By Padraic Halpin
DUBLIN (Reuters) - Bank of Ireland <BIRG.I> was on course to grow its loan book annually for the first time in over a decade and cut its costs in the first six months of the year to make early progress towards new medium-term targets.
Bank of Ireland roughly halved its balance sheet over the past decade following a devastating property crash and like all lenders, found net loan book growth elusive after repayments and redemptions continued to exceed improving new lending.
Its total loans grew to 76.6 billion euros (£68 billion)from 76.1 billion at the end of 2017, as it aims to increase the size of the book by around 20 percent by 2021, part of plans laid out last month to improve profitability and efficiency.
Chief Executive Francesca McDonagh said the bank expects net loan book growth to continue in the second half of the year but the degree to which it will come through on the business side very much depends on Brexit negotiations.
"There is always risks to that and the big question mark on many of our minds is the impact of Brexit negotiations on particularly small business appetite to take on new debt," McDonagh told Reuters in a telephone interview.
"We are seeing increased consumer confidence in Ireland, but for small businesses that is a little bit more tenuous. Every time there is speculations around Brexit negotiations, we do see that confidence dip a little bit."
Ireland's housing market recovery is critical to its loan book target and new mortgage lending rose by 30 percent to give it a 28 percent share in the increasingly competitive mortgage market compared with 27 percent at the end of last year.
That helped the bank report an underlying profit of 500 million euros versus 492 million a year earlier.
Bank of Ireland's net interest margin - a key metric that shows how profitable its lending is - rose a touch to 2.23 percent, while its core Tier 1 capital ratio stood at 14.1 percent versus 13.7 percent at the end of March.
The bank, Ireland's largest by assets, also plans to reduce its cost income ratio to 50 percent by 2021 from around 65 percent last year and cut its operating expenses by 3 percent compared to the second half of last year.
Analysts at Davy Stockbrokers said the results demonstrated early progress on the targets laid out last month.
(Editing by Emelia Sithole-Matarise)