Bank of Ireland Group Q1 Earnings Call Highlights

Bank of Ireland Group LON: BIRG opened its new three-year strategic cycle with what management described as a “strong start” in the first quarter, supported by loan growth, resilient asset quality, and continued momentum in its Irish franchise.

Chief Executive Officer Myles O’Grady told analysts the quarter’s performance reflected “disciplined execution” of the updated strategy, the breadth of the group’s franchise, and “the continued resilience of the Irish economy.” The group reported 5% annualized loan growth in Q1, including 8% growth in the Irish franchise, while deposits were “strong” at EUR 107 billion. O’Grady also highlighted the wealth and insurance franchise delivering EUR 1.1 billion of net inflows during a volatile market backdrop.

Guidance reaffirmed as strategic cycle begins

Management reiterated its previously stated guidance and longer-term targets. O’Grady said the group “reaffirms all of its 2026 guidance and financial targets as 2028,” including a statutory return on tangible equity “building to above 16%” and “mid-to-high teens annual EPS growth.”

On net interest income (NII), O’Grady noted there could be “potential upside from higher rate expectations,” but said the bank was retaining guidance “at this early stage of the year.”

Chief Financial Officer Mark Spain said Q1 NII performance was “very much in line with our expectations,” and reiterated 2026 NII guidance of “around EUR 3.4 billion.” Spain also referenced the longer-term outlook given at full-year results: NII expected to grow to “greater than EUR 3.6 billion by 2027” and “to greater than EUR 3.85 billion by 2028.”

Net interest income: volumes help offset headwinds

In response to questions about NII dynamics, Spain pointed to loan and deposit growth and the benefits of the structural hedge, while also citing offsetting factors in the quarter.

Spain said Q1 also reflected “the offset of lower interest rates and FX impacts and also the impact of deleveraging portfolios,” which “has left us flat versus Q1 last year.” He added that the Q1 performance underpinned “very strong confidence” in the 2026 NII guidance.

Later in the call, Spain said higher rate expectations could provide upside, but the bank was not reflecting that yet: “It’s just too early. We’ll come back to that at the interims.” He added the NII trajectory communicated in March was based on an ECB rate assumption of 2% in 2026, moving to 2.25% by 2028, and noted rate expectations had increased in both the euro area and the UK.

Asked about the structural hedge, Spain said reinvestment yield in Q1 across sterling and euros was “in the sort of 270 range,” which was “what we assume going forward,” while acknowledging “potential upside” if rate markets remain elevated. Spain also said the structural hedge was expected to grow “modestly” over the next three years “basically in line with our deposits and our equity.”

Deposits and competition: stable trends and planned pricing move

Analysts asked about the group’s term deposit rate increase and whether it reflected heightened competitive pressure. O’Grady said the bank’s strategic targets already assumed “some of that growth could go to an elevated level of competition.”

He said the deposit rate move was “scheduled and planned,” and described the group’s deposit base as “very stable” for everyday banking, with “very small and marginal flow into term market for quarter one.”

On quarter-on-quarter deposit movements, Spain said Q1 was “very much in line with our expectations,” attributing the pattern to typical seasonality. “If you look actually over the last couple of years, you’ll see deposits flat in Q1, growth over Q2 to Q4 is very standard,” he said, adding that April trends were also in line with expectations.

Irish mortgages, housing supply, and UK lending positioning

The bank reported a strong Irish mortgage performance in Q1, with O’Grady stating the bank’s market share was 41%. He said the share had been “broadly consistent over the three months,” hovering “above the 40% level.” However, he emphasized the bank does not manage to a mortgage market share target and argued that system growth was a key value driver for the mortgage business.

O’Grady pointed to data suggesting higher housing output in 2026, saying recent figures indicated completions “possibly above 40,000,” which he called “very significant.” He said the bank monitors both completions and the pace of new construction starts, with both supporting expectations for higher housing output and mortgage growth. Spain added that, from a mortgage business perspective, “Q4 will typically be the strongest quarter.”

On the UK retail lending business, O’Grady said performance in Q1 was “strong” and aligned with strategy. He reiterated that the bank’s key strategic pillars include “driving growth in the Irish franchise” and “optimizing capital allocation,” and said the group was comfortable with the level of capital allocated to the UK business. He described the opportunity as for “modest” growth over the next number of years, but said the UK business was not an area where the bank planned to deploy significantly more capital relative to Ireland.

Asset quality, impairments, and portfolio wind-downs

O’Grady said asset quality “remains robust” and cited an overall non-performing exposure (NPE) ratio of 2%. He said the bank had not seen any “real material impact” in Q1 from higher energy and fuel costs, while noting the situation could have a “longer tail” and that the bank remained “very vigilant.”

He also referenced a EUR 40 million post-model adjustment (PMA) taken at the end of last year “to get ahead of the geopolitical risk.” Spain later said the EUR 40 million PMA was part of an overall PMA stock of “over EUR 100 million,” adding that the group would revisit macroeconomic assumptions as part of the half-year ECL exercise. Spain also pointed to the bank’s updated economic forecast, saying forecasts for domestic growth were “basically the same as our central case back in December,” and noted that ECL model weightings included “30%” to the downside.

On portfolio wind-downs, Spain said the group’s Corporate GB, US LAF, and US COE books all reduced in Q1. He said the bank was “pleased with some NPE exits,” which supported the NPE ratio declining to 2%. Spain quantified the expected NII headwinds from these exits at “about EUR 110 million or so” across 2026 to 2028, with “about EUR 60 million, EUR 70 million of that this year.”

Spain also addressed the bond portfolio, saying the bank added EUR 3.5 billion in Q1 and that this was likely “the bulk of our activity for the year” in that area. He said the spreads on those investments were “about 40 basis points.”

On UK motor finance provisions, Spain said there was “no change” in the bank’s provision of GBP 374 compared to March, adding that the bank had aligned with FCA expectations, including “locked-in rates.” He said this gave management “confidence” it should “put that matter behind us.”

On costs, Spain said cost growth was “very much in line with expectations,” and that restructuring costs were expected to be “broadly linear over the year,” though “won’t be exactly linear.” He added that savings initiatives and investment efforts were “playing out as expected in Q1.”

O’Grady closed the call by thanking participants and said he looked forward to speaking again at a future update.

About Bank of Ireland Group LON: BIRG

Bank of Ireland Group is one of the largest financial services groups in Ireland, with total assets of €162 billion at 30 June 2025. We provide a broad range of banking and other financial services. We are organised into four trading segments (Retail Ireland; Wealth & Insurance; Retail UK; and Corporate & Commercial) and one support division (Group Centre) to effectively serve our customers.

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