AIB restructures loans worth €4.46bn to cap 'impaired' borrowings
Published 11/03/2010 | 05:00
ALLIED Irish Banks renegotiated €4.46bn of loans with customers last year, enabling it to cap the amount of borrowings it has had to classify as being impaired.
The volume of loans that have been restructured -- which represents 3.4pc of its total loan portfolio -- compares to a figure of €154m at the end of 2008.
Loans and receivables which have had their terms renegotiated resulted in an "upgrade from 91-plus days past due or default status to performing status," AIB said in its so-called 20F filing with the US Securities and Exchange Commission this week.
"Where possible, the group seeks to restructure loans rather than take possession of collateral," it said. "This may involve extending the payment arrangements and agreement of new loan conditions."
AIB's total impaired loans stood at €17.4bn at the end of December, including €10.9bn of loans that it expects to transfer to the National Asset Management Agency (NAMA).
AIB said it does not normally restructure loans "at concessionary interest rates" or "on uncommercial terms". Where this happens, the loans are still classified as impaired.
"In certain circumstances, as part of a loan restructure, AIB will convert debt to equity and, if the recapitalised borrower is viable, will reclassify the debt as performing," it said.
Still, the rate of loan restructuring is lower than the 5.8pc reported by Belgian-owned KBC Bank Ireland last month.
So far, it is the only other lender in the market to have provided clarity on the extent of loan renegotiations.
However, while the extent of KBC's loans restructuring helped stabilise the bank's arrears profile in the second half of last year, the rate of loans that are categorised as 'high risk' continued to increase towards the end of 2009.