Bank shares plunge as coronavirus hit revealed
€235m first-quarter loss for BoI
SHARES in AIB and Bank of Ireland plunged again yesterday, continuing declines than have seen the stocks’ valuations halve in a matter of weeks.
The share price falls – almost 15pc each for the two main banks – came after Bank of Ireland provided the first significant details of any Irish lender on the impact of Covid-19.
Bank of Ireland said it has yet to see a spike in bad loans as a result of the virus’s economic lockdown, but management’s initial provision for loan impairments pushed it to a loss of €235m for the first three months of this year.
Provisions for the current quarter are likely to be even larger.
AIB reports its numbers today.
Meanwhile, Bank of Ireland said new lending in 2020 could fall 50pc or even 70pc compared to last year.
Chief executive Francesca McDonagh insisted the bank’s capital outlook, a key measure of how well it can bounce back from a crisis, was “strong and robust”.
While Bank of Ireland had yet to see a spike in bad loans as a result of the Covid-19 economic lockdown, management do anticipate that loan impairments will rise this year.
The charge taken by the bank in the first quarter was almost wholly made up of a €250m management estimate of the hit from the deteriorating economic conditions, not based on any loan level evidence of distress, Ms McDonagh said.
The bank also took a €120m charge in its wealth and insurance business – reflecting falling markets, and a €35m charge was incurred from financial instrument valuation adjustments.
Bank of Ireland said it has granted customers 86,000 loan repayment breaks in Ireland and the UK.
The bank is not considering a third payment break in Ireland, for customers whose incomes have been hit by the Covid-19 outbreak, Ms McDonagh said yesterday.
The bank, along with other lenders, have agreed to allow borrowers to take a break from repaying mortgages, business loans and other facilities as temporary measure to ride out the current crisis. The initial three-month break is being extended to last six months in total.
Borrowers unable to meet repayments even after the 24-week break would likely require more intensive debt solutions.
Analysts at Davy said the latest information from Bank of Ireland indicates the bank’s total income this year could be up to 20pc below their €2.8bn forecast.
Asked about persistent pressure on Irish bank shares compared to even hard-hit European peers, Francesca McDonagh said the memory of the last crash, when lenders here were plunged into crisis, was a factor.
Bank shares had already been under pressure coming into the crisis as a result of the political uncertainty after the General Election in February, she added.