Earnings call transcript: Bank of Ireland’s Q2 2025 results and stock dip

Bank of Ireland Group PLC reported its second-quarter earnings for 2025, revealing a profit before tax of €0.7 billion and a cost-income ratio of 48%. Despite these solid financial metrics, the company’s stock fell by 4.06% in early trading, reflecting investor concerns over specific aspects of the report. The bank’s interim dividend is set at €0.25 per share, and it has deployed 80% of its €590 million share buyback program. According to InvestingPro data, the bank offers an attractive dividend yield of 9.64% and has raised its dividend for three consecutive years. The stock currently trades near its Fair Value based on comprehensive analysis.

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Key Takeaways

• Bank of Ireland reported a €0.7 billion profit before tax for the first half of 2025.
• The cost-income ratio stands at 48%, indicating operational efficiency.
• The stock price dropped by 4.06% following the earnings release.
• The bank launched new services focusing on digital and youth banking.
• The company maintains a strong market position with a 40% share in the Irish mortgage market.

Company Performance

Bank of Ireland demonstrated robust performance with a profit before tax of €0.7 billion for the first half of 2025. The bank’s cost-income ratio of 48% suggests effective cost management. In addition to financial stability, the bank is actively innovating, with new services like the "Coming to Ireland" account opening service and "Smart Start" banking for young customers.

Financial Highlights

• Profit Before Tax: €0.7 billion for H1 2025
• Cost-Income Ratio: 48%
• CET1 Ratio: 16%
• Interim Dividend: €0.25 per share
• Share Buyback: €590 million (80% deployed)
• Total Shareholder Returns: €2.6 billion (22% of market cap)

Earnings vs. Forecast

The earnings call did not provide specific EPS and revenue figures to compare directly against forecasts. However, the overall financial performance and strategic initiatives highlight the bank’s efforts to meet and potentially exceed market expectations.

Market Reaction

Following the earnings announcement, Bank of Ireland’s stock experienced a 4.06% decline, trading at €12.28. This movement contrasts with the stock’s 52-week high of €12.94, indicating a cautious investor sentiment despite the bank’s solid financial metrics. InvestingPro data shows the stock has delivered impressive returns, with a 52.31% gain year-to-date and a strong 36.53% return over the past six months. The bank maintains a "GREAT" Financial Health Score of 3.21 out of 5, suggesting robust operational performance.

Outlook & Guidance

Looking forward, Bank of Ireland projects a Return on Tangible Equity (RoTE) of over 17% by 2027. The bank anticipates net interest income to exceed €3.3 billion by 2026 and €3.5 billion by 2027. Additionally, the bank expects deposit growth of around 3% for the full year and assets under management to increase by 5-8% annually. Analysts tracked by InvestingPro forecast continued profitability, with EPS expected to reach €1.62 in 2025. For detailed analysis and growth projections, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

"We will be a smaller and leaner organization by 2027," stated Myles O’Donnell, CEO, emphasizing the bank’s focus on efficiency. CFO Marc Mullen added, "We expect to see AUM growth of around 5% for the year," highlighting growth prospects in asset management.

Risks and Challenges

• Economic Uncertainty: Fluctuations in the Irish economy could impact growth.
• Regulatory Changes: Potential changes in banking regulations may affect operations.
• Competitive Pressure: Maintaining market share in a competitive landscape remains crucial.
• Digital Transformation: Successfully implementing digital initiatives is vital for future growth.
• Credit Risk: Managing impairment charges and credit risk is essential for financial stability.

Q&A

During the earnings call, analysts inquired about the U.S. Acquisition Finance book, which stands at €1.5 billion. Questions also focused on the bank’s capital distribution strategy and restructuring costs, with management clarifying efficiency targets and credit risk transfer protection measures.

Full transcript - Bank of Ireland Group PLC (BIRG) Q2 2025:

Myles O’Donnell, CEO, Bank of Ireland: Good morning from Dublin, and welcome to our H1 results presentation. In February, I highlighted the Bank of Ireland equity story. Notwithstanding the global backdrop, including ongoing trade discussions, we retain our positive outlook to 2027. This is supported by the attractive markets in which we operate, notably our home market. Ireland’s resilient and growing economy underpins balance sheet growth, and we remain highly focused on efficiency.

All of this underlines our confidence in maintaining strong returns with expected RoTE in excess of 17% by 2027, supporting business model investment and sustainable shareholder returns. We have a highly capital generative business model. Turning to our H1 results. As we progress the final year of our current strategic cycle, we are executing well against all of our targets, and this is delivering tangible commercial benefits. We have grown Irish loans and deposits, and today, we are upgrading our NII outlook.

We have also grown wealth assets under management. Together, these contribute to our PBT of CHF0.7 billion. We’ve maintained our focus on efficiency with a 48% costincome ratio. We have a strong CET1 ratio of 16%, and we have declared a dividend of €0.25 in respect of H1 performance and reaffirm our guidance of a progressive full year dividend per share. The €590,000,000 share buyback announced earlier this year is ongoing with circa 80% deployed to date.

Since the start of 2023, the Group has returned CHF2.6 billion to shareholders through a series of buybacks and dividends equating to circa 22% of market cap and reducing the group’s share count by 11%. Our medium term outlook supports further capital returns. Slide seven provides an overview of progress under each of our three strategic pillars. We are building stronger relationships with more than 4,000,000 customers and this is delivering improvements in customer satisfaction. And our drive to make Bank of Ireland simpler to do business with is helping grow our active digital users, which supports a material reduction in complaints.

