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The Governor And Company Of The Bank Of Ireland's CEO Discusses Interim Q2 2012 Results - Earnings Call Transcript

Our deleveraging initiatives have lowered the group’s requirement for wholesale funding, and we have no requirement to raise term funding this year with unsecured term maturity of just €0.4 billion for the remainder of the year. Our unsecured term maturities for 2013 and 2014 are both low and very manageable.

Our operating performance in the first half of 2012 has been impacted by the interest rate environment, exceptional guarantee fees and the economic environment. Operating profits before impairments reduced from €164 million in the first half of 2011 to €58 million for the first half of 2012. This positively reflected a reduction in the level of our average interest earning assets as we deleverage the balance sheet and particularly the sharp reduction in official interest rates, which impacted on our earnings rates. This, together with the continued elevated cost of funding in deposits, impacted our net interest margin which was 1.20% for the half year.

Rebuilding net interest margin is one of our key priorities, and we have taken a range of actions to help rebuild that net interest margin. We have taken a leadership position, endeavoring to bring pricing discipline into an intensely competitive market in Ireland. We have also continued to reduce the quantum of our deposits in wholesale funding on which we are charged ELG fees.

These pricing and ELG actions have not adversely impacted our deposit run charges or volumes we’ve received. In addition, we have taken measured actions to reprice loan assets including in our Irish SME book where we have repriced the loan portfolios to reflect the actual cost of funds and increasing our SVR rate in the UK, 100 basis points in June and a further 50 basis points in September. We expect these and other varied actions we are taking will strengthen our net interest margin.

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