Overview

Bank of Ireland reported first‑half 2026 profit before tax that exceeded consensus by 19%, attributing the outperformance to lower‑than‑expected impairments and valuation gains. Pre‑provision profit was 9% above expectations.

Core Financial Metrics

Net interest income matched forecasts, delivering a net interest margin of 2.68% compared with 2.69% in the second half of 2025. Fee income increased 6% year‑over‑year, outperforming consensus by 2%. Operating costs rose 2% year‑over‑year but were 0.5% below consensus expectations. Impairments were 70% below consensus, translating to a cost of risk of 8 basis points of loans, helped by credit insurance and recoveries.

The bank’s CET1 ratio stood at 15.5%, in line with expectations, and capital generation reached 135 basis points in the first half against a revised full‑year guidance of 270 basis points. An interim dividend of €0.39 per share was declared, representing a 50% payout ratio, versus consensus expectations of €0.31.

Updated Guidance for 2026 and Beyond

The 2026 net interest income outlook was raised to approximately €3.5 billion, up from the prior guidance of about €3.4 billion. Loans are now expected to grow 4% year‑over‑year and deposits 3% year‑over‑year. Hedge income is projected to rise 20% year‑over‑year, double the earlier forecast of 10% growth. Fee income is forecast to increase 4% year‑over‑year, while total costs are expected to be around €2.2 billion, roughly 2% higher than the prior year. Impairments are now forecast at mid‑to‑high teens basis points, down from the earlier low‑to‑mid‑20‑basis‑point range. The statutory return on tangible equity (ROTE) target for 2026 was lifted to above 14%, up from approximately 12.5%.

For 2027, net interest income guidance was increased to roughly €3.75 billion, and for 2028 to above €3.95 billion, both assumptions based on an ECB policy rate of 2.5%.

Operational Highlights

Deposits grew 1% half‑on‑half and 3% year‑over‑year, driven by balances in Irish Everyday Banking. Loans rose 2% half‑on‑half, with Irish lending expanding at a 7% annualised rate. The bank expanded its hedge by €8 billion in July, bringing total hedge size to €77 billion, and the average hedge yield improved to 2.01% in the first half from 1.89% in full‑year 2025.

Disclosure Note

The article was generated with AI assistance and reviewed by an editor.