A simpler business is, of course, also about efficiency, which supports our circa GBP2 billion cost outlook to 2027. We continue to target efficiency, including customer journeys, targeted in sourcing, organizational redesign and artificial intelligence. Our work on AI continues as we assess the considerable opportunity this technology presents to identify the value pools where we can best put it to work. And under our third strategic pillar, we have grown our sustainable finance portfolios by 24%. Moving to Slide eight, Ireland is among the best performing advanced economies.

Output and the employment growth is well above the Eurozone average. We are, of course, vigilant to the evolving external backdrop, particularly around global trade. Against this backdrop, Ireland’s economic position offers reassurance. We have strong private and public sector finances, robust demographics and a diversified economy. We also see record employment, growing retail sales and housing output increasing, notably up 35% year on year in quarter two.

Multinationals account for 11% of total employment, spread across more than 1,800 companies operating in a range of sectors. Many of these companies are long established and embedded in the Irish economy, undertaking financial and professional services, advanced manufacturing and research and development. We expect Irish GDP growth of 8% this year, which includes domestic growth of 2.9%. These economic dynamics, in combination with the group’s strong execution, are contributing to the excellent performance of our Irish mortgage book that you see on Slide nine. The book grew at an annualized rate of 6%, the second consecutive year the book has grown at this pace.

Bank of Ireland is the number one provider of new mortgages in Ireland since quarter four twenty twenty two and our market share of new lending was 40%. Achieving this outcome, while maintaining strong risk and pricing discipline, has been supported by product innovation and significant investment in customer service. The mortgage business is integral to the group’s medium term growth prospects. Our everyday banking franchise, that’s current accounts and deposits, is seeing positive momentum. Customer balances increased at an annualized rate of 5% and flow to term was CHF1.1 billion, lower than last year, in line with expectations.

We continue to innovate and have recently launched two new propositions: Coming to Ireland, a bespoke account opening service which supports customers relocating here and Smart Start, which meets the banking needs of our seven to fifteen year old customers And later this year, the rollout of a major upgrade to our mobile app will commence, offering increased functionality and enhanced user experience. Our differentiated wealth and insurance franchise continues to deliver with assets under management of CHF55.6 billion. This equates to an annualized growth rate of 3% with strong inflows of CHF1.2 billion. Against the backdrop of volatile markets, am very pleased with this performance. The growth in AUM is also a key driver of the 8% increase in fee income for this business.

The favorable demographics in Ireland, in combination with the significant opportunity in wealth creation, are key parts of a structural and resilient growth story for our Wealth and Insurance business. That opportunity is underpinned by the group’s position as Ireland’s number one wealth provider via our Davy and New Ireland insurance businesses. Wealth and insurance offers long term capital light diversified income and we see it being the key driver of overall fee income growth into the medium term. Turning now to Slide 12 on our Corporate and Commercial division. This was a solid first half for our Irish corporate franchise, with the loan book up 3%.

Within this Irish book is CHF1.3 billion of funding, supporting the construction of close to 25,000 homes. To further drive momentum, we recently announced an increased ambition to support the development of 30,000 homes. This ambition is grounded in strong commercial discipline while also responsibly supporting this critical sector for Ireland. By deepening our corporate customer relationships, we’ve also increased fee income by 11%. As previously guided, we are continuing to run down a number of lower returning international portfolios.

And moving to credit quality, our Ireland book continues to perform well. We have increased coverage on our U. S. Acquisition finance book preemptively capturing potential risk, which is reflected in our impairment charge. Our Retail UK division is producing attractive and sustainable returns, generating ROTIO circa 15%.

During H1, both lending and deposits grew, While headline PBT here was lower, this is driven by a normalization of the impairment charge in the current period compared to a net write back last year. And the NPE ratio also improved by 20 basis points. Slide 14 sets out our target for the current strategic horizon spanning 2023 to 2025. We reiterate our 15% full year RODI target and the guidance for a progressive full year dividend per share is maintained. And mindful of our strong capital position and in line with our policy, the group will give further consideration to distributions at our full year results.

Our unique business model, the attractive markets in which we operate and the focused delivery of our strategy underpin our unchanged guidance for 2025 and our positive outlook to 2027. I will now pass over to Marc to bring you through our financial performance in more detail.

Marc Mullen, CFO, Bank of Ireland: Thanks, Myles, and good morning, everyone. There are three key financial takeaways from these results. Firstly, we’ve delivered a good performance in H1 with strong Irish loan and deposit growth while maintaining cost discipline. Secondly, we are reaffirming our key guidance for 2025, a ROTE of circa 15% and capital generation of two fifty to two seventy basis points. And finally, our H1 performance puts us well on track to deliver on our outlook 2027 and deliver a ROVI of greater than 17% in that year.

The income statement on Slide 19 demonstrates resilient income and an ongoing focus on efficiency. We’ve also declared an interim dividend of €0.25 per share, a payout ratio of 40%, in line with last year. Moving to Slide 20. Our NII performance in H1 was better than we originally expected, supported by strong business momentum, especially in Ireland. We’ve also meaningfully increased the size of our bond portfolio to capture higher income, with further growth expected in H2.

We are upgrading our full year NII guidance from greater than €3,250,000,000 to around 3,300,000,000.0 The key positive factors driving our NII performance this year, Irish loan and deposit growth, the structural hedge and the larger bond portfolio, will continue to support our NII growth into 2026 and 2027. We now see 2027 NII being higher than €3,500,000,000 reflecting the momentum we are seeing and the actions we are taking. We had strong lending growth in Ireland in H1, where we delivered an excellent performance in mortgages. The contraction you see in our international corporate portfolios primarily reflects the planned rundown in our GB corporate book. Looking ahead, we continue to see growth in net lending of around 2% for the full year, with Ireland growing by around 5%.

