Bank of Ireland Group (LON:BIRG) used its 2025 results and strategy update to outline strong recent performance, a 2025 shareholder distribution package totaling €1.2 billion, and new targets running through 2028 that emphasize growth in Ireland, rising net interest income (NII) supported by structural hedging, and a mid-40s cost-income ratio by the end of the plan.
2025 performance: growth in Ireland, higher fees, and capital generation
Executives described 2025 as a strong year, led by continued momentum in Irish lending and deposits and growth in fee income driven by Wealth and Insurance. Irish loans and deposits both rose 6% in 2025, while wealth assets under management (AUM) increased 9% to an all-time high.
Asset quality was described as robust. The 2025 impairment charge was €193 million, or 23 basis points cost to risk, which management said was better than expected after a strong fourth quarter. The non-performing exposure (NPE) ratio ended 2025 at 2.2%, down 40 basis points from June, reflecting progress in the second half.
Management said organic capital generation was 270 basis points in 2025, bringing total capital generation over the cycle to 920 basis points, which it quantified as €5 billion. The group’s reported CET1 ratio was 15.1% after distributions.
Shareholder distributions: 2025 payout at 100% of earnings
Bank of Ireland highlighted distributions of €3.6 billion over the last cycle, which it said was equivalent to 37% of its starting market capitalization. For 2025 specifically, the group announced total distributions of €1.2 billion, equal to a 100% total payout of earnings.
The distribution includes:
- An ordinary dividend of €0.70 per share (up 11% year-over-year, subject to shareholder approval)
- A €530 million share buyback “approved” and announced alongside the results
Executives addressed analyst questions on why the payout was not above 100% and on the group’s updated capital framework, emphasizing the balance between distributions, investment, and growth, and reiterating a continued intention to return surplus capital to shareholders.
2026 outlook and NII trajectory through 2028
Management said NII held up in 2025, supported by balance sheet growth, bond purchases, and structural hedging that helped counter lower interest rates and planned deleveraging. For 2026, the group expects NII to rise to around €3.4 billion, above its prior expectation of the “high three threes.” It cited headwinds including lower interest rates and FX, as well as the impact of deleveraging portfolios, including the previously announced intention to run down its U.S. acquisition finance book.
Executives upgraded NII guidance beyond 2026, saying they now expect:
- 2027 NII: greater than €3.6 billion (up from prior guidance of “mid three fives”)
- 2028 NII: greater than €3.85 billion, with “potential for further upside beyond”
They also pointed to the possibility of NII reaching €4.0 billion after 2028, driven by a combination of a more stable rate environment, ongoing balance sheet growth (particularly in Ireland), and residual benefits from the structural hedge.
Structural hedge and fee income assumptions
The structural hedge was presented as a “material positive driver” for NII. In 2025, rollovers and additions lifted the average hedge yield by 16 basis points to 1.89%, with an exit yield of 1.98%. Management guided to fixed-leg income from the hedge increasing 10% in 2026, supported by modest hedge volume growth and the rollover dynamic.
Over the next three years, the hedge is expected to provide a “gross tailwind” of around €0.5 billion as yields move toward 2.5%. Management noted that maturing yields are materially below reinvestment levels, giving the hedge a mechanical uplift as it rolls over, while also acknowledging rate sensitivity and reinvestment dynamics.
On fees, the group expects around 4% growth in 2026 and approximately 4% per year over the strategic cycle, with Wealth and Insurance growing faster. Management said the 4% assumption reflects (1) a strong 2025 performance that included “modest one-off benefits” in the life business, and (2) an expected change in interchange arrangements from the beginning of 2027 that it said would reduce income by about €15 million per year.
Strategy to 2028: growth in Ireland, disciplined costs, and higher returns
Chief Executive Myles O’Grady framed the strategy around three priorities: continued momentum in Ireland, allocating capital to optimize returns, and investing for the future to improve resilience, customer experience, and efficiency.
Core volume expectations include average annual growth of around 4% for lending, 3% for deposits, and 10% for AUM. The group reaffirmed its intent to remain Ireland’s number one mortgage provider, citing a more than 40% share of new mortgage lending for a third consecutive year, and guided to approximately 5% average annual mortgage book growth, while maintaining pricing discipline.
In Wealth and Insurance, management reported record AUM of €60 billion at year-end 2025, up more than 50% since the Davy acquisition in 2022. It expects AUM to exceed €75 billion by 2028, with an objective of reaching €100 billion by 2030.
Cost discipline and operating leverage were central to the plan. Total costs are expected to be around €2.2 billion in 2026 and broadly stable at around €2.2 billion through the strategic cycle. To support a mid-40s cost-income ratio by 2028 (from 52% in 2025), management outlined a €250 million cost reduction program spanning operating model changes, redesigned customer and internal processes (including KYC and onboarding), and supplier consolidation. Executives said staff numbers are expected to decline around 3% per year, largely through natural attrition, and suggested that roughly 20% of the targeted savings are expected to come from AI-related initiatives.
The bank also updated presentation and reporting changes for 2026, including moving restructuring costs “above the line,” incorporating them in operating expenses and the cost-income ratio, and presenting return on tangible equity on a statutory basis.
About Bank of Ireland Group (LON:BIRG)
Bank of Ireland Group is one of the largest financial services groups in Ireland, with total assets of €162 billion at 30 June 2025. We provide a broad range of banking and other financial services. We are organised into four trading segments (Retail Ireland; Wealth & Insurance; Retail UK; and Corporate & Commercial) and one support division (Group Centre) to effectively serve our customers.
