By Carmel Crimmins
DUBLIN, Feb 18 (Reuters) - Bank of Ireland will pay nearly 215 million euros ($291.5 million) in dividends to the Irish government this month, it said on Friday, keeping a lid on the state's stake in the lender at 36 percent, at least for now.
The government last year took its first direct stake in Ireland's largest bank in lieu of a cash payment, but the bank said it would pay the dividend due on the government's preference shares on Feb. 21 after the EU lifted its ban on such payments.
Yet Bank of Ireland needs to raise 1.4 billion euros to meet tough capital requirements under an EU/IMF bailout and with private investors steering clear of Irish financials it may yet end up in state control if the government has to plug the funding gap.
The only major lender still listed on the main stock market, Bank of Ireland is hoping the completion of fresh central bank stress tests, at the end of March, will clarify whether it needs more capital and encourage private investors to take the plunge.
'The dividend payment doesn't change that much,' said one Dublin-based analyst. 'Everything depends on the stress tests and what the ultimate capital requirements will be and how much time they will be given to try and tap non-government sources of capital.'
To reassure investors that it has the funds to pay the state dividends, Bank of Ireland gave an impromptu trading update on Friday in which it said its customer deposits had remained broadly stable since the end of November and reiterated that impairment charges for loan losses peaked in 2009.
LARGE OUTFLOW
In a separate statement, bancassurer Irish Life & Permanent , which has avoided state control due to its cash-rich insurance arm, said it had raised its 2010 impairment charge by between 80 million euros and 100 million ahead of a March 2 results announcement.
Shares in Irish Life & Permanent dropped 4.2 percent to 90 euro cents. Bank of Ireland's stock was flat at 0.379 euros in a general index up nearly 0.7 percent.
Bank of Ireland said its loan to deposit ratio has had a 'significant increase' from the 143 percent at the end of June due in large part to the loss of around 10 billion euros in corporate deposits in the third quarter.
Irish deposits suffered a large outflow of corporate money after the debt ratings of Ireland and its banks were cut.
Bank of Ireland swallowed a 4 billion euros plus loss when it transferred some 9 billion euros in assets to a state-run 'bad bank' last year, but even excluding this loss and impairment charges, underlying operating profit will be 25 to 30 percent lower than last year.
High costs of funding, with Irish banks frozen out of debt markets and intense competition for deposits, hit the underlying earnings.
Bank of Ireland still has around 900 million euros of assets to transfer over to the 'bad bank' and the discount on these assets should be less than the 44 percent average haircut it took on previous transfers, the bank said.
The lender said its core tier 1 capital ratio, a key measure of financial strength, had fallen from 10.2 percent at the end of June but it still exceeded regulatory targets.
(Editing by David Cowell and David Holmes)
($1=.7375 Euro) Keywords: BANKOFIRELAND/ (Reuters Messaging:carmel.crimmins.reuters.com@reuters.net; Telephone: +353 1 500 1529; Email: dublin.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
DUBLIN, Feb 18 (Reuters) - Bank of Ireland will pay nearly 215 million euros ($291.5 million) in dividends to the Irish government this month, it said on Friday, keeping a lid on the state's stake in the lender at 36 percent, at least for now.
The government last year took its first direct stake in Ireland's largest bank in lieu of a cash payment, but the bank said it would pay the dividend due on the government's preference shares on Feb. 21 after the EU lifted its ban on such payments.
Yet Bank of Ireland needs to raise 1.4 billion euros to meet tough capital requirements under an EU/IMF bailout and with private investors steering clear of Irish financials it may yet end up in state control if the government has to plug the funding gap.
The only major lender still listed on the main stock market, Bank of Ireland is hoping the completion of fresh central bank stress tests, at the end of March, will clarify whether it needs more capital and encourage private investors to take the plunge.
'The dividend payment doesn't change that much,' said one Dublin-based analyst. 'Everything depends on the stress tests and what the ultimate capital requirements will be and how much time they will be given to try and tap non-government sources of capital.'
To reassure investors that it has the funds to pay the state dividends, Bank of Ireland gave an impromptu trading update on Friday in which it said its customer deposits had remained broadly stable since the end of November and reiterated that impairment charges for loan losses peaked in 2009.
LARGE OUTFLOW
In a separate statement, bancassurer Irish Life & Permanent , which has avoided state control due to its cash-rich insurance arm, said it had raised its 2010 impairment charge by between 80 million euros and 100 million ahead of a March 2 results announcement.
Shares in Irish Life & Permanent dropped 4.2 percent to 90 euro cents. Bank of Ireland's stock was flat at 0.379 euros in a general index up nearly 0.7 percent.
Bank of Ireland said its loan to deposit ratio has had a 'significant increase' from the 143 percent at the end of June due in large part to the loss of around 10 billion euros in corporate deposits in the third quarter.
Irish deposits suffered a large outflow of corporate money after the debt ratings of Ireland and its banks were cut.
Bank of Ireland swallowed a 4 billion euros plus loss when it transferred some 9 billion euros in assets to a state-run 'bad bank' last year, but even excluding this loss and impairment charges, underlying operating profit will be 25 to 30 percent lower than last year.
High costs of funding, with Irish banks frozen out of debt markets and intense competition for deposits, hit the underlying earnings.
Bank of Ireland still has around 900 million euros of assets to transfer over to the 'bad bank' and the discount on these assets should be less than the 44 percent average haircut it took on previous transfers, the bank said.
The lender said its core tier 1 capital ratio, a key measure of financial strength, had fallen from 10.2 percent at the end of June but it still exceeded regulatory targets.
(Editing by David Cowell and David Holmes)
($1=.7375 Euro) Keywords: BANKOFIRELAND/ (Reuters Messaging:carmel.crimmins.reuters.com@reuters.net; Telephone: +353 1 500 1529; Email: dublin.newsroom@reuters.com) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2011 AFX News
