The European Central Bank (ECB) is anticipated to maintain its current interest rates, according to analysts from ING, Monex Europe, and Pictet Wealth Management. The ECB had previously increased interest rates by 25 basis points in September in response to inflationary pressures since July 2022. This resulted in a 4.50% rate for main refinancing operations, a 4.00% rate on deposit facilities, and a 4.75% rate on marginal lending facilities. Today, these analysts predict no further increases due to slowing inflation, new geopolitical risks, and a recent spike in rates.
The Bank of Ireland's CEO, Myles O’Grady, announced an upward revision of H2 net interest income forecast by 5% over H1's €1.8 billion (€1 = $1.05) following the ECB's rate hikes. Other business income is expected to match H1's €361 million, marking an 11% YoY increase credited to heightened customer activity and the acquisition of Davy in June 2022. Despite modest net organic loan growth of €100 million over nine months, acquisitions from KBC Bank Ireland and forex gains led to an €8.7 billion total loan book increase to €80.7 billion.
O'Grady acknowledged the challenges stemming from the higher interest rate environment while pledging continued strategic execution for strong organic capital generation. He also noted that a government calculation change will push the bank levy from €25 million in 2023 to about €90 million next year.
Analysts predict that the ECB's decision to maintain current rates will influence Eurozone activity as it is likely to reiterate a hawkish tone to keep bond yields elevated. They anticipate that these rates will be maintained for the foreseeable future while the non-performing loans ratio at the Bank of Ireland holds steady at 3.6%.
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