Bank of Ireland shares

Both - listen it’s dynamic lots of variables here - but don’t forget the counter cyclical capital buffers either…..but you know the probabilities for the stock aren’t dictated by that….its that Irish sovereign remains robust to support consumers if/when distress appears, it’s that the loan book is written to low LTV’s, it’s that housing remain scarce and hugely cash flow generative to 50% ltv holders. The only dark spot I can think of is inability of asset holder to take control of assets in the Irish market i.e. repossessions…..for this to matter at scale your talking about GFC level problems again….household balance sheets and corporate balance sheets are ok…in reality the only balance sheets that look shaky this time around are sovereigns. Ireland being the best worst boy in the class on this front

Hi everybody. Just joined.

@bankboucy - Thanks for posting the podcast. Pretty positive about BOI.

Was wondering about the dividend going forward. I have seen some posters expecting a 30 cent interim. As I understand, this would imply a total div of 90 cent. Are we really expecting a 50% increase. Would be great if that were to transpire.

Does this move from GS signal that there might be value in the Irish market?

Yeah we're saying the same thing - final dividends for this financial year (2024).....won't be paid until Q1 2025.......the interim is just that....an early payment on excess capital generated/profits made in 2024.

In this calendar year - you are looking at the final (and only) dividend associated with fiscal 2023......60c per share....and then they've indicated this is the first year since 2008 where they will pay an interim dividend or put another way an intra-year dividend.

This is why the BIRG holder of record today will collect an unusually large amount of dividends in the next ~9 months.....with a normal cadence of interim and final dividends being paid moving forward starting in 2025.

Bank of Ireland upgrading its core legacy IT systems and lifting and shifting them to a new modern microservices infrastructure core has already occured. They've moved their whole internal stack to Temenos UniversalSuite - effectively an IT operating system for a bank. Price tag ~€2bn over the last 3-5yrs.

This was one of the tent pole projects of the McDonagh CEO era.....with all the big ticket costs now in the past.....as BIRG customer it might not feel like it as the front end is still so poor.....but if you look at BIRG operating expenses over the last few years you can see that the €2bn spend has allowed for significant cost reductions in the first instance and more recently impressive cost controls (relative to inflationary wage pressures).

So all this BIG IT spend is behind BIRG - and what remains IMO are the dividends of ripping out the core system......broadly speaking in IT projects it's very difficult and somewhat pointless to put liptstick on a pig.....i.e. make a nice frontend that interfaces with a terrible backend.....BIRG's backend core systems are ready for a better front end now. Let's hope that changes soon - but as I've said the benefit in their operating expenses since moving to Temenos is clear....expense reduction has been impressive.

Short version - BIRG has no large capital or internal projects that might soak up excess capital on the horizon....it is IMO, as I've said, returning to what a duopoly bank in highly consolidated market should be....which is a dependable dividend payer in good times and bad times....BIRG now has the capital base, IT infrastructure & risk/compliance and loan book in place to be just that.

Agree - but from an investor standpoint - the important thing is that the large technological debt the bank had built up in the 2000's has been rectified and the group is sitting, on the backend anyway, a modern fit for purpose infrastructure stack.

By choosing Temenos, effectively a European bank operating system.....the hope would also be that BIRG will in the future effectively get to piggyback on Temenos R&D (which in effect is a pooled R&D team from the many many banks that use Temenos as their vendor).

Let's hope BIRG's CTO picked the right horse here in terms of the most important vendor to put the bank sitting on.....and in that respect this might be a risk to shareholder returns moving forward if he didn't.

Maybe Im mistaken @Timing belt (given my limited knowledge of tech stacks its possible)......but building a pretty frontend with a slick modern UX/UI as a technology project is much smaller ticket item than ripping out a core compliance/crm/accounting system........so you know what we are talking about here is building an improved iOS/Android app/WebApp......which if the backend is modernized and standardized....is not IMO a €2bn project like the Project Omega/Temenos deployment was.

