AIB has the 'worst loan book' ever seen in Europe
Published 07/03/2010 | 05:00
AIB has one of the worst loan books ever seen at any European bank and could run up losses of more than €3bn this year, an international credit research firm has warned.
The bank, which last week reported a pre-tax loss of €2.65bn for 2009 -- its first ever annual loss -- has "little prospect" of recovering soon, according to Simon Adamson, senior analyst with CreditSights.
"At this stage, it looks like loan losses for AIB for 2010 will be even higher than for last year," said Mr Adamson. "The bank could make a pre-tax loss of over €3bn in 2010. From my experience, you have to go back to the Nordic banking crisis of the 1990s to see comparable levels of impaired loans in a big bank as you see in AIB today."
The Nordic banking crisis, which followed a real-estate boom in the 1980s, forced major Scandinavian banks into bankruptcy.
AIB ran up €3.4bn in losses from the loans being transferred to the State's bad bank, the National Asset Management Agency (Nama).
"One problem for AIB is that its non-Nama loan book is also under strain," said Mr Adamson. "It still has a high proportion of property lending, and the bank says that losses are increasing in other sectors too, highlighting the hotels, licensed trade and motor trade sectors."
Among those who owe money to AIB include the Fleming construction group, which could now be wound up after the Supreme Court shot down a rescue plan for the business.
AIB also has a major exposure to the €1.1bn owed by Liam Carroll's Zoe Group to various banks. Anglo Irish Bank and AIB are owed almost €300m for funding the purchase of the controversial Glass Bottle site, which is now valued at about €60m.
"2010 will be the worst year for AIB," said Mr Adamson. "And you'd have to be brave to forecast a return to profitability for AIB in 2011."