Our differentiated Wealth and Insurance business turned in another strong performance in H1. Against the backdrop of volatile markets, net inflows were resilient at €1,200,000,000 which equates to around 4% annualized of opening AUM. This helped AUM to close the half at a record €55,600,000,000 Looking ahead, we expect to see AUM growth of around 5% for the year, supported by inflows and market growth. And the structural drivers for this division remain very much intact, supporting our medium term annual growth expectation of 7% to 8%. Our deposit franchise saw further growth in H1, up 2% to €105,000,000,000 There was particularly good momentum in Irish everyday banking balances with a strong Q2.

Flow to term moderated to €1,100,000,000 in H1 from €1,900,000,000 in H2 of last year, in line with our expectations, and we see this moderation continuing. For the full year, we now see overall deposits growing by around 3%, up from 2% previously. Slide 24 provides an update on our structural hedge. Average volumes are modestly higher in H1, and we see this trend continuing in H2. The hedge yield continues to grow but still remains well below current market rates.

This upside is a key driver of our positive NII outlook over the next number of years. Turning now to business income. H1 saw growth of 4%, in line with our expectations. This was driven by a strong performance in our Wealth business. Associates income was lower, with this down to the nonrecurrence of gains in the prior year period.

For the full year, we expect growth in total business income, including JVs and associates, of around 5%, unchanged from our view earlier in the year. As Miles said, we have a clear focus on efficiency. Operating expenses were 3% higher in H1 with a costincome ratio of 48%. This is primarily driven by higher staff costs, a function of tight labor market conditions. Our operating expense guidance for the year is unchanged at 3%, and we reiterate our outlook for costs to be around €2,000,000,000 at 2027.

Levies and regulatory charges are substantially booked in H1, and we expect them to be around €130,000,000 for the full year. Non core items were €83,000,000 in H1. The majority of this is down to investment in restructuring, including redundancy costs, as we evolve our business model in line with our strategy. We expect a broadly similar quantum of noncore items in H2. This is an acceleration of spend relative to our guidance in February, with total expected restructuring costs over the three years of 2027 materially unchanged.

This investment is directly linked to our outlook for operating expenses of around €2,000,000,000 in 2026 and 2027. On U. K. Motor Finance, there is no change to our provision in H1. We expect further clarity on this in the second half.

Asset quality remained robust in H1 despite the uncertain global economic backdrop. Our NPE ratio was 2.6%, up 40 basis points year to date, but close to multiyear lows. And our overall provision coverage is higher at 1.4 in June. We expect the NPE ratio to reduce modestly in H2, reflecting management actions. We’ve taken a €137,000,000 impairment charge for H1, equivalent to 33 basis points annualized.

This compares to our guidance of low to mid-20s back in February. The H1 charge comprises two elements: 23 basis points reflects net portfolio experience. The biggest driver of this was our UK acquisition finance book, with a charge in that book partly offset by credit insurance protection. The balance of 10 basis points relates to additional management adjustments to capture updated model assumptions and PMAs that reflect the changed environment since the start of the year. We now expect the full year charge to be around 30 basis points.

If I stand back from the detail, the key takeaway is that our overall asset quality is in good shape and our customers are navigating the changing environment very well. Turning now to Slide 13, capital. We finished the half with a CET1 ratio of 16%. The building blocks for this were the Basel IV benefit of 115 basis points, organic capital generation of 110 basis points, the dividend accrual and investment in RWA growth. Our full year guidance is unchanged.

We continue to expect two fifty to two seventy basis points of organic capital generation. The higher capital generation in H2 is mainly explained by timing issues around levies and movements of intangibles. Slide 31 recaps on all of our full year guidance, with RoTE of around 15% expected. Our closing slide here sits at the building blocks that produced our positive medium term outlook, underpinning confidence in our RoTE building to in excess of 17% in 2027. Thank you for your interest in Bank of Ireland.

Our Chief Sustainability and Investor Relations Officer, Eamon Hughes, will now take us through the Q and A.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Thank you, Mark. At this time, we invite those analysts wishing to ask a question to click on the raise hand button, which can be found at the bottom of your screen. When it’s your turn, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you have been introduced, you may unmute yourself, turn your video on and ask your question. We’ll just wait a moment now for the queue to form.

It looks like our first question will come from Diarmid Sheridan in Davy. Diarmid, you may now unmute your audio, turn your video on and ask your question.

Diarmid Sheridan, Analyst, Davy: Good morning. Thank you, Eamon. Good morning, Mark. Good morning, Myles. A couple of questions, if I may.

Maybe just firstly on the impairment charge. Mark, how should we think about the SRT and how they interact with either changes in the credit quality in the acquisition finance portfolio or when you put provisions on? Just trying to understand how the dynamics there work and if there’s any implications for risk weighted assets? Or is that protection kind of fully there to the extent that the SRTs are there? Maybe just secondly then on net interest income and the guidance that you provided and looking out to 2026 and 2027, to what extent should we expect those additional liquid assets that you’ve put on and the hedge to be kind of key drivers of what you’re indicating this morning in terms of that upside that you’ve talked to?

And then finally, maybe, Myles, when you talk to distributions and the target CET1 level, I guess, firstly, is that likely to be something that is a kind of a multiyear to get down towards the just above 14%? And secondly, is there anything stopping you from, at a total level, distribution greater than 100% of earnings in any given year?

Myles O’Donnell, CEO, Bank of Ireland: Okay. Good morning, Dermot. Let me take the broad capital distribution question. I’ll ask Marc to take impairment and that NII profile. On capital distribution, Dermot, consistent with our approach since 2022, our objective clearly is a progressive full year DPS and an assessment of surplus capital returns at year end.

