The Governor and Company of the Bank of Ireland (NYSE: IRE) is one of the largest financial services groups in Ireland. The company conducts its business through 295 full-time retail bank branches, of which 251 were in Ireland and 44 in Northern Ireland. There are no full-service retail bank branches in Britain. Operations in the rest of the world are undertaken by Bank of Ireland Asset Management through offices located in the US, the UK, Australia, Canada and Japan, Corporate Banking through offices located in the UK, France, Germany and the U.S., and Global Markets through offices located in the UK and the U.S.
Retail Republic of Ireland offers a full range of banking services to all major sectors of the Irish economy, including individuals, small and medium-sized commercial businesses, and industrial companies. Bank of Ireland Life offers life assurance, protection, pensions, and investment products to Bank of Ireland customers in Ireland through the extensive branch banking network, as well as the independent intermediary market and a direct sales force. The Capital Markets division provides corporate banking, global markets, asset management, and corporate finance services, principally in Ireland, the UK, Continental Europe, and the US. UK Financial Services brings together all of the BOI's significant activities in the sterling area, including personal lending, business banking, and the sale of banking and insurance products through the UK Post Office.
Bank of Ireland's main competitors are other banks, in particular Allied Irish Banks plc, Ulster Bank Ltd, HBOS plc, National Irish Bank Ltd, Northern Bank Ltd, and Irish Life and Permanent plc.
9 months ended December 31, 2009
The Bank of Ireland's underlying operating profit (before impairment charges on loan assets) was €1,050 million for the nine months ended December 31, 2009, down 28% from the comparable nine month period ended December 31, 2008. An impairment charge of €4,055 million on loan assets (of which €2,231 million relates to assets expected to transfer to the National Asset Management Agency (NAMA) and €1,824 million to non-NAMA assets) resulted in the Group recording a loss before tax of €1,813 million and an underlying loss before tax of €2,972 million for the nine months ended December 31, 2009.
IRE operates in four main segments:
The Capital markets segment offers global interest rate and asset management products. From FY08 to FY09, Capital Markets operating income increased 11%.
The UK Financial Services (GB) segment provides banking products, such as residential mortgages and loans to Great Britain, Scotland, and Northern Ireland. From FY08 to FY09, UK Financial Services (GB) operating income increased 10% due to higher deposit volumes.
U.S. banks, such as Bank of America (BAC), Citigroup (C), and Lehman Brothers (LEH), have suffered millions in losses due to the 2008 Financial Crisis. U.K. banks have not been immune to the U.S. crisis, as the U.K. government has invested €781.2 billion, compared to €9.1 trillion ($12.8 trillion) invested by the U.S. government. U.K. banks have U.S. commercial real estate exposures -- in the form of loans and other debt mortgage-backed securities (MBS). So hardships in the U.S. housing market and banks suffering losses due to subprime lending in turn causes foreign banks to suffer losses.
The Confederation of British Industry predicts that U.K. unemployment will peak at 3.03 million (9.6% of U.K. population) by Q310. On top of all that, the U.K. housing market has been miserable -- as mortgages to home buyers dropped 49% since the beginning of 2008 and housing prices have fallen 20% in that time span. In efforts to reduce the downfall, the U.K. government is on pace to lend over £1 trillion to bailout banks in 2009, which it hopes will boost lending, but may just cause a bigger debt bubble. Investors might want to look further than "across the pond" for economic optimism.
|Competition||Bank of Ireland (IRE)||Allied Irish Banks (AIB)||Royal Bank of Scotland (RBS-LN)|
|Net Interest Income €M||3,670.00||3,867.00||18,675.00|
|Net Income €M||69.00||729.00||(23,710.0)|
|Loan Loss Provision €M||1,513.00||1,822.00||N/A|
|Total Assets €M||194,116.00||182,143.00||2,401,650.00|
|Total Liabilities €M||187,264.00||173,205.00||2,342,770.00|
|12 Month Correlation to IRE||1.000||0.985||0.977|