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The executive director of the Bank of Ireland has said that she does not foresee payment disruptions for financially struggling borrowers as the Covid-19 crisis extends beyond the six months agreed upon by major banks here.
Francesca McDonagh said the sector had been proactive in agreeing to pay interruptions initially for three months and then extending it to six.
“We need to do that in a sustainable way, and I think interruptions in payments give space to home and business owners,” he told RTE News after the bank’s first-quarter results were released.
“But the current plan is for those to be up to a maximum of six months and then we’ll be there to help the Irish economy recover,” said the bank chief.
Ms. McDonagh said the bank continues to lend to customers in need where appropriate and in their best interest.
“I am not aware of any case where a customer has lost their deposit as a result of a change in a Bank of Ireland mortgage,” he said.
“But we must be careful when supporting clients that if their circumstances have changed significantly and their incomes are very different, it is in nobody’s interest to withdraw a mortgage that they cannot pay for the first month onward.” additional.
The bank has set aside 250 million euros as an impairment charge to face the consequences of Covid-19.
But McDonagh said it was difficult to be specific at this time about the future scope of bad loans stemming from the challenges, and said it varies by sector.
“Different sectors are experiencing Covid-19 in different ways and we also see in what we call Horizon 2, the gradual easing of restrictions that come at a different rate in different sectors,” he said.
He said sectors like travel, hospitality or non-food retail are being hit hard.
“Our focus is to support our clients and that is why we have implemented mortgage payment exemptions. This is an example of where we are leaning towards the national effort to support companies during this period of uncertainty,” said the head of the Bank.
Francesca McDonagh said that the losses recorded by the bank in the first quarter were the result of the coronavirus, with strong growth in loans and a reduction in costs.
“But today’s results reflect the realities of Covid-19 and that includes an important part of the reason why we would have recorded a loss in the first quarter,” he said.
“We decided to take a management overlay of Covid-19 for a provision for a possible loss of credit for the future of 250 million euros. That is not specific against any deterioration that we have seen in our loan book, but it is an acknowledgment of that the economic outlook for Ireland this year is quite a significant contraction and an increase in unemployment. ”
“We hope to see it recover by the end of this year and until 2021. But we wanted to assume that position of overlapping prudent administration given the crisis we are all in,” he added.
Despite the challenges facing the bank, Ms. McDonagh indicated that she does not anticipate further job losses or permanent branch closings.
She said the bank had already been on a cost-cutting path for the past two and a half years.
“Our colleagues right now are totally focused on supporting our clients and communities,” he said.
“We have 70% working from home and 30% onsite on the front line doing exceptional jobs that I greatly appreciate. When we think about our costs, we think about efficiency, half of that is people-related and the other half is costs that are not people, “he said.
“In terms of branches, the branch network is a very important part of our offering,” he added.
Ms. McDonagh also said she is confident that the bank is well capitalized for what lies ahead.
“I am incredibly confident and comfortable with the outlook. Today we have taken the impairment charge as a prudent and conservative response to the economy,” she said.
“But our underlying capital is higher than what the regulator requires us to maintain and even in a variety of more pessimistic scenarios and prospects in the economy if that happens, and there is no one who can be sure how this is going to play out, our Capital ratio remains above our previous minimum requirement, “he added.
Bank of Ireland switches to Q1 loss due to Covid-19 impairment charges
Previously, the Bank of Ireland reported an underlying pre-tax loss of € 235 million during the three months to the end of March, as the coronavirus had a “material impact” on the bank’s results.
This compares to underlying earnings of € 143m at the same time last year.
In a provisional management statement, the bank said that the economic outlook for its main markets in Ireland and the United Kingdom has deteriorated, with reduced levels of activity in its businesses.
The Bank of Ireland said today that it had assumed an impairment charge of € 266 million, including the Covid-19 management overlay of € 250 million, which it said primarily reflected the initial impact of the deteriorating economic environment.
Its net interest income for the three months to March reached € 540 million, which the bank said was in line with its expectations.
The lender reported a pre-tax loss of € 214 million over the three-month period, below a pre-tax profit of € 4123 million.
“The economic effects will have a material impact on the group’s financial performance in 2020,” Bank of Ireland group executive director Francesca McDonagh said today.
“The full impact remains uncertain and will be driven by the duration of the Covid-19 restrictions and the successful reopening of the economies of Ireland and the United Kingdom,” added McDonagh.
The Bank of Ireland said today that Covid-19 reached its markets “fast and hard,” but said it took immediate action to help its clients as it launched a range of supports for personal and business clients affected by the virus outbreak. .
A total of 86,000 payment breaks have been approved for customers in Ireland and the UK since mid-March.
The Bank of Ireland said it has strong capital, financing and liquidity to provide this support to clients.
The bank said today that, in a variety of scenarios, its fully loaded Tier 1 core capital ratio would remain above its previous minimum regulatory capital requirement of 11.45%.
Its CET1 index, a key measure of financial strength, fell to 13.5% in late March, from 13.8% in late 2019.
The Bank of Ireland, the country’s largest bank by assets, said it expected more impairment charges and loan losses during 2020, and that new loans could fall from 50% to 70% of 2019 volumes.
The bank said that, in a variety of scenarios, its fully loaded Tier 1 core capital ratio would remain above its previous minimum regulatory capital requirement of 11.45%.
Its CET1 index, a key measure of financial strength, fell to 13.5% in late March, from 13.8% in late 2019.
The state-owned Bank of Ireland by 14% cut costs by 3% yoy and said it maintained a target introduced in February for more aggressive cost cuts by 2021.
The lender said today that 70% of its staff are working from home due to the Covid-19 outbreak, while it has also temporarily closed smaller branches due to reduced footprints.
It has also introduced a subsidy scheme for staff working on the front line and at site locations and is supporting the staff needed to provide childcare or family support.
Shares of the Bank of Ireland have been halved since the first coronavirus case reported here in late February. They were lower in Dublin trade today.
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