The government-rescued Bank of Ireland warned yesterday annual profits will slump by 35-40 per cent this year on falling revenues and the cost of state guarantees at the retail lender.
The dire prediction from the group, which is 36 per cent owned by the state after a huge bailout, came as Irish bond yields remain close to record peaks on worries about the eurozone member nation’s shaky finances.
“Underlying operating profit before impairment charges is ... expected to be circa 35-40 per cent lower than the €1.5 billion for the 12 months to December 31, 2009,” Bank of Ireland said in a grim statement.
“The reduction (will be) driven primarily by lower operating income and the higher cost of the systemic government guarantees.”
And it added: “Economic conditions in Ireland remain challenging as anticipated, however growth appears to have returned to the global economy.”
The country is already under the international spotlight amid fears of a new dangerous phase in the eurozone debt and deficit crisis, six months after Greece was bailed out by the European Union and International Monetary Fund.
Ireland is battling an enormous deficit, after the global financial crisis forced many western nations to rescue their banks, while the subsequent vicious recession also slashed tax revenues.
EU heavyweights Britain, France, Germany, Italy and Spain issued a joint declaration yesterday, insisting that bond market jitters over a future bailout fund were misplaced, as Ireland suffers a debt crisis.
“Any new (bailout) mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements,” the five countries’ finance ministers said in the declaration, issued at the G20 summit in Seoul.
However, 10-year government bond yields stood at 8.879 per cent on Friday, one day after rocketing to 8.949 per cent, which was the highest level since the creation of the European single currency in 1999.
Irish bond yields, the rate of return paid to investors holding the government debt instruments, appear to be on an upwards trend due to growing unease over the nation’s battered public purse.
Ireland has reassured investors that it is fully funded this year, but markets are jittery because the government need to return to the bond markets for financing in July 2011.
Finance Minister Brian Lenihan yesterday welcomed the G20 statement on the embattled nation.
“I welcome the solidarity shown by our EU partners and the G20 with Ireland,” Lenihan said in a brief statement. “The clarity provided by the EU finance ministers of the G20 is most welcome.”