AIB is determined to rebuild trust and return the investment of the Irish people
Published 02/08/2014 | 02:30
AIB and the Irish people have travelled a very difficult road together over the past six years. The State has provided the means for the bank's survival and recovery.
Now AIB has reached a point where it can announce a return to sustainable profitability for the first half of 2014 - €437m before tax. A bank that is generating capital provides fuel for the economy, stimulates growth and secures existing employment and supports job-creation. Crucially, it ultimately allows a return to the shareholder and also goes a long way towards retrieving lost trust and confidence.
When I joined as CEO of AIB in December 2011, the bank’s figures made grim reading. What followed was this: losses of €5.1 billion for 2011; losses of €3.7 billion for 2012; losses of €1.7 billion for 2013.
Moving from financial slump to profitability required stark choices. We were obliged to identify the most immediate and demanding issues that would stabilise, repair and recover the group and ultimately return to profitability. That transformative action included a severe cut in our workforce and the implementation of a stringent cost-reduction programme.
The turnaround that we are now seeing has been complex, involving an enormous coordinated effort between our shareholders, the taxpayer, our customers, the Government, our staff, the board and the leadership team of the bank. Bank staff come from, and are part of, the communities that have taken the brunt of the economic crisis, a recession unique in its severity and duration. They understand the deep impact it has had on families, individuals, businesses, farmers and on their own localities and they bring this experience to bear in their daily dealings with the public.
Prior to the publication of our interim results on Wednesday, the NTMA announced an upward revaluation of AIB - a signal of the bank's changed outlook. We have met many of the main objectives that we set out when I became the CEO.
The portends are positive. In the first half of 2014, AIB has shown a €1.3bn improvement in overall performance compared to the same period last year. We are now a stable organisation with a growing capacity to lend. We approved a total of €5.6bn in the past six months and impaired loans decreased by €2.9 bn, since December 2013.
Dealing with distressed mortgages - and the attendant pressures on our affected customers - has been one of the bank's major challenges and became a central activity of AIB. We approached what was an intransigent and complex problem with vigour and enormous resources to devise solutions to match a range of complicated cases. Operating on the basis that we keep people in their homes wherever possible, we have developed new products, forged new alliances (with the Irish Mortgage Holders Organisation) and reached a point where arrears have peaked.
We are now seeing tangible results with the total number of Irish mortgage owner-occupier accounts in arrears down by 9pc since December. This development is critical from a societal perspective as well as the good health of the bank.
Creating a stable, profitable, well-capitalised bank must be matched with modern, professional customer service. A business that does not prioritise the needs of its customers is a business that ultimately fails. AIB/EBS has 2.2 million customers; First Trust in Northern Ireland has 280,000 customers; AIB GB has 85,000 customers. AIB is maintaining the traditional one-to-one branch service that customers require and the bank is also investing heavily in digital capabilities to meet the public's changing needs.
Our digital strategy has resulted in a 56pc increase in mobile customers since 2012 and a 15pc increase in online customers. At the same time we have invested in an upgrade of our branches and we have seen a reduction of 57pc in our over the counter transactions in the last 12 months. We have opened 11 self-service branches (a further seven are planned).
In order to assist in Ireland's economic recovery, our commercial strategy is ensuring we are providing appropriate and prudent lending to viable business plans. We have approved €4.6bn of loans in the first half of 2014 - a 28pc increase in sanctions. Identifying lending requirements across different areas of the economy is a valuable means of maximising the effects of lending and we have invested heavily in our sectoral knowledge and intelligence.
We must ensure that, behind aspiration, lies practical financial support. In the past six months, we launched funds of over €1bn in key areas of Agri, Exports and new homes development. We support emerging energy and green technologies. As the largest provider of seed capital in Ireland, we made 180 investments in 102 companies creating an estimated 1,100 jobs. We are the number one bank in the market for start-ups, supporting 50,000 jobs in the last three years.
On the retail consumer side we have increased loan approvals for mortgages in Ireland by 17pc with a market share for approvals of 37pc. We expect to maintain our leading position as a mortgage provider as this market returns to more normalised levels. A fully online mortgage approval product, where customers have the ability to obtain a mortgage without having to visit a physical branch, has attracted more than 1,300 applications.
As AIB emerges from restructuring and embarks on the start of a new growth phase, we will continue to work with all our customers, personal, business and corporate, including those in distress, for the good of the economy.
The determination of this management is to rebuild trust through the delivery of service of a consistently high international standard.
If we are successful in these goals we will be able to maximise shareholder value and most importantly, we will be able to begin the process of returning the tremendous investment that the State, ultimately the Irish people, made in AIB.
This week, I believe, AIB demonstrated that it has indeed transformed itself and has reached a very important point on the road to recovery.
David Duffy is CEO of AIB