DUBLIN (AP) -- Bank of Ireland, the only one of Ireland's six banks to avoid nationalization, on Monday reported it returned to net profit in 2011 thanks to heavy debt restructuring in the face of continued losses from dud loans.
Bank of Ireland said it netted euro40 million ($52.8 million) in profit thanks in part to a euro230 million tax refund. The Dublin-based bank recorded a net loss of euro609 million in 2010.
It is the first Irish bank to record a net profit of any kind since Ireland's long-booming economy came crashing down in 2009 amid a burst property bubble.
Bank of Ireland underscored its funding strength versus its two surviving domestic rivals, state-owned Allied Irish Banks and Irish Life & Permanent. Its deposits increased 9 percent to euro71 billion, chiefly at the bank's British division, while its reliance on short-term liquidity loans from the European and Irish central banks fell 29 percent to euro22 billion.
Operating costs fell 8 percent to euro1.65 billion as the bank reduced pension benefits and continued to lay off staff at its retail Irish banks. The bank employed nearly 17,000 in 2007, has around 13,250 employees today and expects to lay off around 750 more this year.
The bank continued to record massive losses from writing off property-based loans, but took the worst of its medicine in 2010.
It reported more than euro1.9 billion in 2011 loan writeoffs to customers, 4 percent more than in 2010.
But the bank in 2010 also suffered a euro2.5 billion loss as it transferred its biggest toxic debts — chiefly loans to bankrupt construction barons — to Ireland's state-run "bad bank," the National Assets Management Agency. That exceptional loss was not repeated in 2011.
Bank of Ireland chief executive Richie Boucher said 5.6 percent of its mortgage customers had fallen into arrears by the end of 2011 compared with 3.7 percent in 2010. He said the bank expects its mortgage-related losses to peak later this year, then ease in 2013.
Emer Lang, an analyst at Davy Stockbrokers in Dublin, said the results "confirm that the bank is making solid progress towards restructuring its balance sheet with loan disposals (and) redemptions and better-than-expected deposit growth significantly reducing wholesale funding."
Bank of Ireland appeared on the road to inevitable nationalization last year, just like Ireland's five other locally incorporated banks, as its deposits dropped and foreign creditors refused to lend fresh cash. All six banks saw their loan books implode in line with a sudden end to a decade-long construction boom that their reckless lending practices had encouraged.
But Bank of Ireland managed a Houdini-like escape, negotiating a partial takeover by a Canadian-American consortium of fund managers led by U.S. investor Wilbur Ross. The foreign investors paid euro1.12 billion for a 35 percent stake, while the government's holding was sharply reduced to 15 percent.
Ross, a billionaire who specializes in leveraged buyouts and investments in distressed companies, told investors last week he expects to be able to sell his Bank of Ireland stake for triple its current market worth in a few years as global confidence in Ireland returns.
Bank of Ireland shares initially rose 1 cent, or 7 percent, to euro0.15 on the Irish Stock Exchange but pared gains in the afternoon. The shares, once a foundation stone for many Irish pension plans, were worth more than euro18 each in early 2007 but reached a record low of 6.5 cents in September.
- Bank of Ireland
- Allied Irish Banks