Over 29,000 SME loans with AIB in trouble
Published 01/12/2011 | 05:00
MORE than 29,000 of AIB's small- and medium-sized business customers are in trouble with their bank loans.
The number of these businesses that are finding the going increasingly tough has risen rapidly in the past six months. Such is the scale of this rise that the state-owned bank has been forced to draft in another 200 staff to deal with these customers, bringing the total number of staff working at its specialised lending units to 800.
AIB and the EBS building society, which is being merged with it, are also dealing with growing numbers of mortgage holders who cannot make their monthly repayments.
The bank said yesterday that it was dealing with 12,000 mortgage customers who were in arrears and that those who were getting into difficulty paying their mortgages had increased in the past three months.
It will be making bigger provisions in its accounts to cope with larger bad debts following the continued surge in customers who cannot pay the bank what they owe. AIB said a higher bad debt provision this year should help to reduce this charge in 2012.
The bank is seeing only "muted" demand from customers for new loans, it said. Putting extra resources into working with the rising number of customers in difficulty has raised costs.
All of the property loans AIB was obliged to transfer to NAMA have been completed. The bad bank purchased these loans at a discount of 55pc of what the bank had valued them at.
In a trading update, the bank said customer deposits had stabilised. The bank has sufficient capital as a result of the money poured into it by Irish taxpayers, it said, to meet the Central Bank's more stringent requirements.
The bank has so far managed to dispose of assets worth €10.7bn as part of its requirements under the bailout programme.
This includes mainly property sales and the disposal of project and leveraged finance loan books in the US and Europe.
It is on track to complete further assets sales before the end of this year, valued at €1bn, depending on market conditions.
This means the bank has already met over 50pc of its non-core asset disposals programme to be achieved by the end of 2013, it said.
It has reduced its loans by €46bn, from €147bn to €101bn over the 21 months to the end of September last, according to AIB.
In the second half of this year the bank has been focused on improving customer service, and the processes and practices at the merged AIB/EBS.
This work is being done in circumstances where difficult trading conditions are continuing to affect the bank's financial performance, it said.
The bank's new chief executive, David Duffy, is due to take over at AIB next month.
He will be charged with implementing a new strategy for the bank that will include the axing of 2,000 jobs.