27th Sep 2005 07:00
Bank of Ireland(Governor&Co)27 September 2005 Bank of Ireland Group Trading Update 27 September 2005 Bank of Ireland is issuing the following trading update before its close periodfor the half year ended 30 September 2005. John O'Donovan, Group Chief Financial Officer, will host a conference call at8.30a.m. G.M.T. today, 27 September 2005. Dial-in arrangements and individual contact arrangements are detailed below. International Financial Reporting Standards (IFRS): The half-year to 30 September 2005 is the first time we will report under IFRS.To enable effective comparison to be made, our expected results to 30 September2005 are compared against pro-forma(1) results for the six months to 30September 2004 under IFRS as contained in the Transition Document. The followinginformation accompanies this statement: •Explanatory note on our approach to the implementation of IFRS •The Transition Document to IFRS Overview:Bank of Ireland Group has continued to perform strongly in the half year to 30September 2005. Highlights of our interim results are expected to featurecontinuing strong growth in our Irish franchise and positive progress towardsour growth objectives in our UK and international businesses. We have also madesignificant progress in the initial phase of our Strategic TransformationProgramme announced in March 2005. The positive performance for the six monthshas taken place against generally favourable economic conditions and alsoreflects excellent asset quality. We expect basic earnings per share (EPS) to grow by close to 30%. Our resultsfor the six months to end September 2004 included exceptional gains totalling€38 million. In the half-year to end September 2005 our results will include again on the disposal of our interest in the Bristol & West branch network (£120million) together with implementation costs associated with our StrategicTransformation Programme. Excluding the effect of these items from both periods,together with any volatility that might arise under IFRS in relation to hedgeineffectiveness, we expect underlying EPS to grow by circa 9%. Commenting on the trading update Brian Goggin Group CEO said:"We expect a strong Group performance for the half year. The continuing strengthof our Irish businesses, together with the emerging benefits of investment inthe UK, and niche international businesses focused on high growth sectors, andthe delivery of the Strategic Transformation Programme, provides us with afoundation for sustained growth." Retail Financial Services Ireland:The Irish economic environment continues to be very favourable with GDP growththis year expected to be circa 5%. Our Retail Financial Services business isbuilding on excellent momentum with strong volume and profit growth across thedivision. Profit before tax is expected to grow by circa 16%. Our leadingdistribution position, well-established relationship management approach topersonal and business customers coupled with a strong and responsible salesculture are the main drivers underpinning this performance. Strong growth involumes in key product areas underlines the attractiveness of our customerproposition. Loans to customers are expected to grow by circa 23% compared tothe same period last year with mortgages and business banking up by circa 26%and 24% respectively. Resources are expected to increase by circa 13%. Bank of Ireland Life:Our Life business continues to grow underpinned by strong product demand andrising investment markets. The environment for the Life business is particularlypositive with favourable demographics and rising prosperity contributing to asignificant rise in new business sales, which are expected to grow by circa 20%for the six months to 30 September 2005 compared with the same period last year.While the transition to IFRS is making reporting of financial performance forthis business more complex, operating profits (before policy-holder taxgross-up, investment variance and discount rate change) are expected to increaseby circa 30% driven by strong sales growth and tight cost control. Wholesale Financial Services:Profit before tax in Wholesale Financial Services is expected to grow by circa10%, a strong performance as the core businesses in this division invest forfuture growth. In Corporate Banking loans to customers are expected to increaseby circa 22%, compared to the same period last year, while the new businesspipeline remains buoyant. We are successfully building an international growthplatform with a network of specialist teams focusing on niche opportunities inhigh growth sectors. We are also maintaining excellent asset quality. Our GlobalMarkets business is also adding specialist teams in key markets and we areincreasingly adding value for our customers through integrated banking and riskmanagement propositions through Global Markets, Corporate Banking, BusinessBanking and our UK Financial Services operations. The other businesses withinthe division are expected to perform strongly. UK Financial Services (in local currency):The results to end September 2004 included the benefit of a technical loan lossprovision release of £10 million, and excluding the benefit of this we expectthe profit before tax outturn to September 2005 to be broadly in line with lastyear. We concluded the sale of the Bristol & West branch network on 21 September 2005for a consideration of £150 million. The branch network is expected to incur asmall loss in the six months to end September 2005. We now have a tighter business portfolio in the UK, focused on growing in keymarket segments. Personal Lending UK is a well-established mortgage businessfocusing on higher margin specialist sectors. The mortgage book is expected togrow by circa 14% with excellent asset quality being maintained. The mortgagebusiness in the UK is expected to deliver profit growth of circa 10% in the halfyear to September 2005 compared with the same period last year. Excluding the benefit of the technical loan loss provision release in thecorresponding period last year, we expect business banking profits to be flat,where strong growth in lending volumes of circa 30% compared to the same periodlast year are offset by the investment in strengthening our Business Bankingteam, which is nearing its conclusion. Tight cost control is being maintained with the Business Improvement Programmeon target to deliver its objectives for the current year. UK Post Office Financial Services (UKPOFS):Performance of UKPOFS, which is progressing well through its development phase,is in line with expectations. We are on track to achieve our customerrecruitment target of 400,000 by year-end and we continue to add to the productportfolio. Asset Management Services:Asset Management Services (AMS) comprises Bank of Ireland Asset Management(BIAM), Bank of Ireland Securities Services (BOISS) and Iridian. Investmentperformance in international equities continues to be an issue for BIAM where weexpect assets under management (AUM) to be circa €43 billion at the end ofSeptember 2005 i.e. circa €4 billion lower than at end March 2005. As aconsequence of BIAM's expected profit performance we expect AMS's profit beforetax to be €20 million lower than the same period last year. BIAM's focus remainson improving its investment performance, strengthening its investment team andreducing its cost base. The other businesses in this division are expected toperform well in the period and the division continues to explore opportunitiesto utilise its expertise and distribution capability. Group:Total Group income in the six months to end September 2005 is expected to growby circa 6% driven by strong volume growth partly offset by lower net interestmargins. We expect the Group net interest margin to narrow by high teens basispoints in line with our guidance to the market in May 2005. The key driversbehind this reduction are the continuation of the change in balance sheetfunding mix to accommodate the growth in assets, together with the low interestrate environment, and to a lesser extent back-book re-pricing in the UK. Totalcosts are expected to grow by circa 5%. Asset quality remains excellent and we expect a reduction in non-performingloans over March 2005. The loan loss charge as a percentage of average loans isexpected to be circa 11 basis points for the half year to September 2005. Strategic Transformation Programme:Our growth-focused Strategic Transformation Programme is progressing well and weare on target to achieve savings of €30 million in the current year under theProgramme. Contact Details: John O'Donovan Group Chief Financial Officer +353 1 632 2054Frank Ryan Group Financial Controller +353 1 604 3503Geraldine Deighan Head of Group Investor Relations +353 1 604 3501Dan Loughrey Head of Group Corporate Communications +353 1 604 3833 Conference Call Dial-in Details:Irish participants please dial: 1800 300 213International participants please dial: +44 1 452 562 716 Post Conference Call Arrangements:The conference call will be available in Digital Replay.To access the recording please dial: +44 1 452 550 000. The Digital ReplaySecurity code is: 8932911 #This service will be available 1 hour after the call and will be available untilthe 4 October 2005.A recording of the call will be available at noon on the 27 September 2005 onour 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--------------------------(1) The pro-forma results reflect the impact of EIR and insurance accounting,and do not reflect the impact of accounting for derivatives and loan impairment. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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