Bank of Ireland Q3 2025: NII guidance lifted, capital strong, outlook upbeat
Bank of Ireland’s Q3 2025 update reads well. Management has nudged full-year net interest income (NII) guidance up to >€3.3bn and highlighted robust capital generation, growing Irish loans and deposits, and healthy inflows into wealth. There is a UK motor finance cloud, but even that looks contained within current capital headroom.
Quick definitions: NII is the difference between interest earned on loans and interest paid on deposits. CET1 is the core equity capital buffer regulators focus on. ROTE is return on tangible equity – a profitability yardstick. NPEs are non-performing exposures (problem loans).
Key numbers at a glance
| Metric | Q3 2025 / Guidance |
|---|---|
| FY25 NII guidance | >€3.3bn (from c.€3.3bn) |
| NII vs 9M 2024 | -7% (ahead of expectations) |
| Net interest margin (NIM) | 2.68% (9M) |
| Total business income | c.+5% y/y |
| Operating expenses | +3% y/y; cost-to-income 49% YTD |
| Customer loans | €82.2bn (Sep-25) |
| Customer deposits | €105.5bn (Sep-25) |
| Wealth AUM | €58.3bn; net inflows €1.6bn YTD |
| NPE ratio | 2.5% |
| CET1 ratio | 16.2% at 30 Sep (note: 15.0% reported post mechanical deduction) |
| Organic capital generation | 185bps YTD |
| 2025 adjusted ROTE | c.15% excluding c.2% UK motor finance impact |
| Share buyback | €590m completed; 50.7m shares at €11.61 |
Income and margins: upgrade signals resilience
Upgrading NII to >€3.3bn is the headline. Despite the average ECB deposit rate falling to 2.35% YTD (from 3.89% in 2024), NII has held up better than planned, helped by volume growth in core loans and deposits and the structural hedge. NIM printed 2.68% for the nine months – not blistering, but respectable given rate cuts.
Total business income was about 5% higher year on year, in line with guidance. Wealth and Insurance assets under management rose to €58.3bn with €1.6bn net inflows and 3% market growth YTD, feeding stronger fee income. That fee momentum is useful as rates drift lower.
Costs: tight control keeps efficiency on track
Operating expenses were up 3% year on year, exactly what the bank had guided. The year-to-date cost-to-income ratio sits at 49%, which is competitive. Regulatory fees and levies were €121m YTD and should land around €130m for FY25.
Management is pushing “simpler business” initiatives to hold costs at about €2bn in 2026 and 2027, aided by restructuring actions. If delivered, that would anchor ROTE through the cycle.
Loans and deposits: Irish mortgages doing the heavy lifting
Customer loans were €82.2bn, broadly flat year-to-date due to FX and planned exits in parts of Corporate and Commercial. Under the bonnet, the core book rose €2.5bn YTD (c.4% annualised), with the Irish loan book up 5% annualised. Retail Ireland net lending rose €2.0bn, driven by mortgages, where the bank held a chunky 41% share of new lending year-to-date. Retail UK lending increased by €0.3bn on a constant currency basis.
Deposits climbed to €105.5bn, up €2.4bn since December. Irish Everyday Banking balances grew 5% annualised. Term migration – customers moving from current accounts into term deposits – totalled €1.5bn YTD (and €0.4bn in Q3), exactly as anticipated. That shift nudges funding costs up, but so far it is manageable and predictable.
Liquidity and funding: conservative and comfortable
Liquidity remains strong: the liquidity coverage ratio was 191% (198% in December), the loan-to-deposit ratio 78% (80%), and the net stable funding ratio 155% (unchanged). Liquid assets rose to €44.7bn, with a reallocation boosting the euro liquid asset bond portfolio to €18.1bn. Wholesale funding reduced to €8.4bn after maturities. In short, no red flags.
Asset quality: still near historic lows
NPEs were €2.0bn, with the NPE ratio at 2.5% (2.2% in December; 2.6% in June). That is still close to historic lows and speaks to a resilient Irish economy. The bank reiterated there is no lending exposure to NBFIs in the US, and the previously signposted US acquisition finance portfolio has behaved in line with revised expectations after proactive provisions earlier in the year.
FY25 impairment guidance remains c.30bps, with macro scenario updates due at year-end as usual.
Capital and shareholder returns: firepower remains
The CET1 ratio was 16.2% at 30 September, reflecting 185bps of organic capital generation and a 115bps uplift from Basel IV, partly offset by the H1 dividend (45bps), a Q3 foreseeable distribution accrual (30bps), and RWA investment. The bank also discloses a reported CET1 of 15.0% after a mechanical deduction of nine-month interim profits under an EBA Q&A – worth being aware of when comparing peers.
Shareholder returns continue to flow. The €590m buyback completed on 21 October, repurchasing 50.7m shares at an average €11.61. Since 2022, the share count is down 12%. An interim dividend of 25 cents per share will be paid on 30 October, keeping to the “progressive dividend per share” line.
UK motor finance: overhang, but quantified
Following the FCA’s consultation on an industry-wide redress scheme for UK motor finance commissions, Bank of Ireland estimates its provision could rise to about £350m (c.€400m) from £143m (€167m) at June. If increased to that level, it would trim the 30 September CET1 ratio by around 35bps.
The RNS also flags an FY25 estimated UK motor finance impact of c.€230m, equivalent to roughly 35bps of CET1 and around 2% of ROTE. Guidance is explicit that 2025 adjusted ROTE would be c.15% excluding this c.2% impact. The final cost depends on the consultation outcome and customer opt-in rates.
Macro tailwinds: Ireland still humming
Domestic demand grew 4.4% year on year in Q2 2025, employment growth is above 2%, and CPI inflation was 2.7% in September. The bank has upgraded GDP forecasts to 10.7% for 2025 and 3.1% for 2026 (modified domestic demand 3.4% and 2.6%).
Housing completions hit a 16-year high of 33k on a rolling 12-month basis, wages are up 5%, and the Irish government plans an 8% spending increase next year while targeting a 0.8% of GDP surplus. That cocktail supports credit quality and loan demand into 2026.
Guidance and outlook: steady into 2026-27
- Business income c.+5% vs 2024; operating expenses c.+3%; levies c.€130m.
- Non-core charges c.€400m in 2025, including the estimated UK motor finance impact.
- Impairment charge c.30bps; organic capital generation 250-270bps excluding c.35bps from UK motor finance.
- ROTE building to >17% by 2027; refreshed strategy and targets due in Q1 2026.
Management’s tone is confident. The combination of mortgage-led growth in Ireland, fee income from rising AUM, and disciplined costs underpins that positive stance even as rates trend lower.
My take for investors
Positives first. An NII upgrade in a falling-rate year is a strong signal. Capital generation is punchy, the CET1 stack is thick, and liquidity is conservative. Irish retail momentum – especially a 41% share of new mortgage lending – gives Bank of Ireland a defensible edge, while fee income from €58.3bn of AUM adds diversification.
On the watchlist: NII was still 7% lower year on year, so the glide path as ECB rates normalise remains crucial. Term deposit migration could pressure margins further in 2026, albeit the bank’s structural hedge helps. The UK motor finance issue is an overhang, but the estimated c.35bps CET1 impact looks readily absorbable given 185bps of organic generation YTD.
Net-net, this is a tidy Q3 print with incremental upgrades, strong capital and clear guidance. If management delivers its cost discipline and maintains mortgage momentum, the stated path to ROTE >17% by 2027 looks achievable. The strategy refresh in Q1 2026 is the next big catalyst.
