Bank of Ireland chief sees Middle East risks as he targets €3.85bn interest income by 2028

DCM Editorial Summary: This story has been independently rewritten and summarised for DCM readers to highlight key developments relevant to the region. Original reporting by Irish Times, click this post to read the original article.

Bank of Ireland said it sees its net interest income growing to €3.85 billion by 2028 as its loans and deposits increase, even as chief executive Myles O’Grady acknowledged a drawn-out conflict in the Middle East could hit consumer confidence.

The medium-term outlook follows a slightly better than expected €3.37 billion outturn for 2025, the lender said on Monday.

The bank posted a €1.2 billion net profit and plans to return 100 per cent of this to shareholders through dividends and a stock buyback, it said.

O’Grady told reporters that an extended military conflict in the Middle East – following strikes by the US and Israel on Iran over the weekend and Iran responding with missile barrages across the region – could lead to a spike in oil prices, supply chain disruptions, and a “dampening of consumer confidence”.

Still, he said the Irish economy remains “resilient”, with it forecast to grow by an average of 3 per cent per annum over the next three years, the Government’s finances in a strong position, and €275 billion targeted for investment over the next decade under the National Development Plan.

Shares in Bank of Ireland were down 4 per cent in mid-afternoon trading in Dublin as the wider European equities market sold off in reaction the geopolitical developments.

The net profit result included a €268 million provision to cover redress for the bank’s involvement in the UK motor finance commission debacle – bringing the total set aside for redress and associated costs to €429 million. That is higher than the bank’s €400 million cost estimate outlined in October, after UK financial regulators unveiled details around an industry-wide compensation scheme.

The bank also set aside €193 million of provisions for potential bad-loan losses, including a €40 million so-called post-model adjustment (PMA) to cover geopolitical risks. Executives confirmed that the top-up was decided well before the developments in the Middle East over the weekend.

“We’ll obviously continue to keep that [the PMA] under review,” said chief financial officer Mark Spain.

Bank of Ireland also booked restructuring costs of €153 million last year, with €67 million of this set aside to cover redundancies. The bank cut 260 jobs in the second half of 2025 through a voluntary severance programme, with further redundancies expected in 2026.

O’Grady said group employee levels would fall about 3 per cent per annum over the next three years from almost 11,300 at the end of December, mainly due to not replacing staff that are retiring or quitting in the normal course of business.

“Overall Bank of Ireland delivered a solid 2025 performance, with profits coming in ahead of expectations thanks to lower-than-anticipated impairments and continued balance-sheet resilience,” said Denis McGoldrick, an analyst with Goodbody stockbrokers.

“Strong capital generation, steady loan and deposit trends, and enhanced shareholder returns, including a higher dividend, reinforce the bank’s positive momentum.”

The bank sees net interest income inching up to €3.4 billion this year, before gradually rising to €3.85 billion in 2028, according to its new medium-term outlook. This would deliver total income of €4.75 billion by the end of the period.

It is targeting 3 per cent, 4 per cent and 10 per cent compound annual growth in deposits, loans and assets under management, respectively, over the three years. Assets managed by its Davy and New Ireland units should end 2028 at about €75 billion, and hit the €100 billion mark two years later, group executives said.

“The group enters the new strategic cycle with momentum, and from a position of strength across our franchise,” said O’Grady. “Our strategy 2028 will drive significant shareholder value through earnings growth, accelerating returns and strong capital generation, with continued momentum to 2030.”