And as I referenced in my narrative earlier, in terms of track record, the group has returned €2,600,000,000 in dividends and cash and buybacks. So hopefully, track record demonstrates that we understand shareholder distributions are integral to the Bank of Ireland equity story. Clearly, had a very strong capital position at the half year with a CET1 of 16%. That’s going to grow out over the course of the second half of the year, and we will think about that in the context of a target capital ratio to be above 14%. Marc?

Marc Mullen, CFO, Bank of Ireland: Yes. Thanks. Good morning, Diarmid. So maybe to stand back on asset quality overall, I’d say, Diarmid, we’re in very, very good shape. Our NPE ratio is 2.6% at H1.

That’s close to multiyear lows. As I look across our portfolios overall, our customers are really weathering, I’d say, the evolving environment very well. On the CRT question, which I think relates to U. S. Acquisition finance in the first half.

So I mentioned in the presentation, 97,000,000 of our charge in H1 relates to portfolio experience. That reflects, I’d say, largely The U. S. Acquisition finance offset by the benefit of the CRT protection in place. Maybe to step back from that.

So we’ve got CRT protection in place over about 70% of The U. S. Acquisition finance book. That’s an integral part of our risk management framework, and it’s designed to protect the group if there is adverse credit experience. And if we think about what’s happening at H1, it’s doing exactly what it should do.

It’s providing a partial offset against the loss experienced in the book. I would emphasize that the that does not represent actual losses have hit at this stage. So that’s effectively a mark to market. And again, as we work through that, if the Stage three which drives that, were to unwind, the recoverable asset would reduce in line with that. Maybe turning to NII, Dermot.

Mean I think there really it’s a real story of, I’d say, positive momentum in the context of NII, and that NII trajectory is obviously a key building block into our overall outlook of RoTE growing to greater than 17% by 2027. If we look at maybe the key building blocks there, really some good momentum there. We’ve got strong Irish loan deposit growth in H1, so 5% annualized growth there. The structural hedge is playing out as we expected, maybe even a little bit better than that in terms of the reinvestment yields. And also, we’ve increased our bond portfolio in H1 as well from €9,000,000,000 to around €15,000,000,000 and there’s further to go in that.

Those factors are supporting our upgraded NII outlook. So we’ve upgraded our outlook this year to around €3,300,000,000 from €3,250,000,000 previously. We expect NII to grow next year to greater than €3,300,000,000 And in 2027, we now expect NII to be greater than €3,500,000,000 compared to €3,500,000,000 previously. If I look at where consensus is today, I don’t think that consensus has probably fully captured that.

Diarmid Sheridan, Analyst, Davy: Great. Thank you.

Myles O’Donnell, CEO, Bank of Ireland: Thank you very much.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Our next question comes from Sanjina Datawala in UBS. Sanjina, maybe unmute your mic and turn your video on. Thank you.

Sanjina Datawala, Analyst, UBS: Good morning. Thank you for taking my questions. Can I have two follow ups from the previous discussion? And then I have a question on noncore. So maybe on the impairment charge, when we look at the CRT benefit within, is it possible to break out?

Because 23 basis points driven by US acquisition finance still seems large if part of it is covered. And then on the guidance implied second half charge of 27 basis points, that’s still higher than the low to mid twenties that we were expecting before. So what are you seeing, in terms of, expectations for the second half, which which has that charge still higher than a mid 20 kind of thing? And then the second follow-up on distributions, should we expect the the consideration to the greater than 14% target at the end of each year, especially given the current excess position, or could it be more phased? And then my question on non core charges, it’s it’s about a 50% increase for this year.

Wondering what’s the total restructuring budget if you could give us a sense. And then what do we now expect for 2026, which was supposed to be again hundred to 01/25 before? And then more importantly, what benefits you’re seeing from these investments in the future?

Myles O’Donnell, CEO, Bank of Ireland: Lovely. Thank you very much for that, Sanjina. Let me comment more broadly on the impairment charge and also capital distributions and then hand to Mark on some of the detail both for H2 impairment and indeed non core. On impairment, overall, Mark would have called us out, asset quality remains very healthy. The best measure clearly overall is our group nonperforming exposure.

That’s at 2% of total book, close to multiyear lows. And when I look across the portfolios across our group loan book, the customers are in good shape. Our impairment in The U. S. Is higher, and I regard that very much as a preemptive measure to capture potential risk.

So this is getting ahead of, I guess, the potential problem, getting our arms around it. Mark talked about the realized losses versus what we’ve taken in a half year. And the work we’ve done here is what you would expect us to do, particularly given The U. S. Dynamics throughout quarter two.

And on capital distributions, again, Sanjina, objective here is a progressive DPS that’s very important to us and also the return of surplus capital. And we will consider that in the context of where that capital is at, at the end of the year relative to a target to be above 14%. It is as straightforward as that.

Marc Mullen, CFO, Bank of Ireland: Yes. And Jeanine, looking at our guidance for the year, our outlook for the year is circa 30 basis points. If you go back to our H1 charge, two elements to it. So the net portfolio loss activity on the one hand and also the further adjustments we’ve made, which are really an additional P and A and also increasing our weightings to the downside. That really reflects our judgment as of June as to the change in the environment.

We will review that again at the end of the year. But if you look at our guidance for the year, we’re effectively assuming no change in that, so that continues, and portfolio loss activity similar to the first half in H2. And if I maybe go out into 2026 and 2027, we’d see a normalized cost of risk somewhere in the mid-20s. On noncore, really, biggest driver of noncore, as I mentioned in the presentation, is really into restructuring charges. And in terms of that, we see some acceleration, but I’d say the overall envelope materially unchanged.

