available-for-sale Other insurance income 102 79 176 Elimination of investment return on 53 (4) (40) treasury shares held for the benefit of policyholders Gain on Sale of Head Office Premises - 32 32 Other income 5 10 21 ----------- --------- -------- 171 117 199 ----------- --------- -------- * Restated for change in accounting policy - see page 24 7 TOTAL OPERATING EXPENSES Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Staff costs 622 605 1,244 Other administrative expenses 363 348 764 Depreciation and amortisation of 69 76 151 intangibles ----------- --------- -------- Total operating expenses 1,054 1,029 2,159 ----------- --------- -------- 8 Employee Information The average full time equivalents categorised in line with the business classes,are as follows: 30 Sept 30 Sept 31 March 2007 2006 2007 Retail Republic of Ireland 8,453 8,217 8,451Bank of Ireland Life 1,179 1,071 1,100Capital Markets 1,688 2,126 1,986UK Financial Services 3,521 3,435 3,415Group Centre 982 1,002 1,000 ---------- --------- --------- 15,823 15,851 15,952 ---------- --------- --------- 9 TAXATION ON PROFIT ON ORDINARY ACTIVITIES Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 •m •m •mCurrent TaxIrish Corporation Tax Current year 143 120 244 Prior years (1) (1) 12Double taxation relief (22) (10) (30)Foreign tax Current year 49 45 98 Prior years - - 3 ---------- --------- --------- 169 154 327Deferred TaxOrigination and reversal oftemporary differences (5) - (21) ---------- --------- --------- 164 154 306 ---------- --------- --------- The Group tax charge for the half-year to 30 September 2007 does not include theshare of tax on associates and joint ventures of €14 million (€12 millionhalf-year ended 30 September 2006 ; €19 million year ended 31 March 2007), asthe profit on these investments is shown net of tax on a separate line item inthe Income Statement. 10 EARNINGS PER SHARE The calculation of basic earnings per unit of €0.64 Ordinary Stock is based onthe profit attributable to Ordinary Stockholders divided by the weighted averageOrdinary Stock in issue excluding Treasury stock and own shares held for thebenefit of life assurance policyholders. Half-Year 30 Half-Year 30 Year 31 Sept 2007 Sept 2006 March 2007 Restated*Basic •m •m •mProfit attributableto Stockholders 926 727 1,651Dividends to other equityinterests (7) (7) (15) -------- -------- -------Profit attributable to OrdinaryStockholders 919 720 1,636 -------- -------- -------Weighted average number of shares in issue excluding Treasury stockand own shares held for thebenefit of life assurancepolicyholders 959m 948m 950m Basic earnings per share 95.8c 75.9c 172.2c Diluted The diluted earnings per share is based on the profit attributable to OrdinaryStockholders divided by the weighted average Ordinary Stock in issue excludingTreasury stock and own shares held for the benefit of life assurancepolicyholders adjusted for the effect of all dilutive potential Ordinary Stock. Half-Year 30 Half-Year 30 Year Sept 2007 Sept 2006 31 March Restated* 2007 •m •m •mProfit attributable to Stockholders 926 727 1,651Dividends to other equity interests (7) (7) (15) -------- -------- --------Profit attributable to OrdinaryStockholders 919 720 1,636 -------- -------- --------Weighted average number of shares in issue excludingTreasury stock and own shares held for the benefit of lifeassurance policyholders 959m 948m 950mEffect of all dilutive potentialOrdinary Stock 4m 7m 7m -------- -------- -------- 963m 955m 957m -------- -------- -------- Diluted earnings per share 95.4c 75.4c 171.0c *Restated for change in accounting policy - see page 24 11 LOANS AND ADVANCES TO CUSTOMERS 30 Sept 2007 30 Sept 2006 31 March 2007 •m •m •m Loans and advances to customers 129,685 111,336 121,933Loans and advances - financeleases and hire purchasereceivables 3,875 3,417 3,543 -------- -------- -------- 133,560 114,753 125,476Allowance for losses on loansand advances (Note 12) (482) (397) (428) -------- -------- -------- 133,078 114,356 125,048 -------- -------- -------- 12 ALLOWANCE FOR LOSSES ON LOANS AND ADVANCES TO CUSTOMERS AND BANKS Year Half-Year 30 Half-Year 30 31 March Sept 2007 Sept 2006 2007 •m •m •m Opening balance 428 360 360Exchange adjustments (5) 2 1Charge against profits (i) 79 49 104Amounts written off (27) (19) (53)Recoveries 7 9 19Other movements - (3) (3) -------- -------- --------Closing balance 482 398 428 -------- -------- --------of which relates to Loans and advances to customers 482 397 428Loans and advances to banks - 1 - -------- -------- -------- 482 398 428 -------- -------- -------- (i) The charge in the income statement is inclusive of amounts in respect of available-for-sale assets. 