Banking Business Review
| Key Performance Indicators | ||
|---|---|---|
| 31 Dec 2008 | 31 Dec 2007 | |
| Operating profit (before impairment of goodwill) | €30m | €219m |
| Banking margin | 105bps | 117bps |
| Loan Book | €40.1bn | €39.1bn |
| New current / checking accounts | 53,000 | 69,000 |
| Customer satisfaction Index | 82.7% | 84.2% |
| Capital – Basel II Total / Tier 1 ratio | ||
| • Pre ICR | 11.3% | 10.8% |
| • Incl. ICR | 9.2% | 8.7% |
In 2008, the group’s banking business faced significant challenges as a consequence of the continuing dislocation in global credit markets and the deterioration in economic conditions. Increased funding costs and exceptional impairment provisions resulted in a sharp fall in the profits of the banking business in 2008.
Funding remained a significant challenge throughout 2008. The introduction of a funding guarantee scheme for Irish banks by the Government in September was a critical and positive intervention breaking the gridlock in credit markets. The predominance of residential mortgages in the bank’s loan book provided a deep pool of collateralised assets which were used as security to draw on ECB facilities in 2008 as and when access to wholesale debt markets tightened.
In the challenging funding environment the strategy of the bank is to moderate loan growth and increase deposit based funding. New lending in 2008 was focused on core lending franchises in Irish mortgages and car finance. Retail deposits enjoyed good growth but this was partly offset by a weaker performance from commercial deposits. The bank continued to enjoy good success in attracting new current / checking account customers in 2008.
The bank finished the year in a strong capital position with a Total / Tier 1 capital ratio of 9.2%.
