BANK OF IRELAND posted its biggest annual profit since the global financial crisis over a decade ago and said it plans to return €104 million to shareholders through dividends and buybacks.

In its annual report, published today, the bank reported an underlying profit before tax of €1.4 billion for the year to 31 December 2021. This is compared to a €374 million loss in 2020.

It said its customer deposits were €92.8 billion at the end of December, €4.2 billion higher than the same time last year.

The bank’s customer loan volumes stood at €76.3 billion at the end of December 2021, €0.3 billion lower than the previous year. 

It said its loan book grew by €0.6 billion in 2021, and that new lending, excluding Retail UK, increased 16% in 2021 compared to the previous year. 

Its return on tangible equity (RoTE) was 12.7% last year, which it said reflected a strong operating performance and an impairment gain.

The bank said it is recommencing distributions “as a result of this profitability and strong capital position” and “in line with our prudent and progressive policy”, with a total of €104 million of dividends and buybacks proposed.

The bank also saw a net credit impairment gain of €194 million in 2021 compared to a €1.1 billion charge in 2020. It said this gain reflected “the improved economic outlook, management adjustments, and actual loan loss experience and portfolio activity in the period”. 

It said its operating expenses (excluding levies and regulatory charges) were 4% lower in 2021 compared to the previous year, reflecting 8% lower staff costs and an 11% reduction in full time employees since December 2020.

Bank of Ireland CEO Francesca McDonagh said the bank had seen a strong rebound in its financial performance for 2021, continued momentum in the execution of its strategy, and confidence in its growth outlook for 2022 and beyond.

“We delivered our strongest performance since the global financial crisis. Our disciplined focus on the execution of our strategy underpins these results, while also supporting our customers throughout the very challenging Covid-19 pandemic,” McDonagh said.

“In 2021 we achieved a 25% increase in operating profit pre-impairment when compared to 2019 (pre-pandemic). We grew income, reduced costs for the eighth consecutive reporting period, and significantly increased capital ahead of the anticipated completion of two transformational acquisitions of Davy and KBC Ireland’s portfolios.”

She said that while uncertainties remain about the residual impacts of the pandemic and emerging geopolitical developments in Eastern Europe, the outlook across its core markets is positive.

“We see continued momentum as we execute our strategy, leading to positive outcomes for customers and colleagues, and growth in sustainable returns for shareholders. This underpins our target to deliver a sustainable return on tangible equity in excess of 10%,” McDonagh said.

Having repaid the Irish State almost a decade ago, we look forward to becoming the first Irish bank to return to full private ownership this year. During 2022, we also plan to provide an update on our strategy and outlook to 2024, including refreshed medium-term targets.

The bank said the outlook for 2022 is positive, with total income expected to be in line with 2021 and the impairment charge expected to be below normalised levels.

In October, Bank of Ireland announced that it would acquire almost all of KBC Bank Ireland’s performing loan assets and liabilities in a deal worth €5 billion.

KBC Bank Ireland said the transaction would ultimately result in KBC Group’s withdrawal from the Irish market.

The deal will see Bank of Ireland acquire around €8.8 billion worth of performing mortgages, €100m worth of mainly performing commercial and consumer loans, €4.4 billion of deposits and around €300m of non-performing mortgages.

The bank also closed 88 of its branches across the country in October. It agreed a new partnership with An Post which now offers customers a range of banking services at over 900 locations.