22nd Mar 2005 07:01
Bank of Ireland(Governor&Co)22 March 2005 Bank of Ireland Group Trading Update Bank of Ireland is issuing the following trading update before its March 2005year end close period. John O'Donovan, Group Chief Financial Officer, will host a conference call at9.00a.m. GMT today, 22nd March 2005. Dial in arrangements and individual contact arrangements are detailed below. Overview Our performance in 2004/05 is strong and we expect alternative earnings pershare to grow by circa 7% for the year to March 2005 or by circa 9% excludingthe impact of the Group's investment in the UK Post Office Financial Services.We are comfortable with market consensus expectations of 113 cent in alternativeearnings per share compared to 106.7cent in 2003/04. We are well positioned in strongly performing economies and our current businessflows provide confidence that our positive performance will be maintained. Commenting on the trading update Brian Goggin Group CEO said: "A strong performance is expected to deliver our 14th consecutive year of profitgrowth and we continue to be very well positioned in growing markets. Thisstrong performance, however, does not make us complacent. As you can see fromour pre-close trading statement Bank of Ireland is embracing change from aposition of strength. We plan to reduce our costs by an annual €120 millionwhile also beginning to build a consolidated operating model, a model which willtransform our support services and retail manufacturing infrastructure. Thiswill enhance the competitiveness of the Bank of Ireland Group and enable us tocapitalise on growth opportunities." Update on Key Strategic Issues Developing a competitive, lower-cost operating model: As stated at our Interim Results announcement in November 2004 our intent is toreduce our costs and to change our operating model so as to provide theefficiency and flexibility to enhance our competitiveness and to capitalise ongrowth opportunities. Our immediate focus is on a programme of specific actionsthat will reduce our costs while also beginning to build a more consolidatedoperating model. This programme will consist of specific efficiency initiativesin our Retail business in Ireland, the streamlining of some Group supportservices and the consolidation of some processing activities currently dispersedthroughout the Group. Measured against the 2004/05 expected cost base we are targeting an annualreduction in costs of €120 million to be achieved over the next four years. Thiswill consist of €30 million savings in 2005/06, increasing to €75 million in2006/07, to €105 million in 2007/08 resulting in an annual reduction in costs of€120 million in 2008/09. A reduction of 2,100 in the Group's staff numbers isassociated with this programme. The rationalisation and implementation costs to achieve the savings are expectedto amount to approximately €210 million. In addition, capital expenditure ofcirca €40 million is expected to be invested in technology and automation aspart of the programme. Rationalisation and implementation costs of circa €115million are expected to be expended in 2005/06. The programme outlined above is in addition to initatives already underwayincluding the Business Improvement Programme in the UK and the outsourcing ofthe supply of I.T. services to HP that commenced in April 2004. Review of UK businesses: We have concluded the sale of our financial advice business, Chase de Vere. We also stated in November 2004 that we were reviewing the future options forthe non-mortgage elements of Bristol & West (i.e. the physical branch networkand associated deposit base). We have received expressions of interest inrespect of this network from a number of interested parties. We are in theprocess of evaluating these expressions of interest as part of the review of allof the options for this business. Our strategy in the UK is to focus on Business Banking (including our retailoperations in Northern Ireland), Mortgages and Consumer Banking which will beprimarily through our joint venture with the UK Post Office. Divisional Performance: Retail Republic of Ireland Retail Republic of Ireland expects to report very strong results, with profitbefore tax growing by circa 17%. This is driven largely by circa 23% growth inlending volumes with mortgage lending up by circa 26% and Business Bankinglending up circa 22% while strong resources growth of around 12% is expected tobe achieved. Bank of Ireland Life The Life Business continues its excellent performance, and expects to growoperating profits (profit after distribution costs and allocated overheads) by17%, while increasing its share of the Life and Pensions market by 3% based onmarket information for 12 months to December 2004. The investment variance whichis the mark to market of the embedded value was a positive €15 million at 17thMarch 2005. Wholesale Financial Services Profit before tax in Wholesale Financial Services is expected to grow by circa10%. Lending volumes are expected to be up by circa 25% in Corporate Banking andwe are continuing to expand our highly skilled lending teams. Due to the changein the general interest rate cycle Global Markets experienced more challengingtrading conditions and will not repeat the exceptional gains achieved in theprior year. Other businesses within Wholesale Financial Services are expected todeliver strong performances. UK Financial Services UKFS is expected to achieve growth of circa 2% in profit before tax on aconstant currency basis. This