BANK of Ireland Plc, the country's second-biggest bank, fell the most in 19 years yesterday after saying it will cut its dividend and post a drop in first-half profit.

The lender slumped as much as 13 percent, and traded down 30 cents, or 6.5 percent, at 4.32 euros (US$6.13) as of 11am yesterday in Dublin.

The bank said yesterday it would reduce its dividend by 50 percent to preserve capital as loan losses mount.

"We are taking the right action on the basis of what we know to protect the bank's capital position," Chief Financial Officer John O'Donovan said.

Ireland's economy may enter a recession this year, for the first time in more than two decades, as construction shrinks and house prices slide.

The bank's impairment charge may climb to about 0.35 percent of total loans in the six months to September 30, from 0.12 percent a year earlier, as borrowers struggle to repay loans, according to Bloomberg News.

"The overall tone of the statement was even more negative than we anticipated," said NCB Stockbrokers analysts, including Christopher Wheeler.

"The dividend cut looks sensible, although it may raise questions about how bad Bank of Ireland believes the situation may get," they said.