Bank Of Ireland Cuts 2nd Half Forecast, Sees Underlying Loss

Bank of Ireland PLC (IRE) on Thursday lowered its earnings forecast for the second half, saying it now expects to post an underlying loss after previously guiding for "marginally better than break-even," as the deepening economic crisis has increased loan losses.

Underlying earnings exclude several items, including the impact of non-core items and goodwill impairment. BoI said it expects to post an underlying profit for the full year.

Ireland's second-largest bank issued the surprise trading update in the wake of its EUR3.5 billion re-capitalization by the government late Wednesday.

"There has been a further sharp and widespread deterioration in global economic and financial conditions," BoI said. "Our core markets are in recession with rising unemployment, reduced levels of economic activity and falling asset prices."

It added that equity markets remain weak and volatile, while global inter-bank and wholesale funding markets remain stressed.

BoI expects a loan impairment charge of around EUR1.4 billion for the 12 months to March 31, 2009.

Around 45% of the increase in the loan impairment charge in the second half arises from the bank's property and construction portfolios.

The bank also revised upwards loan impairment charges for the three years to March 2011 to EUR4.5 billion from EUR3.8 billion.

"Uncertainty regarding the future results in risk to this estimate," the bank said. "As key economic indicators deteriorate there is a downside risk to this estimate which may result in an additional loan impairment charge of up to EUR1.5 billion for the three years to March 2011."

Total income is expected to be "mid-single digit percentage points lower" for the year to March 31, 2009 versus the prior year.

It sees operating expenses to be "low single-digit" percentage points lower compared to the prior year.

Chief Financial Officer John O'Donovan told a media conference call that there were no current plans to raise capital in the markets, but added, "One can never say never."

At Wednesday's close, BoI shares were down 13% at EUR0.61 on the Irish Stock Exchange. At that price it's capitalized at EUR612 million. The stock has plummeted from EUR9.49 from this time last year.

Company website: http://www.bankofireland.com

-By Quentin Fottrell, Dow Jones Newswires; 353-1-676-2189; [e-mail]