And those costs, they include voluntary redundancy costs and other restructuring costs, are directly linked to our outlook for having costs flat at around EUR 2,000,000,000 in 2026 and 2027.

Sanjina Datawala, Analyst, UBS: Thank you. So is there more to come in 2026 and 2027?

Marc Mullen, CFO, Bank of Ireland: Yes. That’s similar to what I was saying in February. So it’s sort of a three year sort of program, Sanjina. So we’d expect something similar next year and then materially lower in 2027.

Myles O’Donnell, CEO, Bank of Ireland: I guess, Sjina, that plays in very much to our cost target of €2,000,000,000 by 2027. And Mark referenced redundancies. I said before that I expect that we will be a smaller and leaner organization by 2027. Headcount will reduce over the course of the second half of this year, and that includes two sixty voluntary redundancies expected before year end and most likely more in 2026 as well. Thanks, Sungena.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Okay. Our next question comes from Grace Dargan in Barclays. You may unmute your microphone, Grace.

Grace Dargan, Analyst, Barclays: Good morning. Thank you for taking my questions. Maybe I could start with one on the deposit performance, which has been really strong. Maybe you could be a little bit more granular around the kind of retail corporate and the geographic split and the mix within the deposits as well as how that’s outperformed and what you’re expecting in H2 and next year in particular? And then secondly, can I just ask a couple of clarifications?

So on NII, you said maybe further still on the bond portfolio. Do you have a sense of how much you’re looking to grow that book? And then finally, can I just confirm, did you say you were looking for similar restructuring charges in 2026 on 2025? Or did I just mishear that? You.

Myles O’Donnell, CEO, Bank of Ireland: Morning, Grace, and thank you for that. I mean on the broad answer to your deposit question, firstly, very pleased that, that deposit book has grown at an annualized rate of 5%. Of course, at the same time, as on our Wealth business, we’ve seen our AUM at the highest level ever, including net inflows of 1,200,000,000.0 as well. So both parts of that product offering, the deposit offering plus the more sophisticated wealth offering working well. Marc, over to you on some of the detail.

Marc Mullen, CFO, Bank of Ireland: Yes. And Grace, if you look at the underlying or the individual businesses, it’s really our Irish retail business, so everyday banking, those current accounts and deposits, which have grown in the first half of the year, very strong Q2 there. And that’s one of the reasons why we’re increasing our guidance in terms of deposit growth for the full year to be around 3% now given that Q2 performance. I’d say also just the flow to term playing out very much as we expected. So it’s reduced from €1,900,000,000 second half of last year to 1,100,000,000.0 in the first half of this year, and we expect further reduction and moderation in the second half of the year.

We’re seeing that on the ground. Should I go on to maybe the bond portfolio, Grace? So I’d say further to go there, maybe something similar. So up at 5,000,000,006 billion euros and we’re working actively on that. We see an economic opportunity there, and that’s going to support that really positive NII outlook that we’ve given this morning.

And on restructuring costs, correct. Similar in the broadly similar ballpark next year and then materially lower in 2027.

Grace Dargan, Analyst, Barclays: Okay. Thank you.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Thank you, Grace. Okay. Our next question is from Boricola Ramirez from Citibank. Do you want to unmute your phone, Borca?

Boricola Ramirez, Analyst, Citibank: Hello. Good morning. Thank you very much for your time, for taking my questions. I have two questions. Firstly, I think on the cost side, I think I don’t know why, but consensus does not seem to fully incorporate your cost savings.

So I think there seems to be some upside to consensus estimates. That would be my first question. And then my second question would be On the NII sensitivity, if you could kindly provide a bit more details on the developments compared to the second half? And also, if you have any actions to decrease the sensitivity to rates? Thank you,

Myles O’Donnell, CEO, Bank of Ireland: Borger, and good morning. I mean on costs, the key message that’s most important for me to communicate is that we remain on track with our cost target of CHF 2,000,000,000 by 2027. We are in an inflationary environment, so the team are working hard across the organization to secure efficiencies. I think we can see that in our headline numbers overall. If we go back to last year, costs increased by 6%.

This year, we’re guiding 3%. So that work is coming through in terms of limiting the impact of inflation. Deploying a range of interventions, some examples, digitizing our customer journeys. We launched a new business loan platform linked to that, really working hard with our third parties to secure greater value from them, working on our organizational design overall, but also insourcing cheaper and better, frankly, engineers for our technology change programs. And I referenced AI as well.

That’s an important component. And overall, I mean, essentially half the cost of Bank of Ireland is people costs. So we do know that, of course, while we continue to invest in our people, overall headcount will reduce between now and ’27 with some of those departures occurring in the second half of this year. Mark, on NII sensitivity?

Marc Mullen, CFO, Bank of Ireland: Yes. Just to add, Borje, you’re right in terms of the consensus. There is a gap, but obviously, we’re reiterating our outlook this morning. So on the NII sensitivity, key factors there versus the year end, or the increase in the structural hedge, which reduces sensitivity. And also on the upside, we’ve reflected also our experience of pass throughs as we’ve gone through the cycle.

So those are the two key moving parts. And I noted in the call this morning that we expect the structural hedge to continue to modestly increase as we go forward, in line with our expectations on deposit growth.

Boricola Ramirez, Analyst, Citibank: Thank you. Very clear.

Diarmid Sheridan, Analyst, Davy: Thank you, Markus.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: That’s great. Our next question is from Sheila Shah in JPM. Sheila, you may unmute your microphone.

Sheila Shah, Analyst, JPMorgan: Great. Thank you. Hopefully, you can hear me. Yes, great. Two questions from me, please.

