Bank of Ireland lifted its full-year guidance on Monday and said it expects to increase returns to shareholders after rising interest rates, a growing Irish economy and a shrinking banking sector helped it more than double first half profit.
The bank reported a 1.2 billion euro ($1.1 billion) first-half underlying profit before tax versus 435 million euros a year ago when it was still operating in a negative interest rate environment. The European Central Bank has since lifted borrowing costs by a combined 425 basis points.
Ireland's largest lender by assets said its full year return on tangible equity (ROTE) would be similar to the 18.5% posted in the first half, well above the 15% target it set in March to build returns to in the period between 2023 and 2025.
As a result, it currently expects annual ordinary dividends to rise to 33% of statutory profit, compared with 25% last year, and Chief Executive Myles O'Grady said the performance supported plans for another share buyback.
Bank of Ireland shares were up 1.5% in early trade.
The guidance upgrade centred around the bank's expectation that net interest income in the second half will be marginally up on the first, when it jumped by 68% year-on-year.
It also maintained guidance for a 6% full year rise in operating expenses.
Main rival AIB raised its guidance for the second time in three months on Friday, as Ireland's two dominant lenders benefited not only from higher rates but the recent exits of KBC and NatWest's Irish units.
That left Ireland with just three retail banks, including the smaller Permanent TSB. All three have added hundreds of thousands of new customers and in Bank of Ireland's case, acquired 7.8 billion euros of loans from KBC.
The KBC deal helped push Bank of Ireland's share of the Irish mortgage market to 41% from 24% a year ago, moving ahead of AIB. ($1 = 0.9083 euros) (Reporting by Padraic Halpin, Editing by Louise Heavens and Alexander Smith)