Bank of Ireland posts a pre-tax loss of £211 million in Q1 as Coronavirus fuels loan losses

In its announcement on Monday, the Bank of Ireland (LON:BIRG) said that its pre-tax loss came in at £211 million in the first quarter. The bank said that in Britain and Ireland combined, it identified 86,000 customers for whom it extended loan breaks that resulted in an impairment charge of £233 million that swung it to a loss in Q1.

In the same quarter last year, the largest bank in Ireland by assets posted a £107.60 million in profit. The bank also said on Monday that it foresees loan losses and associated impairment charge to widen in 2020. The new lending volumes, as per the Bank of Ireland, are expected to lie in the range of 50% to 70% of last year. The reduced economic activity is also expected to fuel a 40% decline in its business income.

CEO Francesca McDonagh’s comments on Monday

According to CEO Francesca McDonagh:

“We made a good start to the year – growth lending, selling more than a quarter of all new mortgages in Ireland, reducing costs, and with the lowest level of arrears of any Irish bank. However, right now everything is seen through the lens of COVID-19.”

Owing to the Coronavirus driven volatility in the stock and bond market, Bank of Ireland also took an additional £135.60 million hit to its financial assets. The bank’s wealth and insurance business was also under pressure in the recent quarter. COVID-19 has so far affected around 23,000 people in Ireland and has caused roughly 1,500 deaths.

Bank of Ireland’s CET1 ratio drops to 13.5%

Bank of Ireland’s CET1 (common equity tier 1) ratio registered at 13.5% in late March that came in lower than 13.8% that it recorded at the end of last year. Its minimum regulatory capital requirements, on the other hand, dropped from 11.45% to 9.27%. Despite the weaker outlook, the bank expressed confidence that its capital levels will keep above the previous 11.45% in 2020.

Other noticeable figures in Bank of Ireland’s report on Monday include its deposits that climbed to £76 million in Q1 resulting in a 0.03% contraction in its net interest margin to 2.07%. With an increment of £87.50 million, the bank's loan book advanced to £69.64 million. Bank of Ireland also saw a £1.31 billion growth in its quarterly net lending.

At £1.33 per share, the Bank of Ireland is currently 70% down year to date in the stock market and has a market cap of £1.46 billion.