13 Financial instruments 30 Sept 30 Sept 31 March 2007 2006 2007 Restated* •m •m •m(a) Trading securities Debt securities: Government 405 140 - Other 626 337 520 ------- -------- -------- 1,031 477 520 ------- -------- -------- (b) Other financial assets at fair value through P/L Unit Trust 292 258 542 Debt securities: Government 2,079 2,057 2,168 Other 605 502 756 Equity securities 9,928 8,029 9,241 ------- -------- -------- 12,904 10,846 12,707 ------- -------- -------- (c) Available-for-sale financial assets Debt securities: Government 5,101 6,370 6,380 Other 28,313 26,117 27,020 Equity securities 39 28 49 ------- -------- -------- 33,453 32,515 33,449 ------- -------- -------- * Restated for change in accounting policy - see page 24 14 ASSETS & LIABILITIES CLASSIFIED AS HELD FOR SALE Under IFRS 5 the Group are required to classify non-current assets as held forsale if their carrying amount will be recovered principally through a saletransaction rather than continuing use. Based on the criteria of IFRS 5 theGroup has reclassified the following assets and liabilities as being "held forsale". 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Assets: Group Property 12 140 73 Assets of Davy - 1,630 - Other assets held for sale 33 79 10 -------- -------- -------- 45 1,849 83 -------- -------- -------- Liabilities: Liabilities of Davy - 1,551 - -------- -------- -------- 15 CUSTOMER ACCOUNTS 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Current accounts 18,035 17,009 16,932Demand deposits 24,909 22,418 25,393Term deposits and other products 30,650 29,050 27,333Other short-term borrowings 2,754 2,314 2,619 -------- -------- -------- 76,348 70,791 72,277 -------- -------- -------- 16 SUBORDINATED LIABILITIES 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •m Opening balance 7,808 6,493 6,493Exchange adjustments (121) (17) (64)Issued during period 422 733 1,479Fair value movements 4 12 (105)Amortisation 3 2 5 --------- -------- --------Closing balance 8,116 7,223 7,808 --------- -------- -------- 17 RETIREMENT BENEFIT OBLIGATIONS The Group operates a number of defined benefit and defined contribution schemesin Ireland and overseas. The defined benefit schemes are funded and the assetsof the schemes are held in separate trustee administered funds. The mostsignificant defined benefit scheme is the Bank of Ireland Staff Pension Fundwhich accounts for approximately 80% of the pension liability on the Groupbalance sheet. The financial assumptions used in deriving the valuation are set out in thetable below: Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 Financial assumptions % pa % pa % paIrish schemesInflation rate 2.35 2.25 2.25Discount rate 5.70 4.65 4.95Rate of general increase insalaries 3.48 3.38 3.38 UK schemesInflation rate 3.25 2.75 3.00Discount rate 5.70 5.00 5.30Rate of general increase insalaries 4.75 4.22 4.22 The mortality assumptions used in estimating the actuarial value of theliabilities for the Bank of Ireland Staff Pension Fund are set out below. 30 Sept 30 Sept 31 March 2007 2006 2007Post-retirement mortality assumptions (Main scheme) years years yearsLongevity at age 70 for current pensionersMales 14.9 14.0 14.0Females 17.3 16.8 16.8 Longevity at age 60 for Active Memberscurrently aged 60Males 25.0 24.5 24.5Females 27.8 27.5 27.5 Longevity at age 60 for Active Memberscurrently aged 40Males 27.4 24.5 24.5Females 30.2 27.5 27.5 30 Sept 30 Sept 31 March 2007 2006 2007Defined benefit pension plans •m •m •m Present value of obligations 4,910 5,105 5,092Scheme assets 4,559 4,254 4,505 --------- -------- --------Deficit within schemes 351 851 587 --------- -------- -------- The change in assumptions has reduced the defined benefit pension deficit in thebalance sheet from €587 million at 31 March 2007 to €351 million at 30 September2007. This change net of deferred tax has been reflected in the statement ofrecognised income and expense. 