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

Our operating costs remain in line with the first half of 2011. Lower staff costs were offset by investments in our core franchises and in processes and systems aimed in improving customer service and bringing cost efficiencies, which will flow through. As we restructure the group to further improve their efficiencies, regrettably, the number of people that we employ will reduce. Revised redundancy terms have been agreed with key stakeholders and our volunteer redundancy programs to facilitate the controlled departure of stock in line with the group’s revised requirements has recommenced.

Impairment charges and loans and advances to customers were €941 million. This was higher than the first half of 2011, but below the level incurred in the second half of 2011. We remain focused on proactively managing the credit quality of our portfolios. Without being complacent, we are becoming more comfortable with the performance of our corporate and unsecured consumer loan books and our UK mortgage book. We are seeing some stabilization in Irish commercial real estate and in the Irish SME sector, albeit the very challenging conditions remain.

The management of arrears in our Irish mortgage book is a critical priority. We have made significant investments in people, processes and systems in order to help us support customers in difficulty through engagements and restructures, where they are sustainable and appropriate. Whilst the number of customers moving into arrears has increased, reflecting both the economic environment and a considerable number of our buy-to-let customers moving from interest-only to full capital and interest-repayment basis. The rate of migration into earlier arrear and to broad categories has begun to reduce.

We still anticipate that impairment charges will reduce from the level recorded at the half year, trending to a more normalized level as the Irish economy recovers. However, the pace of the reduction in impairment charges will be particularly dependent on the future performance of our Irish residential mortgage book and on the commercial property market, as well as, obviously, our own credit management initiatives.

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