DUBLIN (Reuters) - Bank of Ireland expects its net interest margin to fall this year following a dip in the final quarter of 2018 and said its forecast for continued loan book growth was predicated on Britain securing an orderly departure from the European Union.
Ireland's largest bank by assets grew its loan book last year for the first time in a decade, but said competition in the UK mortgage market, which accounts for almost a third of its total book, contributed to a fall in lending profitability.
The bank's net interest margin (NIM) - a measure of how profitable its lending is - fell to 2.20 percent at the end of December from 2.23 percent three months earlier, and it forecast a further decline to around 2.16 percent this year.
Its underlying profit fell by 13 percent to 935 million euros (£811.8 million) last year, despite a 13 percent rise in new lending volumes and a 3 percent year-on-year cut in costs - trends it expects to continue once a Brexit deal is reached.
"We do remain confident despite the uncertainty so our outlook does assume that some type of deal is eventually done with an appropriate transition period," Chief Executive Francesca McDonagh told Reuters in a telephone interview.
"We are ready, independently of what the (Brexit) outcome would be."
With Ireland's economy heavily exposed to Brexit, McDonagh added that small and medium sized businesses were deferring investment decisions, creating an investment gap with European peers that could be quickly closed once there is certainty.
Investec analyst Owen Callan said the results were a "mixed bag", while analysts at Davy Stockbrokers said the challenging NIM environment would be the main area of focus despite progress towards the bank's medium term targets, including a dividend increase.
(Reporting by Padraic Halpin; Editing by Mark Potter)