The Bank of Ireland said its level of problem loans remained unchanged in the first three months of the year, even though the Covid-19 restrictions remained in place longer than expected.

The bank’s NPL ratio stood at 5.7% at the end of March, unchanged from the end of 2020, he said in a business update on Friday.

“The group has not seen any noticeable change in loan losses since December 2020,” the bank said, adding that it would take a fresh look at the macroeconomic assumptions that fuel its loan loss provisioning when it releases. the figures for the first half of the year.

Of the roughly 100,000 borrowers who took advantage of the bank’s payment holidays at the height of the coronavirus crisis last year, only 4% remained unpaid at the end of March. Some 96 percent of concluded payment interruptions reverted to pre-Covid-19 conditions, while the remaining 4 percent required further forbearance.

The level of distress on Irish mortgage portfolios has so far been far lower than feared at the start of the pandemic, with home loan portfolios helped by the fact that many of the less well-performing workers paid people most affected by closings in sections of the economy – including leisure and non-essential retail businesses – are less likely to have mortgages. Government aid for wages and Covid-19 unemployment benefits also helped.

Ulster Bank, which plans to exit the Irish market in the coming years, said on Thursday it had released some of its pandemic loan loss provisions for a second consecutive quarter in the three months through March.

Nonetheless, NPLs are expected to increase at banks later this year, especially in small business portfolios.

Loan book

Bank of Ireland’s loan portfolio size remained unchanged at EUR 76.7 billion at constant currencies in the first quarter, with lower net lending in its Retail Ireland and Retail UK units offset by growth in loans to businesses.

“New mortgages in Ireland of 500 million euros in the three months to end of March remained strong despite ongoing Covid-19 restrictions on normal housing market operations and continued competitive dynamics in the mortgage market “, did he declare.

The group‘s Tier 1 regulatory capital ratio, a widely followed measure of a lender’s ability to absorb losses due to shocks, was 14.7% at the end of March, or 4.9% above its minimum regulatory requirements.

The bank said the “strong capital position” provides it with “sufficient leeway” to complete the recently announced plan to acquire the nearly € 9 billion in performing mortgage loans from KBC Bank Ireland as the Belgian lender joins Ulster Bank to withdraw from the Republic.

The Bank of Ireland stressed that it also had “a proven track record of executing balance sheet optimization initiatives which could generate additional capital if needed in the future.” The bank is known to be considering selling a portfolio of non-performing mortgages, most likely through bond market refinancing, which may free up loan capital.

The bank said its net interest income was “higher than expected with stable performance” during the three months ended at the end of March compared to the same period in 2020.

“This reflects higher business loan volumes, higher UK mortgage margins and the increased application of negative interest rates on some deposits,” he said.

Its net interest margin, the difference between the average rates at which it finances and lends to its customers, also remained unchanged, at 2 percent, for all of last year.