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The Bank of Ireland says it is not considering a third payment disruption to customers whose incomes were affected by the Covid-19 outbreak, Chief Executive Officer Francesca McDonagh said Monday.
The bank along with other lenders have agreed to allow borrowers to take a break from paying mortgages, business loans and other facilities as a temporary measure to get out of the current crisis.
The initial three-month break is being extended to the last six months in total.
However, a new extension is not considered Francesca McDonagh, she said.
Borrowers who can’t keep up with payments, even after the 24-week break, will likely require more debt-intensive solutions.
The Bank of Ireland said it has yet to see a rise in bad loans as a result of Covid’s 19 economic shutdown, but the administration has made a provision for past due loans to increase this year.
That was a major factor at the bank that reported an underlying loss of € 235m during the first three months of this year.
Towards the end of the three months through March 31, the bank experienced the initial effect of Covid-19, with adverse movements in valuations and other items of € 155 million and impairment charges of € 266 million.
Impairment charges include what is described as a management overlap of € 250 million, reflecting primarily the initial impact of the deteriorating economic environment, in layman’s terms, an initial estimate of the likely impact on the bank of the crisis.
The group warned that Covid-19 would have a “material impact on 2020 results.”
In addition to the risk of more bad loans, he said new loans could drop 50 to 70 percent from last year, including a sharp drop in home loans.
Business income is expected to be 30pc – 40pc lower due to reduced economic activity.
Francesca McDonagh, CEO of the Bank of Ireland, said: “We started the year off right: we increased loans, sold over a quarter of all new mortgages in Ireland, cut costs and had the lowest level of arrears of any Irish bank. ” However, now everything is seen through the Covid-19 lens. “
“The economic outlook for our main markets in Ireland and the UK has deteriorated, with reduced levels of activity across all of our businesses. The economic effects will have a material impact on the group’s financial performance by 2020, “McDonagh said.
“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,” he added.
Elsewhere, customer loan volumes were € 79.6 billion at the end of March, an increase of € 0.1 billion from the end of December 2019.
The bank’s net interest margin, a key barometer of a bank’s profitability, was 2.07pc, three basis points lower than the last quarter of 2019, reflecting the low interest rate environment.
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