Bank of Ireland Group Reports €1.4bn Profit in 2025 and Unveils Growth Strategy to 2028

Non-core items of €430 million mainly reflect UK motor finance-related customer redress and restructuring costs. Statutory RoTE was 10.9%, or 12.8% excluding the UK motor finance impact. Asset quality remains robust: the non-performing exposure (NPE) ratio is 2.2%, and the net credit impairment charge of €193 million equates to 23bps.

Balance sheet and liquidity: Irish engine humming, liquidity strong

Total loans ended the year at €82.5 billion, flat overall. The Irish book grew by €3.2 billion, Retail UK by €0.1 billion, offset by planned deleveraging in International Corporate (-€1.6 billion) and an FX/impairment impact of -€1.7 billion. Customer deposits rose €4.4 billion to €107.5 billion, led by a 6% increase in Irish Everyday Banking and a 4% increase in Retail UK (driven by Northern Ireland).

Liquidity remains a strength. The liquid asset portfolio is €46 billion, the liquidity coverage ratio is 191%, the loan-to-deposit ratio is 77%, and the net stable funding ratio is 156%. The Group purchased €12 billion of bonds during 2025, supporting the structural hedge – which is expected to see around 10% fixed-leg income growth in 2026.

Strategy to 2028: higher returns, disciplined growth, and capital firepower

The plan for 2026-28 is built around three themes: grow in Ireland (mortgages, wealth and everyday banking), optimise capital in the UK and internationally, and keep investing in digital, data, AI and people. Bank of Ireland highlights leading #1 or #2 positions across retail, business and corporate banking and says it is #1 in Ireland’s fast-growing wealth sector.

Financially, the Group is targeting statutory RoTE to build to more than 16% by 2028 (equivalent to more than 19% on the prior Adjusted RoTE basis), mid to high teens reported EPS CAGR, and total income above €4.75 billion by FY28. NII guidance is upgraded to circa €3.4 billion in FY26, more than €3.6 billion in FY27 and more than €3.85 billion in FY28.

Costs are guided to stay stable at around €2.2 billion across FY26-28, driving the cost-income ratio down by about 6 percentage points to the mid-40s by FY28 (on the new basis). Capital generation is expected to average roughly 260bps per year, with projected cumulative net capital generation of about €3.7 billion over the cycle – described as equivalent to around 25% of end-2025 market capitalisation. The Group is also exiting its US Leveraged Acquisition Finance business, with a €1.2 billion book expected to run down over roughly three years.

2026 guidance in one glance

• NII of circa €3.4 billion; structural hedge fixed-leg income growth of around 10%.
• Deposit growth about 3%; loan growth about 4% (Ireland strong, UK stable; run-down of GB Corporate and US LAF, circa €1.7 billion remaining).
• Fee income growth of about 4%, led by Wealth & Insurance.
• Total costs of €2.2 billion (operating expenses plus restructuring), with circa 2% growth in operating expenses.
• Cost-income ratio flat versus 52% in FY25 on the new basis (which includes restructuring costs and JVs/associates income).
• Cost of risk in the low to mid-20bps, assuming no material change in the outlook.
• Statutory RoTE of about 12.5% (equivalent to circa 15.5% on the prior Adjusted RoTE basis).
• CET1 guidance around 14.5%; capital generation circa 250bps, with approximately 25% for RWA investment.
• Progressive ordinary DPS with around 50% payout of attributable profits; surplus capital may be considered for further distributions.

My take: positives, pressure points, and what to watch

Positives first. Ireland is doing the heavy lifting and looks set to keep doing so – loan and deposit growth, record AUM, and pricing discipline (311bps loan spread) underpin revenue. The capital story is strong: 270bps organic generation in 2025, 100% payout now, and a plan to average circa 260bps p.a. to 2028 while still targeting CET1 around 14.5%. If management delivers the mid-40s cost-income ratio by 2028, operating leverage should push returns up and cash back to shareholders.

Now the pressure points. Non-core charges tied to UK motor finance and ongoing restructuring are a drag – they subdued statutory RoTE in 2025. The 2026 RoTE guide of about 12.5% is solid but implies a step up is needed in 2027-28 to hit more than 16%. NII remains sensitive to the rate backdrop, even with the structural hedge, and credit costs are guided to the low-to-mid 20bps region, which is a normalisation from ultra-low levels. CET1 guidance is lower than the year-end position, so discipline on risk-weighted asset growth will matter.

Watch-fors in 2026: delivery on the €2.2 billion cost ceiling, Irish lending momentum, fee growth from Wealth & Insurance, and capital returns above the circa 50% dividend payout if surplus capital builds. The run-down of GB Corporate and US LAF reduces complexity and risk but will dampen loan balances – the Irish engine needs to keep purring.

Quick jargon buster

• RoTE: Return on tangible equity – profit as a percentage of shareholders’ tangible equity. A key bank profitability metric.
• NII: Net interest income – interest earned on loans and securities minus interest paid on deposits and funding.
• CET1: Common Equity Tier 1 – the core capital buffer regulators focus on for bank resilience.
• NPE ratio: Non-performing exposures – the share of loans that are in default or close to it; lower is better.
• Cost-income ratio: Operating costs divided by income; falling ratios indicate efficiency gains.
• Structural hedge: A treasury setup using fixed-rate assets (like bonds) to smooth and support NII through rate cycles.
• bps: Basis points – 100bps equals 1 percentage point.

Where to read more

You can find the full annual results and strategy materials in the Bank of Ireland Results Centre: https://investorrelations.bankofireland.com/results-centre/