Bank of Ireland Group

As Ireland’s financial landscape evolves, investors may look for ways to benefit from a concentrated banking market, an increasingly wealthy population, and growing demand for long-term savings and protection products. Bank of Ireland, one of the country’s largest financial services groups, is closely tied to these structural trends. It operates in a market dominated by just three major banks, the Bank of Ireland, Allied Irish Banks, and Permanent TSB, serving more than four million customers across retail banking, wealth management, corporate lending and insurance.

Irish households are relatively affluent, with net financial wealth per household rising steadily in recent years alongside falling levels of wealth inequality. However, individuals tend to store wealth in deposits and housing equity rather than investment funds or insurance. With a relatively young population, Ireland is expected to see a structurally growing market for pensions, protection, and wealth products as young people mature and their financial needs evolve. Bank of Ireland may benefit from long-term demographic and behavioural trends. Compared to the UK, this is also supported by a lack of cash ISAs, which could encourage investment among consumers, although a more onerous tax system on investments could continue as a headwind.

Bank of Ireland operates through four main trading segments. Retail Ireland provides day-to-day banking for personal customers and small and medium-sized enterprises (SMEs), including current accounts, credit, payments and everyday financial services. Retail UK covers the bank’s UK residential mortgage business, its Northern Ireland branch network, business lending, asset finance, and contract hire. The third segment is Corporate and Commercial, which provides lending, transaction banking, and treasury risk management solutions for national and international corporate clients.

The final division is Wealth and Insurance, which has grown significantly in recent years. It includes the life assurance subsidiary New Ireland Assurance Company (NIAC), which offers protection, pensions, and investment solutions through the bank’s distribution network, independent financial brokers, and corporate partners. The 2021 acquisition of Davy further strengthened its wealth capabilities. While originally purchased following a conflict-of-interest ruling and a €4m fine, Davy remains Ireland’s leading provider of wealth management and capital markets services. Bank of Ireland Insurance Services also sits within the Wealth and Insurance segment, offering general insurance products such as home, car and travel cover.

The group is nearing the end of a three-year strategic plan built around three pillars: strengthening customer relationships; simplifying the business; and, embedding sustainability. It has invested in product innovation and new digital technologies to improve customer experience, while cost reduction and productivity initiatives aim to improve operational efficiency and support margins.

Shareholders have seen substantial returns over recent years, including over 100% share price performance over the last year. This has been driven by strong operating results. In the most recent interim results for the six months to 30th June 2025, the bank delivered profit before tax of €0.7bn, with the cost-income ratio improving to 48% and an adjusted return on tangible equity of 14.8%. Growth was broad-based across Irish loans, deposits, and wealth assets, with the wealth and insurance franchise reaching €55.6bn of AUM, a 3% annualised increase on the period prior. The bank also achieved a strong 40% share of new mortgage lending in Ireland in the first half of 2025.

In addition to developing new products to strengthen the customer proposition, Bank of Ireland is also returning a substantial amount of cash to shareholders, including a €590m share buyback announced at the start of last year. Since 2023, the group has returned €2.6bn through dividends and buybacks, equivalent to 22% of its market cap, and reduced its share count by 11%. The group declared an interim dividend of 25c and reiterated guidance for a progressive full-year dividend, contributing to an attractive income profile. Despite recent share price performance momentum, investors face several considerations. First, the bank remains rate-sensitive, and the long-term trajectory of European interest rates will influence margins. The group is increasing its structural hedge, a financial strategy used by banks to mitigate some interest rate sensitivity, but lower rates would still pressure earnings.

Competition is also evolving. Challenger banks and digital entrants, such as Revolut, are raising customer expectations around technology and user experience, an area where Irish incumbents have historically lagged. Meanwhile, costs are structurally higher across the sector, driven by regulation, need for digital investment, and wage inflation. Rising mortgage rates could also contribute to higher impairments if household financial stress increases.

Finally, the recent share price valuations may give some pause following recent strong performance. At the time of writing, Bank of Ireland traded at a premium to its listed peer Allied Irish Banks on a price-to-earnings basis, and also screened more expensive relative to its own historical averages. Part of this reflects expectations for sustainably high returns on equity, but it leaves less margin for error. Many investors will be looking towards the bank’s refreshed targets and new strategic objectives which are to be announced in early 2026.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance. The information and views were correct at time of publishing but may have changed at point of reading.