Bank of Ireland said a weakening economy is hurting its earnings and that some business customers are finding it increasingly difficult to repay loans, knocking nearly 14 percent off its shares.
"It's time for hard hats I'm afraid. It's time to run this bank in a very conservative way," Richard Burrows, governor of Bank of Ireland's board, told shareholders at the company's annual shareholder meeting.
Ireland's second-biggest bank by market value highlighted the risks posed by economic slowdown and global market turmoil at the time of its full-year results in May but analysts said the tone of Tuesday's statement pointed to a deterioration in outlook.
"We have spoken to management this morning and they acknowledge that the environment has changed considerably since the full-year results in May," Davy analyst Scott Rankin wrote in a research note.
"Momentum has slowed and we will need to cut our (earnings) forecasts again by at least 5 percent," he added.
Rankin said that also had implications for other Irish banks, particularly Allied Irish Banks.
The country's banking stocks index was down 7.7 percent at 1342 GMT, dragging the overall Irish market 3.7 percent lower.
Bank of Ireland, whose shares have lost three quarters of their value since hitting a life high early last year, fell 8.1 percent to 4.65 Euros after an earlier drop to 4.36 Euros.
Analysts at NCB said they expected to cut their earnings forecasts for the company by at least 10 percent.
The bank declined to give earnings guidance when it published full-year results in May but had indicated they would drop by pointing those analysts predicting a rise to the more pessimistic forecasts of some of their Irish colleagues.
"After ducking EPS guidance at the results presentation stage, there was a suspicion they could come out and give a general nod in the direction of consensus," Goodbody analyst Eamonn Hughes said.
"However, this is missing this morning, so that may cause some uncertainty in the short term."
Credit Slippage
Bank of Ireland said the slowdown had been most pronounced in its Irish retail business.
Rates of lending growth at its UK and international corporate banking operations in the second half of its last business year had continued into the first quarter to the end of June but were expected to moderate, it added.
"While we expect to increase our customer lending in the current year, we are taking a prudent and selective approach to this growth in the current environment," the bank said.
Davy's Rankin said that indicated the bank may miss its target of a double-digit percentage increase in loans this year.
The bank said its loan book of residential mortgages was "proving resilient" despite a weakening housing market but there had been some "credit slippage" over the last three months, particularly in its portfolio of loans to businesses.
Bank of Ireland said that was in line with previous guidance that impairment charges on bad loans would rise this year.
The bank said it remained "highly vigilant" given the external environment and described cost growth in the first three months of its business year as minimal.
"Let us be very clear, Bank of Ireland will make a profit," Burrows said of the current year.
Asked if the bank may have to resort to a rights issue to bolster its capital position, Burrows described the company as "perfectly adequately capitalised" for the current environment and for any future problems envisaged by management.
Burrows also said the bank currently had no approaches on the table that could lead to a takeover of Bank of Ireland .
On top of customer deposit growth, the bank said it had also raised 3 billion Euros ($4.7 billion) in funding from wholesale markets since the end of March.
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