Firstly, I’m looking at your mortgage market shares. They’ve held at 40% consistently for the last few years, actually. And I’m wondering around the competitive dynamics in the Irish market, where do you expect these mortgage market shares to be held at 40%? Or do you expect it to maybe drop over the coming quarters? And then secondly, again, on mortgage side, I’m looking at some data points you provided around the mortgage to insurance penetration.

Six out of 10 take out of new life insurance policy, four out of 10 take out a general insurance policy. What’s the upside to this? Where do you think mortgage to insurance penetration could go towards? Is that something that you’re that you see as a growth prospect? Thank you

Myles O’Donnell, CEO, Bank of Ireland: for that, Sheila, and good morning. I mean the part of the fundamental pillar clearly of the Bank of Ireland equity story is the growth in Irish loans and our home market, supported by a very strong economy, but also supported by structural opportunities such as the mortgage market in particular. So the biggest factor that drives value for Bank of Ireland market is the fact that the mortgage market itself and size is increasing. So that’s largely driven by the increased supply of new homes that is coming to the market and Bank of Ireland’s position in relation to that. That’s one of the reasons why the book has grown by 6% last year and 6% on an annualized basis so far this year.

In the context of competition, I think, I mean, I’ve said it before, I do feel given that Ireland is an attractive market, that competition is going to increase. I think we can see that both from traditional banks but also from some of the neo banks. We’re well positioned to compete. Strong risk and pricing discipline, we’ll always maintain that. But the combination of a physical footprint plus our digital offering is really important.

And in the mortgage space, we’re seeing that come through. And so it’s not so much, Sheila, that I have that we have a mortgage market share target. It’s an outcome of everything that we do. And again, value really comes from that size of market growing and that pricing discipline really important in the context of protecting the value of the total book and not just flows of share. But I do think out to the medium term, a more normalized share is probably in the low to mid-30s.

We’re comfortable with that. The book will grow at that rate. I go back a number of years where the market share was in the region of just 20%, 21%. And on the cross sell, I mean one of the reasons why we talk about Bank of Ireland having a differentiated business model, it is because of that wealth and insurance division from New Ireland insurance but also from Davion. And that rate of cross sells of six customers, mortgage customers taking a life product, four taking a home insurance.

It’s been pretty stable out over the last number of years. We’ll, of course, want to do more in that space. One factor that we have to think about, of course, as the broker market and the mortgage market becomes more dominant, that can have an impact on that cross sell. But again, a consistent, solid performance. And actually, I know it’s not the question you asked, but there are many other areas in our Wealth business, particularly on the insurance side, the pension side, which does offer upside as well.

Thank you for that.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Our next question, we’re going to go now to Andrew Stimson in KBW. Andrew?

Andrew Stimson, Analyst, KBW: Two for me, please. First one on Slide 25. I’m just wondering what’s driving the other valuation items to the result this half, please, is quite a big swing. I appreciate those lines falling outside the scope of the guidance that you kindly provide. But just wondering how we should think about that from here.

And if for whatever does cause that calms down, does that reverse into a bigger positive in the future? Does it just get back to zero over time, please? And then the second point on the bond portfolio increasing. Thank you for the extra detail there. Can you talk about the durations that you’re investing in there?

And just maybe how the shape of the yield curve has pushed you out in durations or whether there’s further benefit if you do see this steepening continue, whether there’s even more opportunity to take more duration and get bigger benefit there, please?

Myles O’Donnell, CEO, Bank of Ireland: Morning, Andrew. Thanks for those. I’ll ask Marc to take those, please.

Marc Mullen, CFO, Bank of Ireland: Yes. Andrew, the valuation items there are actually probably similar, maybe a little bit lower than we published in IMS actually in April. So we don’t budget those at the beginning of the year as they relate to market movements and interest rates, FX, etcetera, and they’re largely mark to market, which work to par over time. But that’s what’s going on there. So we don’t make any allowance for that in H2 either positive or negative as we look forward.

On the bond portfolio, we’re seeing an attractive opportunity there. Credit spreads are somewhere around 50 basis points higher on sovereigns and related bonds. And that does that presents an opportunity relative to, let’s say, cash at the ECB. That’s what we’re capitalizing on in terms of duration on those up to around eight years.

Chris Canton, Analyst, Autonomous: Thank

Myles O’Donnell, CEO, Bank of Ireland: you, Andrew.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Okay. We’ll move on to our next question from Chris Canton, Autonomous. Chris, if you want to unmute your microphone.

Chris Canton, Analyst, Autonomous: Good morning. Can you hear me?

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: All good, Chris.

Chris Canton, Analyst, Autonomous: I’m not sure the camera is working. Yes. Thanks for taking the questions. One on NII and one on leverage finance, please. So in terms of the discussion around the bond portfolio picking up a bit of a better spread on liquidity, you’ve nudged up your near term balance sheet growth expectation, the hedge is growing, nudged up your 25% NII guide.

Could I invite you to comment on the guidance you gave for 27% NII? So I think it was circa $3,500,000,000 you had in earlier in the year. Just if you could speak to how you’re seeing the path towards that? And should we expect a bit of upside to that given that it feels like the sort of drivers are heading in the right direction? And then on leverage finance, could you just remind us how big the book is?

And in terms of the CRT coverage, what’s the sort of attachment point? So I guess, put another way, this is one of the things that investors probably forget that you have, and we have a court like this where you take a bit of a mark on it and everyone gets quite upset. What’s the sort of order of magnitude of maximum risk, I guess, is the question? So if that entire book blew up, when you say it’s 70% covered, we kind of need to know the attachment points, right? So you’re taking kind of a 15% slice of coverage against 70% of the book, like what’s the overall actual exposure covered through CRT if the whole thing went belly up?

