BIRG Results; Poor Credit Losses, Negative for Allied Irish

Bank of Ireland (BIRG ID) 2H23 results which missed on earnings due to a spike in credit losses. The outlook statement is for this to improve but we can still see a reason for poor spread performance in this. BIRG already trades wider than AIB (see graphic) and, much as this is a poor lateral for AIB, that should support BIRG in relative terms.

• Key credit metrics: the credit loss charge appeared to spike in 2H23 (see below) but non-performers were relatively stable at 3.40% (from 3.31% at Jun-23). CET1 is 14.3% (from 15.0% at Jun-23) and lower than 14.6% in consensus.
• Revenues were 0.5% ahead of consensus, costs broadly in line but credit losses were weaker than expected. They were EUR267m (+70% vs. 1H23) and around double consensus expectations. So the charge was 41bp of lending in the first half and 67bp in the second, allegedly due to “management adjustments” related to CRE.
• Mgmt’s outlook is for revenues marginally lower in FY24 (cons -0.5% y/y) and credit losses in the low-30bp region but this will clearly be questioned after today’s results, we feel. Overall RoTE is seen as “>15%”, which is broadly in line with consensus.