Bank of Ireland has reported a profit before tax of €1.94bn for 2023, up from €1bn in 2022.

The bank is recommending €1.15bn of dividends and buybacks following this rise in profits.

Bank of Ireland attributed the increase to a 42pc jump in operating income last year.

Operating income stood at €4.4bn in 2023, with the increase driven by higher interest rates, positive business momentum from commercial delivery, as well as the bank’s strategic actions and acquisitions.

Net interest income, the key driver of bank profitability, soared by €1.2bn to €3.7bn across the year.

The bank said the growth was supported by higher Irish deposit rates and volumes, higher lending income and the acquisition of a portfolio of loans from KBC, which was completed in February of last year.

Business income jumped 10pc following growth in wealth and insurance. This income also benefitted from a full year of Davy Wealth Management’s operations following its acquisition in 2022.

Cash distributions to shareholders are set to soar following the bank’s 2023 performance, with Bank of Ireland recommending €1.15bn of dividends and buybacks.

This is a sharp increase from the €350m proposed last year.

This includes €634m in ordinary dividends, equivalent to a dividend per share of 60 cents, as well as a €520m share buyback.

The group’s loan book increased by €7.7m in 2023, including a 23pc rise in its Irish loan book.

New mortgage lending at the bank grew by a quarter to €4.9bn, bringing the group’s total loan book to €80.7bn.

Operating costs at the bank rose to €182m, up 11pc from 2022. This growth followed an increase in Davy operating expenses as the bank recorded a year of costs from Davy compared to seven months in 2022.

The bank also pointed to an increase in costs related to the acquired portfolio from KBC.

Bank of Ireland also recorded a net credit impairment charge of €403m to cover potential loan losses as a result of a “slightly higher” loan loss environment.

Net interest income is now anticipated to be 5pc to 6pc lower in 2024 as interest rates are expected to decline. Business income is set to be mid-single digit higher than 2023 levels as wealth, insurance and Retail Ireland business divisions are set to grow.

Full year operating expenses are anticipated to be mid-single digit higher than last year’s levels reflecting inflation, growth of the business and investment in the business.

“In 2023, the group performed well with strong financial results, tangible strategic progress and improved customer and employee outcomes,” chief executive Myles O’Grady said.

"This represents an excellent start to our three year strategic cycle, underpinned by our differentiated business model, the attractive markets in which we operate, especially Ireland, where the loan book grew by 23pc and Wealth assets by 18pc.”

He said that the bank is “mindful” of risks in the external environment but added that “the overall outlook for our core markets, and Ireland in particular, remains positive.”

Reporting On:independent.ie