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Bank of Ireland eyes 20% increase in loan book, to invest more in restructuring

Bank of Ireland Group PLC expects to increase its loan book by roughly 20% by 2021 and aims to invest an additional €500 million in its restructuring program as it unveiled new financial targets.

The bank said June 13 that the additional investment, split between improving its IT systems and boosting its business model and cost base reduction efforts, will bring total investments under its 2016-2021 strategy to €1.4 billion.

The investment is expected to help the bank reduce its cost base in 2021 to around €1.7 billion from €1.9 billion, with the average investment 2018 to 2021 amounting to €275 million per year, or about 50 basis points to 60 basis points of annual common equity Tier 1 capital.

Of the total loan growth target, the bank said 65% will come from Ireland and 35% through "selective international diversification." This will lead to an expected impairment charge under the IFRS 9 accounting standards in the range of about 20 basis points to 30 basis points per annum, according to the lender.

Net interest margin is expected to be around 2.24%, in line the 2017 exit level, while business income is projected to be around 20% to 25% of total income.

By 2021, the lender's return on tangible equity is projected to exceed 10%, while its cost-to-income ratio is expected to be about 50%. It also expects to maintain a regulatory and fully loaded CET1 ratio of over 13%.

The bank added that dividend will increase on a "prudent and progressive basis," building toward a payout ratio of 50% of earnings. "To the extent the group has excess capital, other means of capital distribution will be considered," Bank of Ireland said.