The Governor of Bank of Ireland said the bank was pleased with the quality of commercial property lending, despite the difficulties currently being experienced by the commercial property industry.
Patrick Kennedy said the bank's commercial real estate loan book has held up well so far, having fallen in size by about €1 billion, or 12 percent, last year.
“This reflects both a prudent approach and proactive bookkeeping,” he said in response to a question from shareholders at the bank's annual general meeting (AGM) in Dublin this morning.
Irish commercial property valuations have fallen significantly in recent years due to the interest rate environment, weak demand and oversupply.
But Kennedy added that there are huge differences between the situation in 2008, when the property market crash began, and today.
Kennedy said that in 2008, Bank of Ireland's commercial property lending was around €37 billion to €38 billion, or about 25 percent of its loan book, but now it is €7 billion, or less than 10 percent.
He added that while there was speculative land lending in 2008, “that's completely gone now,” and the overall credit management and governance approach, risk framework, risk oversight and management information are very different.
Kennedy also said the bank was very supportive of the “cash environment” and would absolutely comply with the government's proposed new legislation on access to cash.
“We recognise the importance of the cash environment in the payments system,” he said, adding that Bank of Ireland was upgrading more than 650 ATMs it owns across the country.
On banker pay, Kennedy told shareholders the bank has responded carefully and thoughtfully to changes to government pay limits and links pay to the achievement of the bank's long-term strategic and commercial objectives and the delivery of services to clients.
But he added, referring to salary and bonus restrictions still in place in the industry, “as a general principle, public policy should promote a level playing field for all businesses.”
“We will continue to consult with all stakeholders on the future development of our industry, including remaining restrictions and other policy developments that create an unfair playing field for other companies and competitors,” Kennedy said.
This was Kennedy's final annual meeting after 14 years on the board, six of which as chairman.
Chief Executive Miles O'Grady paid tribute to Kennedy's contributions and said a successor would be announced shortly.
O'Grady also told the conference that Bank of Ireland plans to invest around €2 billion over the next four years in future-proofing the business.
“Our investments are focused on ensuring long-term operational resilience, accelerating digital capabilities and driving operational excellence and efficiency — all aimed at meeting the rapidly changing expectations of our more than four million customers,” he said.
Many of the questions from shareholders focused on the treatment of former employees who were members of the bank's defined benefit pension scheme.
Many contributors criticized the 1% tax on the fund and the 4% cap on cost-of-living increases, which were introduced more than a decade ago as part of efforts to stabilize the fund and eliminate the deficit.
Mr Kennedy said a proposal had been made to hold fresh discussions with the banks' chief financial officers on these issues and he hoped it would be accepted.
Asked whether the bank would consider fractional share purchases, which would allow small shareholders to sell shares to the bank at a premium, as AIB recently approved, Kennedy said AIB's shareholder base was more diversified than Bank of Ireland's.