Sunday 22 January 2017

AIB lay-offs alert over €1.8bn staff mortgages

Emmet Oliver Deputy Business Editor

Published 17/03/2010 | 05:00

AIB provided €1.8bn worth of mortgages to its own staff and other groups in a move which may create difficulties when the bank lays off staff later this year.

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The bank's total Irish mortgage book came to €27.1bn at the end of 2009, with 64pc of this amount going to ordinary householders and 29pc loaned out to buy-to-let investors. According to the bank the remainder had been advanced to "staff and others". The bank did not provide a breakdown of this last group.

The current level of arrears on mortgages to staff is not known or disclosed by the bank. However, the national rate of arrears is close to 4pc, according to the financial regulator. The arrears figure refers to mortgage accounts which are more than 90 days behind their agreed schedule.

The bank is expected to announce a major cost-cutting programme later this year as it attempts to improve its cost-income ratio and sell assets in order to drum up additional capital.

The final figure for redundancies could be in the thousands according to some observers -- but group managing director Colm Doherty has refused to speculate until the EU Commission rules on its restructuring plans.

Lay-offs could pose a challenge for those staff members holding mortgages with the bank, particularly given the background of 12.6pc unemployment. The bank adheres to strict rules that staff members in arrears must be treated exactly the same as customers.

Bank of Ireland also advanced large sums to its staff. Both banks have refused to divulge whether bank shares were used as security for personal loans or remortgages.

Mr Doherty recently rejected suggestions that the mortgage books of the banks could represent a so-called 'second wave' of loan losses. UCD economist Morgan Kelly has warned that Irish banks could end up "drowned" by the losses on mortgages.

Provisions

But so far AIB has not taken large provisions in this area.

The provision charge for Irish residential mortgages was just €91m or 0.35pc of total average residential mortgages at the end of 2009. This compared with €35m or 0.16pc in December 2008. The bank cited the impact of increasing unemployment for the rise in provisions.

Nationally, there are almost 793,000 mortgage accounts in Ireland with a combined value of €118.3bn, the regulator said. Of these, 28,603 accounts, about 3.6pc of the total, were in arrears for more than 90 days, according to the latest set of figures.

Irish Independent

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