AIB and Bank of Ireland may need to raise further capital – Fitch
RATINGS agency Fitch has warned that that the country’s two pillar banks Allied Irish Banks and Bank of Ireland may need to raise further capital in the future.
Costs involved with mortgage arrears and the necessity for stronger capital reserves will make it harder for the banks to return to profitability, Fitch also said.
The warnings come just days after economist Jim Power said the main banks may need to raise €20bn in additional capital following stress tests later this year.
Fitch expects impairment charges to rise this year and to peak in 2014 as lenders attempt to meet targets on mortgage arrear resolutions while the banks will not return to operating profitability until 2015, at the earliest.
"As Irish banks' capital ratios continue to be eroded and a return to profitability only appears feasible in the longer term, the banks may need to raise additional capital before they can contemplate a future independent of state support", says Denzil De Bie, a Director in Fitch's Financial Institutions Group.