Sunday 25 August 2019

AIB says it's consolidating shares, warns Central Bank lending rules will restrict mortgage market


Paul O'Donoghue

Allied Irish Banks said it expects the Central Bank’s new mortgage lending rules to restrict growth in the mortgage market.

The bank also said it is working with the Department of Finance to finalise the terms of a capital reorganisation announced earlier this month which will see the bank start to repay some of the €21bn it received in the form of a bailout from the taxpayer.

This includes a consolidation of shares with an offer of one for every 250 held by investors as part of the process.

The share consolidation will result in a reduction of the number of AIB shares in issue to 2.7 billion from 523.4 billion at the moment.

AIB said today that lending activity levels are increasing across the sector, adding that drawdowns of €6.2bn to the end of September were 53pc higher compared to the same period in 2014.

However, it added: “At an industry level, the demand versus supply dynamics and the Central Bank of Ireland Macro Prudential measures are expected to impact future growth rates in the mortgage market.

Earlier this year, the Central Bank imposed new mortgage lending rules which include income multiple limits of 3.5 times income, and loan-to-value limits of 80pc.

Customer accounts at the end of the third quarter of the year were “stable” at €63bn and account for 64pc of the group's total funding base.

AIB CEO Bernard Byrne said: "The bank's performance continues to improve, showing further advances in the third quarter. Our customer-focused strategy is enabling us to grow our lending, support the economy and further reduce non-performing loans. 

"Encouragingly, total lending drawdowns continue to increase, with €6.2bn for the year to date and additionally impaired loans have further reduced by €2bn in the quarter."

He added: "The key indicators show that AIB is set to continue playing a central role in the rapidly-growing Irish economy. The recent approval by the ECB of our reorganised capital structure is welcome and positions us well to repay capital to the State".

Finance Minister Michael Noonan said: "“My Department expects to finalise the terms of this reorganisation in the coming days but today’s announcement by AIB outlines the remaining key details for the various components involved.

"When implemented they will address the remaining legacy instruments in the bank and ensure AIB has a capital structure that is not only fit for purpose in the current regulatory environment but is an important initial step in our efforts to maximise our return from this important investment and will start the process of repaying the Irish taxpayer for their substantial support in recent years.

He added: "I am confident that the State will ultimately recover the full value of their €20.8bn investment in AIB in the years ahead”.

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