By Padraic Halpin
DUBLIN (Reuters) -Bank of Ireland will more than triple returns to shareholders this year, it said on Tuesday as the lender laid out plans for substantial further growth on the back of rising interest rates and a strengthening Irish economy.
Ireland's largest lender by assets will return 350 million euros ($267 million) to shareholders this year through dividends and buybacks, up from 104 million euros in 2021, after its return on tangible equity (ROTE) reached a better than expected 10.6% last year.
Over the next three years the bank is targeting ROTE of 15% and aims to build up to an annual ordinary dividend of about 40% of statutory profit, compared with 25% last year, while also considering further distributions via annual buybacks.
Finance chief Mark Spain told Reuters that the bank expects generate "meaningful amounts" of surplus capital on an annual basis.
In a presentation to investors, the bank's executives said its new targets were based on prudent economic assumptions, including flat Irish house prices in 2023 and 2024 versus annual house price inflation of 7.8% in December 2022.
It also assumes that the rate the Eureopean Central Bank pays on bank deposits will peak at 3% this year and fall to 2.5% in 2025. Finance chief Spain said it would be a positive for the bank if investors are correct in predicting a jump to 4% by year-end.
The bank reported a full year underlying pretax profit of 1.2 billion euros, down 12% year on year after a 194 million euro provision writeback in 2021 turned into a 187 million euro impairment charge.
Underlying profit was still 3% higher than a consensus estimate in a company poll of analysts.
Bank of Ireland, which recently completed the acquistion of 7.8 billion euros of loans from KBC as the Belgian group leaves the shrinking Irish market, increased total income by 11% year on year, with new lending up by a similar amount.
It said its expects 2023 net interest income to be more than 12% higher than the 3 billion euro annualised level implied by a strong fourth quarter, reflecting "business momentum, interest rate expectations and the KBC acquisition".
Shares in the bank rose 3.7% to 10.82 euros in morning trade, having more than doubled in the past year.
($1 = 0.9367 euros)