includes a release from NDSP of GBP£10 million,and the negative impact of mortgage back book re-pricing. Mortgage lendinggrowth of 9% and business lending growth of 18% is expected. Costs are beingtightly controlled with the Business Improvement Programme delivering on target. UK Post Office Financial Services Performance is in line with financial projections. Operating losses togetherwith goodwill amortisation are expected to be circa GBP£38m (our share GBP£24mwhich includes goodwill amortisation of GBP£8m) and is in line with previousguidance that alternative earnings per share will be negatively impacted bycirca 3 cent for the year. Six product lines are now being offered through theUK Post Office network with further products in the pipeline for the comingyear. Asset Management Services Asset Management Services expects profit before tax, to fall by circa 8%compared to March 2004. BIAM continues to experience specific challengesprimarily relating to the relative underperformance of the North American EAFEproduct with consequent mandate losses. Assets under management in BIAM areexpected to have fallen by circa €10 billion compared to the March 2004 level of€57.5bn. A full-year impact of the actual outflows, which are comprised mainly ofspecialist equity mandates, on profit before tax will be circa €3.2 million foreach €1 billion change in assets under management. Bank of Ireland Group Performance: We expect alternative earnings per share to grow by circa 7% for the year toMarch 2005 or by circa 9% excluding the impact of the Group's investment in theUK Post Office Financial Services. Profit before tax and exceptional items, isset to increase by circa 5% or by 10% excluding the impact of the Group'sinvestment in the UK Post Office Financial Services. The Group continues to take advantage of the strong economies in which itoperates. Group lending volumes have risen by circa 16%, with mortgage lendingin Ireland expected to be up 26% and in the UK up 9% and business bankinglending set to increase by circa 22% and circa 18% in Ireland and the UKrespectively. Net Interest income is expected to increase by circa 9% with the Group's netinterest margin expected to fall by circa 20bps for the year to March 2005. Themajor influences affecting margin attrition are the UK mortgage back bookre-pricing, the change in funding mix and the low interest rate environment. We expect non-interest income to grow by circa 2% this year, reflecting lowerfee income from Bank of Ireland Asset Management and the inclusion in the prioryear of a change in the discount rate of €19 million in our Life business. Excluding the impact on cost growth of the investment in the UK Post Officejoint venture both costs and income are expected to grow by circa 6% reversingthe negative 2% cost/income jaws reported in the half year to September 2004.Total costs, including the investment in the UK Post office Financial Services,are expected to show an increase of circa 9% year on year. The expected loan loss charge of circa 11bps (14bps in the year to March 2004)had the benefit of a draw down from the NDSP provision of €27 million (€39million in the year to March 2004). Asset quality across the Group is strong. Balances-under-provision figures areexpected to show an improvement on the March 2004 position. Profit before taxand alternative earnings per share outlooks in this statement exclude a specialrelease from general loan loss provisions of €100 million arising from a reviewof loan loss provisions on our Balance Sheet. Contact details:-John O'Donovan Group Chief Financial Officer +353 1 632 2054Fiona Ross Head of Group Investor Relations +353 1 604 3501Dan Loughrey Head of Group Corporate +353 1 604 3833 Communications Conference Call Dial-in Details: Irish participants please dial: 1800 300 213 International participants please dial: + 44 (0) 1452 56 2716 Post Conference Call Arrangements:The conference call will be available in Digital Replay. To access therecording: Please dial: +44 (0) 1452 55 00 00 The Digital Replay Security code is: 4783520# This service will be available 1 hour after the call and will be available until 29th March 2005 A recording of the call will be available later in the afternoon of the 22nd ofMarch 2005 on our website: www.bankofireland.ie/investor This statement contains certain forward-looking statements as defined in the USPrivate Securities Litigation Reform Act of 1995 with respect to certain of theGroup's plans and its current goals and expectations relating to its futurefinancial condition and performance and the markets in which it operates.Because such statements are inherently subject to risks and uncertainties,actual results may differ materially from those expressed or implied by suchforward-looking statements. Such risks and uncertainties include but are notlimited to risks and uncertainties relating to profitability targets, prevailinginterest rates, the performance of the Irish and UK economies and theinternational capital markets, the Group's ability to expand certain of itsactivities, competition, the Group's ability to address information technologyissues and the availability of funding sources. The Bank of Ireland Group doesnot undertake to release publicly any revision to these forward-lookingstatements to reflect events, circumstances or unanticipated events occurringafter the date hereof. /ends This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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