Bank of Ireland - ROTE >10%; strong lending; expanded transformation for greater efficiency gains

Davy Research
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Bank of Ireland’s (BOI) strategic plan focuses on growth and an expanded transformation programme to drive front-end technology benefits with additional efficiency gains — lending growth of 18% (+€14bn) and 2021 cost guidance of €1.7bn (50% cost/income target). Commitment to the UK is re-affirmed, supported by multiple initiatives to double the divisional return on tangible equity (ROTE). The above actions are targeted to increase sustainable ROTE at a group level to in excess of 10% from 6.9% in 2017. We see the announcement as supportive of our investment thesis given the additional clarity on areas of uncertainty, while we view its financial targets, particularly ROTE, as conservatively set with an exit ROTE of 11-12% more likely.