Bank of Ireland shares fall on U.S. related impairment charge

By Padraic Halpin

DUBLIN (Reuters) -Bank of Ireland shares fell 3% on Tuesday after it set aside more money than expected to cover potential losses in its U.S. acquisition finance business in the first half of the year when lower interest rates cut its pre-tax profit by one-third.

Ireland's biggest lender still maintained its guidance for a full year return on tangible equity of around 15% after upgrading its net interest income forecast to 2027.

The bank set aside 137 million euros ($158 million) in the first half, reflecting a cost of risk of 33 basis points and increased its expectation for the year as a whole to 30 basis points from the low- to mid-20s previously forecast.

It said just under a third of the first half charge reflected its view of the macroeconomic outlook, with most of the rest related to its 1.5 billion euro ($1.7 billion) U.S. finance business, equivalent to just under 2% of its total loan book.

"I regard that very much as a preemptive measure. This is getting ahead of the potential problem and what you would expect us to do, particularly given the U.S. dynamics throughout quarter two," Bank of Ireland CEO Myles O'Grady told an analyst call.

Bank of Ireland shares were 3.3% lower at 0840 GMT.

First half pre-tax profits fell to 721 million euros ($832 million) from 1.1 billion euros ($1.3 billion) in 2024 following a run of European Central Bank rate cuts.

The bank's Irish loans and deposits grew by 5% year-on-year in the first half, which contributed to it nudging up its net interest income expectations for the next three years.

Those upgrades point to upside to 2026 and 2027 management and consensus expectations, analysts at Davy Stockbrokers wrote in a note.

The bank added that its estimates in February for deposit and loan book growth of 3% and 4% respectively in both 2026 and 2027 were unaffected by the uncertainty associated with U.S. tariffs.

Finance chief Mark Spain told Reuters its loan book showed there were no perceptible challenges emerging from the tariffs and that the caution larger business customers had shown at the height of trade tensions in April was beginning to dissipate.

($1 = 0.8652 euros)

($1 = 0.8645 euros)

(Reporting by Padraic Halpin; editing by Barbara Lewis and Giles Elgood)