Bank of Ireland's pre-tax profit rises by 92%

The bank, which operates across the Republic of Ireland and the UK, is one of Northern Ireland's so-called "big four" banks

Bank of Ireland's annual pre-tax profit rose by 92% in 2023 to just under €2bn (£1.7bn).

But its UK retail division, which includes its Northern Ireland business, saw its profit fall slightly from €276m (£236m) to €271m (£231m)

The bank said this reflected lower lending volumes in the UK driven by its "value over volume" approach.

This means the bank is targeting only more profitable lending opportunities, particularly in mortgages.

As part of this strategy it has ended its financial services partnership with the AA in the UK and stopped offering unsecured personal loans under the BoI (UK) and Post Office brands.

The bank also has a substantial car finance business in the UK which trades as Northridge Finance.

An investigation into whether people had been paying too much for car finance in the UK was launched by the Financial Conduct Authority (FCA) last month.

The FCA is looking at "discretionary commission arrangements" under which some lenders had allowed car dealers to adjust interest rates on loans, which would improve the commission they received.

In short, the higher the interest rate, the higher the commission, creating an incentive for brokers to increase how much people were charged for their car loan.

Some banks, such as Lloyds, have already begun to set aside money to cover the potential costs arising from this investigation.

However Bank of Ireland has not taken that step saying it is "not considered that a legal or constructive obligation has been incurred in relation to these matters that would require a provision to be recognised at this stage".

'Signs of resilience'

It added that it is not currently practicable to estimate the extent of any financial impact.

The bank said its overall strong performance was driven by its consumer banking division in Ireland where income more than doubled.

Chief Executive Myles O'Grady said the Irish economy was showing "clear signs of resilience" including total employment increasing to a record 2.7m people towards the end of last year.

Rising interest rates are generally good for bank profits as they enable banks to increase the "spread" between what they charge borrowers and pay to savers.

That spread is known as the net interest margin (NIM) and at Bank of Ireland it increased from less than 2% in 2022 to just over 3% in 2023.