Bank of Ireland loan volumes rise on currency movements

Pedestrians walk past the old Bank of Ireland building on Royal Avenue in Belfast January 17, 2012. REUTERS/Cathal McNaughton

(Reuters) - Bank Of Ireland's loan volumes grew for the first time since the financial crisis but the bank had to reply on an increase in the value of sterling and the acquisition of loan books from its rivals to do so.

While Ireland's economy is the fastest growing in Europe, many people are still grappling with big debts, shrinking the stock of outstanding credit across the banking sector as repayments and redemptions continue to exceed new lending.

Bank of Ireland said its loan book grew to 85 billion euros (61 billion pounds) in April from 82 billion euros at the end of December with the rise in the value of sterling accounting for 3 billion euros.

After the bank completed the purchase of 500 million euros worth of loans during the period, this implied an underlying contraction of around the same amount since December, Davy Stockbrokers said in a note.

Bank of Ireland, the country's only lender to escape nationalisation, said new lending continued to grow in line with expectations, as did trading in general with net interest margin growing modestly.

The 14-percent state owned bank said its Core Tier 1 capital ratio - a measure of financial strength - stood at 14.6 percent or 11.7 percent under the so-called fully loaded Basel III ratios, both down a touch since December.

Capital levels were hit by a net increase in the deficit of its defined benefit pension schemes to around 1.7 billion euros from 1 billion at the end of last year. The bank cited the impact of quantitative easing for the sharp rise.

Like most of its rivals, Bank of Ireland made a profit last year for the first time since the 2008 financial crisis, thanks to growth in new lending and a claw-back of money set aside for bad loans.

(Reporting by Padraic Halpin, editing by Louise Heavens)