Bank of Ireland Estimates Cut

In its 3rd quarter trading update, The Governor and Company of the Bank of Ireland (IRE - Analyst Report), or BOI, reduced its earnings outlook due to higher loan impairment charges.

IRE raised its estimate of bad debts to EUR4.5 billion from EUR3.8 billion for the 3 years through 2011, with roughly EUR1.4 billion expected for the 2009 fiscal year ending March 31. Moreover, BOI said there is downside risk to this estimate, with EUR1.5 billion of additional impairment charges possible.

Consequently, we are cutting our fiscal year EPADS estimates to $2.55 from $3.30 for 2009 and to a loss of $2.90 per share from a loss of $2.40 per share for 2010.

In other news, IRE will receive a capital injection from the Irish government of EUR3.5 billion (up from EUR2 billion previously) of 8% perpetual core tier one non-cumulative preference shares with warrants. This raises the pro forma Tier 1 capital ratio to 11.7% from 8.7% at September 30, 2008. In addition, IRE eliminated its common dividend to conserve capital.

IRE is expected to report fiscal 2009 results on May 19.

We have a Hold on Bank of Ireland. The current Zacks rank is 2, indicating near-term upward bias in IRE’s share price. On Monday, IRE shares were down $0.45, or 16%, from Friday’s closing price of $2.77.