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Bank of Ireland investors eye D-word as O’Grady takes charge – The Irish Times

Myles O’Grady, the former chief financial officer of Bank of Ireland confirmed as its next chief executive on Monday, will be able to skip the induction when he takes the helm later this week.

Especially since one of the main items on its agenda will be to carry out a renewal of the group’s strategy and financial objectives, which the group had planned for the end of this year before Francesca McDonagh handed in her holiday in April.

According to the Goodbody Stockbrokers analyst, Mr O’Grady, who was chief financial officer until March before a short spell at Musgrave Group, is expected to deliver the outcome of the review when the Bank of Ireland will publish its annual results next spring. John Cronin.

Investors are not expecting a drastic change in management as Mr O’Grady has been heavily involved in the strategy set out by the former McDonagh.

But as Bank of Ireland is set to take over KBC Bank Ireland’s 9 billion euros in performing loans early next year and the European Central Bank (ECB) has launched a series of aggressive rate hikes interest rate, the lender’s objective of providing a return on tangible equity of more than 10% no longer seems as ambitious as it once did.

According to Diarmaid Sheridan, an analyst at Bank of Ireland’s Davy, one of the “final pieces of the puzzle” is an update to the bank’s policy for distributing cash to shareholders – the dividend.

At present, the Bank of Ireland’s dividend policy is that it will “increase in a prudent and gradual manner”, evolving “over time” towards a payout equal to 50% of sustainable earnings. Investors are looking for something more concrete now that the outlook for interest income has improved significantly following the ECB’s rate moves.

And while Bank of Ireland spent 50 million euros earlier this year on its first share buyback in two decades, Mr O’Grady is expected to provide more clarity on returns on excess capital in the strategy refresh. .

The bank’s ability to provide greater clarity on distributions will have been helped by the fact that its non-performing loan ratio will fall to 3.7%, around EU standards, following a selling a few more lots of problem loans last week. The ratio will fall further once KBC loans resume.

Still, Mr. O’Grady will need to fully understand where non-performing loans are headed in light of the cost of living crisis before making firm distribution commitments.