AIB to cut cost of deleveraging
Published 10/08/2011 | 05:00
AIB could complete its massive deleveraging project at a cost of just €2.63bn -- well below the €4.25bn allowed by the bank's latest recapitalisation -- according to stockbrokers Davy.
In a note issued yesterday, Davy credit analyst Stephen Lyons pointed to AIB's recent success in achieving a third of its €21bn deleveraging sales in the first half of the year at a charge of just €130m.
Mr Lyons acknowledged that future sales were "likely to command higher losses" but he expected AIB to still book a total deleveraging charge of €2.63bn, based on a 60pc loss for land and development loans and a 25pc loss on the residual loans.
Davy also praised AIB for exiting the Central Bank's 'non-standard' funding measures in the first half of the year, by paying off €11.4bn of emergency liquidity assistance (ELA) advanced by the Central Bank.
ELA has a funding cost of about 3pc against the 1.5pc offered by the European Central Bank's main operations, but Mr Lyons pointed out that "cheaper monetary funding" would now be the first thing it paid off as it sold assets.
Davy expects funding costs to remain under pressure.