Bank of Ireland has announced a profit before tax of €1.9bn (£1.6bn) for 2024, paving the way for a bumper dividend to shareholders, even after allowing for a potential hefty compensation payout to car loan customers in the UK.
The bank published its full year 2024 annual results on Monday. It reported an adjusted return on tangible equity of 16.8% and shareholder distributions of €1.2bn (£1m).
The bank also provided an update on its positive outlook out to 2027, targeting an adjusted return on tangible equity of above 17% in 2027 supported by a positive macroeconomic backdrop, balance sheet and income growth, and cost efficiency.
CEO Myles O’Grady said the bank is two-thirds of the way through its current strategic cycle and continue to meet or beat all business targets.
“The group enters 2025 with momentum across all business lines. Notwithstanding potential impacts to global trade, our business model continues to be highly capital generative for the coming year and beyond, supporting customer growth, business model investment and attractive shareholder returns,” he said.
The bank’s net interest income, a key measure of banks’ potential profitability, was €3.6bn (£3bn), supported by growth, particularly in Ireland – where lending was up 6% and deposits increased 2%.
Business income was up 4% and fee income was up 6%.
The distribution of €1.22bn (£1m) to shareholders is 6% up on 2023 and includes a proposed ordinary dividend of €630m (£522m) plus €590m (£489.3m) of approved share buybacks.
On the cost side, Bank of Ireland said operating expenses have progressed in-line with expectations, up 6% higher in 2024, primarily reflecting inflation, increased pension costs and continued investment.
The results include a UK motor finance provision of €172m (£143m) which is at the lower end of analysts estimates and is effectively set aside to cover costs and compensation that’s likely to arise after a sector wide probe by UK authorities of interest charged on car loans in the UK, where Bank of Ireland’s Belfast-based Northridge unit is a significant player.
Since the beginning of last year financial regulatory watchdog the Financial Conduct Authority (FCA) has been probing historical discretionary commission arrangements between car dealers and banks stretching back to 2007.
These secret deals were where car dealerships and brokers had the power to set interest rates on car loans, and earn higher commissions along the way.
Analysts have estimated banks could face a combined £16bn compensation bill, potentially making it one of the sector’s most costly consumer compliance failures.