The bad news is that even after cutting costs, Bank of Ireland's operating costs rose. The good news is that profits were up in corporate and treasury

Bank of Ireland's second quarter results are out. They are not pretty: there was a pre-tax loss of €1.25bn. Much of this was attributable to loan losses, mortgage arrears and low interest rates. However - worryingly, the bank didn't do too well in terms of operating profits either. Bank of Ireland is part way through its plan to cut 1,000 jobs, but operating costs remained stubbornly high, at €842m vs. €843m one year earlier.

There were reasons for this: although staff costs fell €4m, pension costs rose €8m as a result of the government's pension levy. Any gains from lower staff numbers, reduced redundancy payments and salary restraint were therefore offset by higher pensions.

Bank of Ireland didn't mention additional cost cutting initiatives, but if costs remain high, the redundancy target may have to be raised. In its statement accompanying the results, Bank of Ireland said the existing restructuring programme should start to deliver efficiency benefits by December 2012.

There was some good news too. As the chart below shows, profits rose 22% in Bank of Ireland's corporate and treasury business. The real drag, in contrast, was the retail bank in Ireland and the UK.