The Bank of Ireland (BoI) may have to scale back its planned share buybacks as it prepares to absorb potential costs linked to a UK-wide investigation into historical motor finance commissions, The Times reports.
The bank has not yet disclosed how much it will set aside, but provisions announced by British lenders last week indicate the financial impact could reach hundreds of millions of euros.
Close Brothers, for example, set aside £165 million in its interim results last Wednesday, which suggests Bank of Ireland could face a charge of around €470 million on a comparable basis.
A provision of that scale would affect the bank’s next round of share buybacks, expected to be announced alongside its full-year results on 24 February. Analysts had estimated a buyback programme of around €600 million, but some are revising their forecasts downward.
“You pay distributions based on the worst-case scenario, so Bank of Ireland’s excess capital might get parked on the balance sheet until there is more clarity on motor finance costs,” Benjamin Toms, banking analyst at RBC Capital Markets, told The Times. He now expects a €500 million buyback, slightly below last year’s level.
Goodbody analysts anticipate the bank will “grasp the nettle” by taking an initial €120 million charge next week to reassure investors of its prudence.
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By GlobalData
RBC has projected a €150 million provision in the short term, rising to around €600 million by 2027.
Motor finance in the dock: Court ruling could reshape UK dealer commission models
