Bank of Ireland posted first-half 2026 profit before tax that exceeded company consensus by 19%, a result the bank said was underpinned by impairment charges materially below expectations and by valuation gains.
On a pre-provision basis, the bank’s profit beat consensus by 9%. Net interest income met forecasts, with a net interest margin of 2.68% in the period compared with 2.69% in the second half of 2025. Fee income rose 6% year-on-year and came in about 2% ahead of consensus estimates.
Operating expenses increased 2% year-on-year but landed 0.5% below consensus. Impairment charges were a standout, coming in 70% lower than consensus and translating to a cost of risk of 8 basis points of loans. The bank attributed the lower impairments to the impact of credit insurance and recoveries.
Bank of Ireland’s common equity tier 1 ratio stood at 15.5%, in line with market expectations. Capital generation reached 135 basis points in the first half, against the bank’s revised full-year guidance of 270 basis points.
The board approved an interim dividend of c0.39 per share at a 50% payout ratio, above consensus expectations of c0.31 per share.
Management updated its 2026 guidance. Net interest income is now expected to be approximately c3.5 billion, up from previous guidance of approximately c3.4 billion. The bank is forecasting 4% loan growth and 3% deposit growth year-on-year, while hedge income is now expected to rise 20% year-on-year compared with a prior expectation of 10% growth.
Looking at other line items, fee income is projected to increase around 4% year-on-year. Operating costs are expected to be approximately c2.2 billion, roughly 2% higher than a year earlier. Forecast impairments were trimmed to the mid-to-high teens basis points range, down from the prior guidance of low to mid-20 basis points.
The bank also lifted its statutory return on tangible equity target for 2026 to above 14%, from an earlier target of approximately 12.5%.
Guidance for subsequent years was revised higher for net interest income: the bank now expects approximately c3.75 billion for 2027 and above c3.95 billion for 2028, on the assumption of an ECB rate of 2.5%.
On balance-sheet momentum, deposits rose 1% half-on-half and 3% year-on-year, driven by Irish Everyday Banking balances. Loans increased 2% half-on-half, with Irish lending expanding at a 7% annualized rate.
The bank expanded the size of its hedge by c8 billion in July to c77 billion. The average yield on that hedge was 2.01% in the first half, up from 1.89% in full-year 2025.
Overall, Bank of Ireland delivered first-half results that outperformed consensus on several metrics, while management raised near-term profitability and capital generation targets and tightened impairment expectations for 2026.