Bank of Ireland plans to increase the size of its loan book and invest in front-end technology as part of efforts to improve profitability and efficiency, CEO Francesca McDonagh said yesterday at the bank’s investor day.

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The bank expects to increase its lending by around 20% over three years, with 65% of that growth in Ireland and 35% internationally.

It is targeting a return on tangible equity (ROTE) of above 10% by 2021 compared with 6.9% in 2017.

“We have a clear recovery story. We have fully repaid the Irish taxpayer executing in full or EU restructuring plan,” McDonagh said.

“We have returned to sustainable profitability, making our first dividend payment in ten years to our shareholders last month.”

“Unlocking growth in our Irish business will drive expansion in lending volumes and fee income, and increase our revenue.”

To support the growth and drive cost cuts the bank is planning to invest 250 million euros in its IT systems, which is in addition to 900 million euros of investment in banking systems previously announced.

The bank will invest 250 million euros in changes to its business model, including increasing the proportion of customer-facing staff and closing 28 service centres this year.

As a result, the bank expects to reduce its cost base by 200 million euros in 2021, and achieve a cost income ratio of around 50% in 2021, compared with around 65% in 2017.

The bank intends to address its underperforming British business, where overall returns are below the cost of capital, generating low single digit returns on tangible equity.

“There are parts of our business we must improve as quickly as possible to reduce cost of funding, acquisition and service,” said McDonagh.

Bank of Ireland intends to invest in its Northridge car leasing and finance business digitisation and automation, and has embarked on a strategic review of its credit card business.