I mean how much could it reasonably cost to hire some Revolut-esque hotshots to build three apps........€50-100m?

Such a project with that expense profile would therefore not be material for the share price for a bank producing say €1.5bn of PBT annually.

@Timing belt so what would you estimate would be the sticker price at the very very high end to deliver a new iOS/Android/WebApp experience?....I mean throw everything at it and assume the worst.

🤣 Bank of Ireland is never going to the moon 🫣 I'll leave that to the astronauts 👩🏻‍🚀 15% annualized return over say the next three years will work very well for me...majority of which is made up of forecastable & relatively predictable dividend distributions (~10%) and the remaining 5% made up of share price appreciation driven by buybacks/NII per share growth (5% of s/o shrinking p/a)......the upside is that in that same period one might get a re-rating of multiples or P/TBV that the marginal buyer is happy to pay....the ceiling on this is a 1.3 P/TBV IMO....will be interesting to watch

BOI have been really cleaning up the share register.
at the end of 2019 they had 96,000 individual shareholders, and at the end of 2023 it was 80,000.

A massively disproportionate % of that 96,000 had a shareholding below €500.

Retail investors now own 10% of outstanding shares, down from 15%, which is a huge drop in one year.
this years much larger €500m buyback will hoover up more and is ongoing as we speak every single day (and had been for a few months).

We’ll see next Dec 31 how the share register looks.

I know AIB are looking at a purchase of all shares from holders with 1-20 shares, with trade costs covered by AIB. BOI dont have quite the same long tail of shareholders as the stock splits weren’t as severe.

well it won’t affect the SP from the perspective of having fewer retail shareholders (retail only control 10% of the 1.03bn outstanding shares).

it would affect the SP mathematically for the simple reason that it’s a buyback - the shares get bought and cancelled, so the number of outstanding shares will drop by about 50mn shares, from 1.03bn to 998mn, and therefore everyone owns a slightly higher % of the business - your shareholding therefore has a slightly higher value.

I believe the Berkshire investment in AMEX is the best example to study if you’re into Buybacks - they bought a small holding back in the 80s and without buying any more shares, ended up owning 20% of the business via annual buybacks of shares by AMEX (that’s just my recollection - Google it for more).

I’m not personally a fan of buybacks, but they’re ok in a business like this that isn’t issuing new shares to management/staff/rewards etc. otherwise they can just be a revolving door to hide management award share grants.

🙄

The share register has become increasingly more manageable over the past year, with a reduction of 16000 shareholders, from 96,000 to 80,000, which equates to a reduction in retail holding size from 15% to 10% of the outstanding shares.

retail shareholders would appear to be selling in large numbers once the SP rose - when usually retail tends to do the opposite and buy rising SP’s.

ah ok

I’m a mid May 2020 buyer, so my ROCI from the ‘23, ‘24, ‘25 dividends and buybacks will put me in a free position next year all going well.

PTSB alone are looking to remove 128,000 shareholders, who have less than 100 shares (valued about €150), and represent a massive 99.5% of all shareholders.

If my math is correct it means there’s about 600 shareholders above that €150 level who collectively control all the shares.

As for AIB:

“AIB is seeking to buy out holders of 20 or fewer shares. They account for almost 90 per cent of the bank’s 75,000 shareholders by number but only hold 0.01 per cent of the company combined”.

If it works out, the AIB register will be 10% of its previous size, and still have 99.99% of the shareholders by value.

More detail in this link than the other one:

https://www.irishtimes.com/business/2024/04/06/ptsb-joins-aib-in-plan-to-take-out-small-legacy-investors/

makes sense. BOI were only diluted by 14% for the Gov investment, whereas it was 99.9% for AIB and PTSB.

We describe it as small shareholders being “wiped out”, but in practice they still hold those shares and are on the register, but the shares are effectively valueless.