For Bank of Ireland bosses, 2024 has long been shaping up to be a year they might rather forget.
While rival AIB has been one of the darlings of the Irish stock market of the year, rising 36 per cent, Bank of Ireland has only edged a little over 5 per cent higher – as the sector enjoys still-elevated interest rates even as the European Central Bank (ECB) has set off down a path of reducing borrowing costs.
Autonomous Research, part of AllianceBernstein, circulated a note to clients earlier this month, lamenting “messy messaging” from Bank of Ireland.
It started, Autonomous said, when the bank unveiled full-year results in February and signalled net interest income for 2024 would be weaker than the market had been expecting. AIB, on the other hand, had ensured consensus forecasts were “more conservatively struck”, it noted.
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The next “allergic reaction” came, it said, when Bank of Ireland issued a trading statement in October, resulting in analysts having to take red pens to their estimates for this year and next.
Bank of Ireland’s shares have also been trading under a cloud since the UK Financial Conduct Authority (FCA) announced in January it was looking into whether motor finance customers had been overcharged under the historical use of discretionary commission arrangements (DCAs) between car dealers and lenders. Bank of Ireland has a 2 per cent share of the UK motor finance market.
A landmark court of appeals ruling in London in October – involving three lenders – appeared to set the bar higher for dealers and lenders than even the FCA had required, potentially setting the stage for a massive compensation programme across the industry.
The three test cases are now under appeal with the UK supreme court. The FCA is holding off until at least next May before deciding its next steps.
Analysts at RBC Capital Markets and Autonomous estimate the Bank of Ireland faces between €950 million and €1 billion of total costs stemming from the industry-wide investigation. That includes fines, redress and administration expenses.
Meanwhile, The Irish Times reported on Thursday that Bank of Ireland has agreed to pay a company controlled by former Davy shareholders €48 million to settle legal disputes between both sides – and other matters – stemming from the bank’s purchase of the stockbroking firm in 2022.
The deal is being seen as a major victory for former Davy shareholders, including senior figures who were involved in a controversial bond trade a decade ago that resulted in a Central Bank fine. But for Bank of Ireland, at least it draws a line under the matter.
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