BoI facing higher capital requirement

BANK of Ireland yesterday revealed its required capital conservation buffer for 2018 remains well below its current counter-cyclical reserves of 14.7pc as the ECB continues to phase in a tougher regulatory regime to ward off a repeat of last decade’s financial crash.

As of next year, the lender will be required to maintain a common equity tier one ratio of 8.625pc, compared to the 8pc ratio set for 2017. Investec’s Owen Callan said the well-flagged increase precedes further rises in 2019, when the bank’s required buffer ratio is expected to reach 9.75pc. But he argued the main Irish lenders are likely to have returned to a “normalised” state by the requirements plateau in 2020/22, fuelling prospects of special dividends and share buy-backs.

AIB disclosed its 2018 CET1 requirements at its latest quarterly results earlier this month with Permanent TSB set to update the market by the end of the year. Both lenders have steep CET1 ratios due to their high-level non-performing exposures.

Bank of Ireland’s shares closed up 1pc yesterday to €7.07. Meanwhile, the Stoxx Europe 600 declined as gains for airline shares and real estate companies failed to offset a drop in resource stocks.

The region’s core bonds declined, with German yields seeing their biggest climb in more than five months after a European Central Bank Governing Council member said discussions were moving to the future use of interest rates rather than asset purchases to regulate the economy.

However airlines remained in a focus for investors after stricken holiday carrier Niki reportedly swung back into the cross hairs of British Airways and IAG, the parent of Aer Lingus. IAG had been one of the initial bidders for Niki but lost out to Lufthansa.