18 SHARE CAPITAL 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •mAllotted and fully paid Equity964.3 million units of €0.64 ofOrdinary Stock 617 608 61161.9 million units of €0.64 ofTreasury Stock 39 48 45 --------- -------- -------- 656 656 656Other equity interests1.9 million units of Non-CumulativePreference Stock of Stg£1 each 3 3 33.0 million units of Non-CumulativePreference Stock of €1.27 each 4 4 4 --------- -------- -------- 663 663 663 --------- -------- -------- 19 RESERVES Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 Restated* •m •m •m Share premium account Opening balance 771 767 767 Premium on issue of stock 4 - 4 --------- -------- -------- Closing balance 775 767 771 --------- -------- -------- Capital reserve Opening balance 429 359 359 Transfer from retained profit 66 65 70 --------- -------- -------- Closing balance 495 424 429 --------- -------- -------- Retained profit Opening balance previously reported 4,672 3,330 3,330 Impact of change in accounting policy - (142) (142) --------- -------- -------- Revised opening balance 4,672 3,188 3,188 Profit for period attributable to 926 727 1,651 stockholders Equity dividends (377) (324) (524) Dividends to other equity interests (7) (7) (15) Transfer to capital reserves (66) (65) (70) Other - (2) - --------- -------- -------- Profit retained 476 329 1,042 Re-issue of treasury stock 96 44 129 Transfer from revaluation reserve 43 - 108 Transfer from share based payments reserve 2 - 15 Actuarial gains / losses on pension funds 167 (30) 190 --------- -------- -------- Closing balance 5,456 3,531 4,672 --------- -------- -------- * Restated for change in accounting policy - see page 24 19 RESERVES (continued) Half-Year Half-Year Year 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •mRevaluation reserveOpening balance 252 342 342Transfer to retained profit onsale of property (43) - (108)Revaluation of property (1) - 34Deferred tax on revaluation /reclassification of property 2 - (16) --------- -------- --------Closing balance 210 342 252 --------- -------- -------- Available-for-sale reserveOpening balance (33) 26 26Net changes in fair value (164) 1 (57)Deferred tax on fair value changes 22 - 8Profit on disposal (11) - (10) --------- -------- --------Closing balance (186) 27 (33) --------- -------- -------- Cash flow hedge reserveOpening balance 195 60 60Net changes in fair value (72) 49 188Deferred tax on fair value changes 15 (15) (53) --------- -------- --------Closing balance 138 94 195 --------- -------- -------- Other equity reserveOpening balance 114 114 114Movement during period - - - --------- -------- --------Closing balance 114 114 114 --------- -------- -------- Share based payments reserveOpening balance 24 27 27Charge to income statement 6 6 12Transfer to retained profit (2) - (15) --------- -------- --------Closing balance 28 33 24 --------- -------- -------- Foreign exchange reserveOpening balance (76) (125) (125)Exchange adjustments during period (135) 84 49 --------- -------- --------Closing balance (211) (41) (76) --------- -------- -------- 20 RELATED PARTY TRANSACTIONS There were no related party transactions that materially affected the Group'sfinancial position or performance in the half-year to 30 September 2007. 21 Memorandum Items Contract Amount 30 Sept 30 Sept 31 March 2007 2006 2007 •m •m •mContingent liabilitiesAcceptances and endorsements 31 34 39Guarantees and assets pledged ascollateral security 2,206 1,508 1,719Other contingent liabilities 796 613 745 ---------- --------- -------- 3,033 2,155 2,503 ---------- --------- -------- Commitments 39,603 33,768 36,013 ---------- --------- -------- 22 AVERAGE BALANCE SHEET AND INTEREST RATES The following tables show the average balances and interest rates of interestearning assets and interest bearing liabilities for each of the half-years ended30 September 2007 and 2006 and the year ended 31 March 2007. The calculations ofaverage balances are based on daily, weekly or monthly averages, depending onthe reporting unit. The average balances used are considered to berepresentative of the operations of the Group. Rates for the half-years areannualised. Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate •m •m % •m •m % •m •m %ASSETSLoans to banksDomestic offices 7,374 148 4.0 8,882 142 3.2 7,625 259 3.4Foreign offices 1,087 31 5.7 582 12 4.1 726 33 4.5Loans to customers (a) (d)Domestic offices 72,766 2,216 6.1 58,484 1,476 5.0 62,584 3,354 5.4Foreign offices 59,201 1,887 6.3 50,476 1,460 5.8 53,133 3,140 5.9Debt SecuritiesDomestic offices 31,497 723 4.6 28,376 569 4.0 30,368 1,283 4.2Foreign offices 476 14 5.9 1,671 35 4.2 1,414 59 4.2Other financialinstruments at fair valuethrough P/LDomestic 31 - - 49 - - 29 - -Foreign 272 5 3.7 268 6 4.5 276 13 4.7 ------- ------ ----- ------- ------ ------ ------- ------ -----Total interestearning assetsDomestic offices 111,668 3,087 5.5 95,791 2,187 4.6 100,606 4,896 4.9Foreign offices 61,036 1,937 6.4 52,997 1,513 5.7 55,549 3,245 5.8Net swap interest - 4 - - 3 - - 7 - ------- ------ ----- ------- ------ ------ ------- ------ ----- 172,704 5,028 5.8 148,788 3,703 5.0 156,155 8,148 5.2Impairmentlosses onloans andadvances (457) - - (381) - - (391) - -Non interestearning assets (b) 24,189 - - 21,071 - - 22,146 - - ------- ------ ----- ------- ------ ------ ------- ------ ----- Total assets 196,436 5,028 5.1 169,478 3,703 4.4 177,910 8,148 4.6 ------- ------ ----- ------- ------ ------ ------- ------ ----- 22 AVERAGE BALANCE SHEET AND INTEREST RATES (continued) Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 ------------- ------------- --------------- Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate •m •m % •m •m % •m •m % ------- ------ ----- ------- ------ ----- ------- ------ ------liabilities andstockholders'equityDeposits bybanks (c)Domestic offices 8,670 179 4.1 15,526 187 2.4 12,526 294 2.2Foreign offices 11,155 261 4.7 15,138 385 5.1 15,318 772 5.0 Customer accountsDomestic offices 32,866 559 3.4 31,094 360 2.3 31,389 880 2.8Foreign offices 27,832 754 5.4 23,614 499 4.2 25,331 1,129 4.5 Debt securities in issueDomestic offices 48,896 1,128 4.6 32,102 653 4.1 36,214 1,609 4.4Foreign offices 13,225 388 5.9 6,793 159 4.7 6,914 326 4.7 SubordinatedliabilitiesDomestic offices 4,396 109 5.0 3,504 79 4.5 3,722 167 4.5Foreign offices 3,587 118 6.6 3,013 94 6.2 3,357 214 6.4 ------- ------ ----- ------- ------ ----- ------- ------ ------Total interestbearing liabilitiesDomestic offices 94,828 1,975 4.2 82,226 1,279 3.1 83,851 2,950 3.5Foreign offices 55,799 1,521 5.5 48,558 1,137 4.7 50,920 2,441 4.8 ------- ------ ----- ------- ------ ----- ------- ------ ------ 150,627 3,496 4.6 130,784 2,416 3.7 134,771 5,391 4.0 Non interestbearingliabilitiesCurrent accounts 12,761 - - 11,599 11,958 - -Other non interestbearing liabilities (b) 25,850 - - 21,421 - - 25,069 - -Stockholders'equity including non equityinterest 7,198 - - 5,674 - - 6,112 - - ------- ------ ----- ------- ------ ----- ------- ------ ------Total liabilitiesand stockholders'equity 196,436 3,496 3.6 169,478 2,416 2.9 177,910 5,391 3.0 ------- ------ ----- ------- ------ ----- ------- ------ ------ (a) Loans to customers include non accrual loans and loans classified as problem loans (b) The balance sheets of the life assurance companies have been consolidated and are reflected under "Non interest earning assets" and "Other non interest bearing liabilities" (c) The Deposit by banks Domestic and Foreign balance and interest lines above have been adjusted to correct for inter-jurisdictional funding items that arise through normal business activities, to give a more meaningful picture of the Group's Domestic and Foreign activities (d) The Group applies hedge accounting on a macro cash-flow basis to the total balance sheet. The outcome of this activity has been allocated between domestic and foreign loans and advances to customers as appropriate. 