DAVY VIEW

2019 was equally a year of progress (costs down; lending up) and frustration (interest rate environment; macro-backdrop) for Bank of Ireland (BIRG). It has increased its 2021 cost reduction target by €50m, while ROTE is now guided at c.8% from 10%+ (still targeted in the longer term). The lower near-term ROTE guidance will not come as a surprise. Banking in this environment is a difficult business and we are likely to lower our 2020 forecast earnings by c.5% on higher impairment charges and reduce our dividend. Nevertheless, trading at <0.5x tangible book should more than incorporate the risks, and ongoing benefits to pre-provision profits, loan growth and robust organic capital generation should again be evident in 2020.