25 October 2018
The Group continues to trade in line with expectations.
Economic growth in our core markets of Ireland and the UK remained positive notwithstanding ongoing uncertainties related to the UK’s decision to leave the European Union.
Net interest income was in line with the first half of 2018. Net interest margin for the 9 months to September 2018 was 2.23% and was in line with our expectations. Business income has remained in line with the first half of 2018.
The Group continues to maintain tight control over the cost base, while making appropriate investments in our businesses, infrastructure and people including our multi-year business transformation programme which continues to make progress. We expect that operating expenses for the second half of 2018 will be lower than the first half of 2018.
Customer loan volumes were €76.6 billion at the end of September 2018, an increase of €0.5 billion since the end of December 2017. New lending in the first 9 months of 2018 was c.15% higher than the same period in 2017, including a 24% increase in new mortgage lending in Ireland where our market share was 28% for the first 8 months of 2018. The Group is re-entering the Irish mortgage broker market in November 2018.
Asset quality across our loan portfolios has continued to improve in line with our expectations. Absent a change in the economic environment or outlook, we expect a modest impairment charge in the second half of 2018 and a net impairment gain for the full year 2018. As previously communicated, the Group continues to review NPE reduction strategies.
Customer deposits were €77.9 billion and wholesale funding was €11.6 billion at the end of September 2018.
In September 2018, the Group implemented previously announced changes to its Irish mortgage credit risk models as required under TRIM. On a pro forma basis at the end of June 2018, this reduced the Group’s fully loaded CET1 ratio by c.70bps, from 14.1% to 13.4%.
The Group’s fully loaded CET1 ratio (net of the TRIM impact) increased during the quarter by 10bps to 13.5% at the end of September 2018. The Group’s organic capital generation during the quarter of c.40bps was offset primarily by investments in our business transformation programme and a dividend deduction.
The Group’s regulatory CET1 ratio was 15.1%, and the Group’s Total Capital ratio was 19.0% at the end of September 2018.