DUBLIN, Nov 9 (Reuters) – The Bank of Ireland (BIRG.I) followed its main rival AIB (AIBG.I) on Wednesday in raising its net interest income forecast for 2022, reflecting the accelerating pace of European Central Bank interest rate hikes.

Ireland’s largest bank by assets said in a trading update it expects net interest income to rise by around 6% to 7% year-on-year. other than its previous forecast of it being slightly higher in 2021.

AIB, the country’s largest mortgage lender, forecast last month that its net interest income would rise more than 15% from the 10% previously expected.

AIB is the only Irish bank so far to raise untracked mortgage interest rates since the ECB began raising rates at its fastest pace ever. Bank of Ireland and Permanent TSB (IL0A.I), the only other high street lender, have yet to move.

The 3% growth in interest income at Bank of Ireland since the start of the year is explained by the fact that the bank is no longer charged negative rates by the ECB for excess deposits.

He also said he plans to repay all of his ultra-cheap ECB funding this month, boosting his income by another 30 million euros.

In addition to the rate hike last month, the ECB changed the terms of its widely used long-term loan program known as TLTRO-III to encourage banks to repay at least some of the money.

The Bank of Ireland added that new lending has increased by 13% so far this year compared to 2021, including a 30% increase in Irish retail, a 23% increase in businesses and markets and a down 19% in the UK, where it continued to focus on value rather than volume.

“Overall business momentum is positive. The strength of our business model means we are firmly on track to deliver sustainable RoTE (return on tangible equity) above 10% in the near term,” the CEO said per acting Gavin Kelly in a statement.

Reporting by Padraic Halpin; Editing by Simon Cameron-Moore

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