Ratings agency Moody's believes Bank of Ireland's plan to invest up to €900 million over the next four years to modernise its IT platform is "crucial" to the future success of the business.
In a commentary published on Wednesday, Moody’s said: “We positively view the bank’s commencement in 2016 of a four-year programme to replace its core banking platforms and believe these enhancements to the infrastructure directed at operating efficiency and improved customer experience are crucial to the bank maintaining its strong position in the increasingly competitive Irish market.”
Following the publication of its full year results last week, Bank of Ireland chief executive Richie Boucher signalled a spend of between €175 million and €225 million annually from capital over the next four years on its IT infrastructure.
Bank of Ireland’s results for last year showed a 16 per cent decline in pre-tax profit to just more than €1 billion. Moody’s said its profitability was “relatively constrained” given the prolonged period of low interest rates, high regulatory costs and the depreciation of sterling.
But the results showed “further improvements” in asset quality and capitalisation and the bank maintained a stable funding profile and sufficient liquidity levels, it added.
“We expect these trends to continue into 2017,” author Irakli Pipia, a Moody’s vice president, senior credit officer said.
“Overall, the bank’s 2016 results were in line with out expectations of the bank’s profitability benefitting from lower funding costs and impairment charges while negatively affected by asset margin pressures and high regulatory costs,” Pipia said.
“Despite these challenges and the macroeconomic uncertainties related to the UK’s exit from the EU, we expect BOI’s profitability to normalise over the medium term as the bank’s efforts to increase operating efficiency and new business generation offset the negative pressures.”
Moody’s expects Bank of Ireland to continue to maintain “conservative” capital levels through earnings generation and “prudent” capital management.
The Moody’s report was an update to the markets and does not constitute a ratings action.