And I’m not suggesting that it would do that, but just keen to understand how much protection you’re actually getting when you say you’ve got 60% to 70% covered in some fashion. Okay.

Myles O’Donnell, CEO, Bank of Ireland: Chris, thank you for that. Let me offer some of the data points on The U. S. Acquisition finance book, then Marc can translate that into our CRT profile and also your question on 27 upside to NII guidance. The size of the book, The U.

S. Acquisition finance book is 1,500,000,000 so that’s less than 2% of group loans. So it’s important, but I guess not material in the overall profile of the loan book. Given the macro backdrop, particularly since interest rates began to increase, we’ve been more cautious in recent years. So that book has declined from about €2,400,000,000 since 2022.

I should say, Bank of Ireland has been in The U. S. Acquisition finance business for about twenty five years now. This has got a very strong track record of overall asset quality and indeed profitability. It’s navigated its way through very positive economic environments, but also significant periods of economic uncertainty and generally has held up well.

And I know I said it earlier, but it’s important to highlight, and Markus said it too, the impairments we’re taking here, regard these very much as a preemptive measure to capture potential risk. Mark?

Marc Mullen, CFO, Bank of Ireland: Yes. And Chris, specifically then in terms of how it works, effectively, this is a first loss. It’s a risk sharing with the investors. The bank bears a first loss. And then there’s a second loss of up to 16% on the book on the covered element.

So that’s where the protection comes. And as I said earlier, what’s happening there is that is doing exactly what it should do if we experience an adverse credit in the first half of the year. From an NII perspective, Chris, yes, as you mentioned in the presentation, actually, we have upgraded our outlook for 2027. So we now expect NII to be greater than €3,500,000,000 versus around €3,500,000,000 back in February, and that’s really reflecting the momentum we’re seeing in terms of deposits and lending in Ireland, the benefits from the bond portfolio and also the structural hedge playing out and maybe some of those reinvestment yields maybe a little bit higher than we had allowed for the beginning of the year.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Thank you, Chris. Okay. We’ll now move on to our next question from Rob Noble in Deutsche Bank. Rob, do you want to unmute your microphone?

Marc Mullen, CFO, Bank of Ireland0: Hello, can you hear me?

Marc Mullen, CFO, Bank of Ireland: Yes, Ralph.

Marc Mullen, CFO, Bank of Ireland0: Yes, sorry about that. Just a few questions or clarification. I think you touched on each of these already. But say the bond portfolio has got GBP 5,000,000,000 to 6,000,000,000, but your LCR is at 198%. Is it what’s stopping you doubling the size of the portfolio?

What’s the limits to how far that can actually go theoretically? The leverage finance business, it is that a business that really fits into an Irish retail bank? Like is it it seems to cause more headaches, just from an analyst perspective. It seems to cause more headaches than we can see the benefits sort of separately, because I don’t get the income and P and L of that business. And then the restructuring charges, did you just to clarify, did you say GBP 300,000,000 over three years, but $160,000,000 year, then another 160,000,000 next year?

So kind of implying nothing in 2027. And do you really expect like do you really expect there will be no material restructuring necessary for this business from 2027 and beyond?

Myles O’Donnell, CEO, Bank of Ireland: Okay. I mean thank you, Rob. Let me take The U. S. Acquisition finance business and how it plays into Bank of Ireland.

Again, I am, I guess, repeating some of the narrative from Christmas call, but it’s important. This is a business that we have been in for a quarter of a century, has a strong track record of overall performance. So when I look at the P and L performance out over through the cycle period, it has done very well and again navigated through difficult periods as well. Of course, we have taken a material impairment charge, and I understand the nature of the question, Rob. But I would regard, again, our impairment as a preemptive measure.

And of course, the team on the ground now has actually given the broader U. S. Backdrop right now, there’s very little acquisition finance being written, particularly in the mid market, which is the area that we participate in. So that team are working very, very hard to make sure that, that risk that we’ve captured is mitigated and diminished insofar as we can, and we look forward to updating the market on that in due course. But I would review I would regard it in that context.

And Marc, on the bond portfolio?

Marc Mullen, CFO, Bank of Ireland: Bond portfolio, yes. So Robert, you’re right. The bonds are LCORE eligible, etcetera. They can be pledged, etcetera. So no constraints from that perspective.

Our expectation is we’re going to do the same again, maybe a little bit more in the second half in terms of bonds. And obviously, we’ll review the situation at that point, but it is even what we’re allowing for. That’s a key support of that positive NII trajectory and then that Rohe built into greater 17% by 2027. And noncore, just to clarify what I said earlier, broadly similar next year and then materially lower in 2027. I don’t think I said zero.

Marc Mullen, CFO, Bank of Ireland0: Just the bond point, I guess, what’s the factor that stops you ramping? Is it stress test related rather than why

Myles O’Donnell, CEO, Bank of Ireland: wouldn’t all of

Marc Mullen, CFO, Bank of Ireland0: your cash be in bonds?

Marc Mullen, CFO, Bank of Ireland: Yes. So I think the stress test is not really a factor actually because though the bonds that we’re buying will be put into the held hold to collect category, and therefore, they’re effectively protected in the stress test. So I think Robert, it’s more of where we are, where we started from. Historically, the bond portfolio has been about $1,718,000,000,000 euros We’re going to go beyond that, and we’ll get to a next point, and then we’ll review at that point if there’s further to go for.

Sheila Shah, Analyst, JPMorgan: Okay. Thank you.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Thank you, Rob. Okay. Our next question comes from Dennis McGoldrick from Goodbody. Dennis, you may have met your mic.

