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Friday 22 September 2017

BoI and AIB profitable in 2014 -- Fitch

The Bank of Ireland headquarters in central Dublin.
The Bank of Ireland headquarters in central Dublin.
Colm Kelpie

Colm Kelpie

BANK of Ireland and AIB will likely turn profitable next year, ratings agency Fitch has said.

The ratings agency also predicted that the amount of bad loans will peak next year and begin to gradually reduce after that.

But it warned that all banks would need to set aside money after the recent balance sheet assessments carried out by the Central Bank.

Fitch said the additional provisions would impact earnings and capitalisation ratios for this year, but would provide a level of comfort ahead of the Europe-wide stress tests carried out by the European Central Bank at the end of next year.

But it warned that there will still be challenges for asset quality.

"A weak commercial property sector and regulatory pressure to resolve a high proportion of forborne loans and long-term arrears could derail improvements to asset quality," the agency said.

"Impaired loans typically have high loan-to-values and rely on collateral, which are difficult to resolve in the short or medium term, so are harder to recover.

"We believe Irish banks will become long-term property managers for many of these loans and keep properties on their balance sheets for some time."

Fitch is predicting that the economy will grow 1.1pc next year -- significantly lower than the 2pc that was forecast by the Department of Finance.

Irish Independent

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