Thursday 19 January 2017

Taxpayers will get back 'bulk' of the €13.3bn cash injection

Hodgkinson acknowledges the hurt of investors and insists worst is over despite €10.4bn loss

Published 13/04/2011 | 05:00

AIB executive chairman David Hodgkinson. Photo: PA
AIB executive chairman David Hodgkinson. Photo: PA

AIB boss David Hodgkinson yesterday insisted the taxpayer would get back the "vast bulk" of the €13.3bn soon to be pumped into the bank, despite rocketing losses.

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The comments came as AIB admitted it lost €10.4bn last year, a result that would be the biggest loss in Irish corporate history if not for the even worse performance of Anglo Irish Bank.

Mr Hodgkinson admitted the outturn was "very disappointing", adding that he wished to "acknowledge the hurt" of private investors who "are entitled to feel aggrieved that their money was not better protected".

But he insisted that the "worst was over" and that the €13.3bn of taxpayer funds set to go into AIB over the coming months would not be "lost money". "What has essentially been wiped out is the private shareholders and some bondholders who have lost about €18bn," Mr Hodgkinson said.

"The message for the public should be that, yes, you put [more] capital into the bank but the vast bulk of that should come back over time."

Asked when the State could realistically expect to start getting its money back, Mr Hodgkinson said that was a "really tough one to call" but that it would "not be this year or next".

Profit

AIB is hoping to tempt private investors to buy some of the Government's 93pc stake when the bank returns to profit sometime after 2012.

Once the markets stabilise, AIB may also be able to wind-down its "overcapitalisation" and return money to the Exchequer. "I don't think this [the Government's exit] will be a big bang," Mr Hodgkinson said. "This will be a progressive thing."

The €10.4bn loss reported yesterday was sharply worse than the €2.3bn hit recorded during 2009, as losses on AIB's Nama-bound loans more than doubled to €8.5bn.

Last year also saw a substantial deterioration in AIB's "other" loans, which booked impairments of €4.5bn in 2010 against a charge of €1.6bn in 2009.

Residential mortgages account for about a third of the €94bn non-Nama portfolio, making them AIB's single biggest exposure.

The bank took an extra €438m of provisions on mortgages last year, bringing total provisions to €566m.

The results for 2010 were also blunted by €500m worth of fees for the government guarantee scheme, AIB finance boss Bernard Byrne said yesterday. Though he admitted the bank was also benefiting from lower funding costs.

As AIB's deposits fell by €22bn last year, its reliance on last-resort central bank funding surged to €36bn, including €11m in 'emergency' funding from the Central Bank of Ireland.

The €25bn of funding that comes directly from Frankfurt carries an interest rate of 1pc while the €11bn from the Central Bank of Ireland costs AIB about 3pc. Both are well below what the bank would be paying on the money markets.

AIB yesterday said that its reliance on 'emergency' money from the Irish central bank has significantly reduced in recent months, after the bank received the proceeds of its €2.1bn sale of Bank Zachodni.

AIB's funding position was also boosted by the acquisition of €8.5bn in deposits from Anglo Irish Bank, and executives said deposits had "stabilised" since the March 31 bailout announcement.

Shares in the bank closed down 3c, or 12pc last night, amid average trading volumes.

Irish Independent

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