Marc Mullen, CFO, Bank of Ireland1: Good morning, Myles and Mark, and thank you for taking my questions. Two, please, if I may. One is just around a clarification on impairments and cost of risk. So obviously, the guidance now is 30 basis points this year. But am I correct in saying that for ’26 and ’27, the guidance is back to the low to mid-twenty basis points?

And then secondly, just maybe a little bit more color on the term deposit growth that you saw in H1, which obviously continues to reduce. Maybe just around is that flow coming from new flow or within existing customers? And then maybe just a comment on where the deposit beta is at now, please. Okay.

Myles O’Donnell, CEO, Bank of Ireland: Thank you very much for that, Dennis. Mark?

Marc Mullen, CFO, Bank of Ireland: Yes. Impairment, Dennis, I think a bit sort of mid-20s as we go forward. So I think that’s a good guide. And remember, our charge this year, there’s two elements. One is the underlying portfolio activity charge, let’s say, what’s going on the ground, the benefit of protection, etcetera.

But really, the delta versus our guidance at the beginning of the year is because we’ve taken the additional adjustments, so the P and A and the adjustments to the probability weightings. So mid-20s. And in terms of the term deposit growth, yes, a mix, some rollover of customers and there’s certainly some new. But I’d say when you look at the weekly figures, Dennis, what you see is Q2 will be there’ll be less flow to term than Q1, and that plays into our expectation of a moderation in the second half of the year and into next year as well.

Marc Mullen, CFO, Bank of Ireland1: Okay.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: We move on to our next question from Seamus Murphy in Carrick Hill. Seamus?

Diarmid Sheridan, Analyst, Davy: So it’s just a question actually on capital. Obviously, you’ve given very strong capital guide, you’ve a 60% CET1 ratio. I think you said also that the buyback is 80% complete from FY 2024. And so I’m just trying to understand why the Board is or at least our bank bond is not more dynamic in terms of the decision around buybacks or special dividends at the interim stage because you have given very strong guide for 26%, 27%. And it looks like it’s kind of we’re always kind of very, I won’t say backward looking, but certainly, I think maybe the just trying to understand why a little bit more dynamism around potentially interim consideration of the level of capital isn’t there.

Myles O’Donnell, CEO, Bank of Ireland: Seamus, thanks for that, and good morning. Again, just to recap, we’ve discussed a number of the different components of the business model over the course of this year. When you step back from it overall, this is a business that’s going to generate between two fifty and two seventy bps of capital this year and again supportive of that consistent target to be in the region of 15% really for this year. So overall, the business is performing very well, strong levels of capital generation. And certainly, last year was the first year we reintroduced interim dividend.

So we’re doing that again this year, and that’s our objective to get capital back more quickly. We know clearly that the equity story for Bank of Ireland, not just about our ability to generate capital but also to distribute it. We understand that. But our approach has been broadly consistent since 2022, which is, again, a progressive DTS for full year and an assessment of capital returns at the end of the year. That’s our approach and our objective, again, is to get capital back to shareholders.

Thanks, James.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Okay. It looks like we’re going to our last question. We’re going to go back to Guy Stabbings in BNP.

Marc Mullen, CFO, Bank of Ireland2: Good morning. Thanks for taking the questions. Just a couple of follow ups, really. So the first one was back on impairments. I appreciate it’s very difficult to predict the macro in this environment or tariff news flows, but interested in when you updated your models, what assumptions you were making on tariffs and if it’s consistent with the developments in the past few days?

I mean, I’d make the observation that you already start from a position of strength in terms of coverage levels in the performing loan book. So the move to date is a little bit conservative there. And then on restructuring, the messaging seems to be that this is more than just timing on restructuring, unless I’m missing something. But if 26% is similar to 25%, there’s a modest charge. And 27%, it looks like you’re going to be higher than where expectations were, hence some focus today.

So I’m interested what’s changed there? I mean, this you responding to others in the market? Or is it just what’s needed to enable you to manage the cost base to €2,000,000,000 which was, I guess, always considered a stretching target? Thank you.

Myles O’Donnell, CEO, Bank of Ireland: Morning, Guy. Let me take the relationship between the impairment and tariffs and the economy and market on the restructuring. I mean, certainly, overall, I welcome the news regarding the agreement on U. S. And EU tariffs.

I think a lot of the detail needs to be ironed out, but the headlines, I think, begin to offer much needed clarity and certainty. And to your point, I mean, and therefore, Bank of Ireland entered this period from a position of economic strength for Ireland and a position of balance sheet strength for Bank of Ireland. Our latest forecast, we project GDP of 8% this year. Within that, the domestic economy likely to grow by 2.9%. And beyond this year, sustained annual growth of about 3%.

And these forecasts broadly capture the latest news on tariffs that came out on Sunday and yesterday. So we expect both the domestic and the multinational sectors in the Irish economy to be both resilient and growing. And certainly, that supports our objective of growing our balance sheet and indeed growing our capital generation as well. Marc?

Marc Mullen, CFO, Bank of Ireland: Yes. So Guy, on the restructuring, I’d say a little bit higher, but not materially so. And again, I’ll come back to what’s the purpose of that. It’s ultimately directly linked to the delivery of that circa £2,000,000,000 cost outlook that we’ve given in 2026 and 2027 and the range of initiatives underway, which we’re making good progress on.

Marc Mullen, CFO, Bank of Ireland2: Okay, thank you.

Myles O’Donnell, CEO, Bank of Ireland: Thank you, Kai.

Eamon Hughes, Chief Sustainability and Investor Relations Officer, Bank of Ireland: Okay, everyone, that concludes today’s conference call. Thank you for your participation this morning, and we look forward to meeting with as many of you as possible over the coming weeks. And if you have any questions on these results, please reach out to any of us on the Investor Relations team. Thank you.

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