23 RATES OF EXCHANGE Principal rates of exchange used in the preparation of the accounts are asfollows: Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 Closing Average Closing Average Closing Average•/US$ 1.4179 1.3692 1.2660 1.2733 1.2912 1.3318•/Stg£ 0.6968 0.6809 0.6777 0.6847 0.6783 0.6798 24 Capital Adequacy Data Half-Year Half-Year Year 30 Sept 2007 30 Sept 2006 31 March 2007 •m •m •mAdjusted capital baseTier 1 9,347 8,464 9,308Tier 2 5,261 4,389 5,038 ------------ ------------ ------------ 14,608 12,853 14,346Supervisory deductions (1,061) (926) (1,019) ------------ ------------ ------------ 13,547 11,927 13,327 ------------ ------------ ------------Risk weighted assetsBanking Book 118,860 104,760 109,968Trading Book 3,358 4,504 2,972 ------------ ------------ ------------ 122,218 109,264 112,940 ------------ ------------ ------------ Capital ratiosTier 1 Capital 7.6% 7.7% 8.2%Total Capital 11.1% 10.9% 11.8% 25 The interim financial statements were approved by the Court of Directors on 13 November 2007. Independent review report to the Governor and Company of the Bank of Ireland Introduction We have been engaged by the Governor and Company of the Bank of Ireland (the"Bank") to review the condensed set of financial statements in the InterimStatement for the six months ended 30 September 2007, which comprises theConsolidated Income Statement, Consolidated Balance Sheet, ConsolidatedStatement of Recognised Income and Expense, Consolidated Condensed Cash FlowStatement and related notes 1 to 21. We have read the other informationcontained in the Interim Statement and considered whether it contains anyapparent misstatements or material inconsistencies with the information in thecondensed set of financial statements. Directors' responsibilities The Interim Statement is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the Interim Statement inaccordance with the Transparency (Directive 2004/109/EC) Regulations 2007 andthe Transparency Rules of the Irish Financial Services Regulatory Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with International Financial Reporting Standards asadopted by the European Union. The condensed set of financial statementsincluded in this Interim Statement has been prepared in accordance withInternational Accounting Standard 34, "Interim Financial Reporting", as adoptedby the European Union. Our responsibility Our responsibility is to express to the Bank a conclusion on the condensed setof financial statements in the Interim Statement based on our review. Thisreport, including the conclusion, has been prepared for and only for the Bankfor the purpose of the Transparency (Directive 2004/109/EC) Regulations 2007 andthe Transparency Rules of the Irish Financial Services Regulatory Authority andfor no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board, for use in the United Kingdom and Ireland. A review of interimfinancial information consists of making enquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an auditconducted in accordance with International Standards on Auditing (UK andIreland) and consequently does not enable us to obtain assurance that we wouldbecome aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the Interim Statement for thesix months ended 30 September 2007 is not prepared, in all material respects, inaccordance with International Accounting Standard 34 as adopted by the EuropeanUnion and the Transparency (Directive 2004/109/EC) Regulations 2007 and theTransparency Rules of the Irish Financial Services Regulatory Authority. PricewaterhouseCoopersChartered AccountantsDublin13 November 2007 -------------------------- (1) On 31 October 2006 we disposed of our 90.444% stake in Davy. Excluding theprofit contribution of Davy in the prior comparative period, underlying PBT grewby 15% and underlying EPS grew by 13% in the half-year to 30 September 2007 onan adjusted EPS of 70.9c for the half-year to 30 September 2006. This information is provided by RNS The company news service from the London Stock Exchange

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