AIB costs to increase as a result of tracker mortgage scandal
AIB expects to incur exceptional costs this year as a result of the tracker-mortgage scandal and "business-restructuring projects".
In a trading update, the largely State-owned bank said costs would increase as the tracker mortgage examination programme reaches its final stages.
AIB has set aside €263m to cover costs associated with the scandal, including customer redress and compensation.
Yesterday, consumer advocate Brendan Burgess said the bank had made no provision for the 6,000 borrowers affected by the prevailing rate issue, other than the €1,615 already paid to them, which would come to around €10m.
The bank admits the customers were wrongly denied the option of moving to a tracker contract when their fixed-rate contracts expired from 2008, but AIB won't put them back on a low-cost rate.
It argues it abolished trackers by the time the customers came off a fixed rate, so they would not have benefited from a low tracker rate.
Meanwhile, trading at AIB in the first three months of this year was "in line with expectations".
During the period lending at the bank increased 11pc.
In the Republic of Ireland mortgage lending increased 9pc, and the bank's market share of mortgage drawdowns in the three months to March 31 was 31.4pc, down from 32pc in the same period last year.
Net interest margin - a key barometer of a bank's performance - increased to 2.5pc from 2.48pc.
Meanwhile, the bank's non-performing loans reduced by 21pc to €4.8bn from €6.1bn at year end.
This includes a €1bn sale of bad loans that controversially includes around 200 family-home mortgages as well as thousands of buy-to-lets. The portfolio consists of loans linked to 2,200 customers and 5,000 assets.
Colin Hunt, chief executive of AIB, said: "In this, my first update on the trading performance of AIB, I'm delighted to confirm that we have had a good start to 2019 with solid profitability, strong new lending and continued performing loan book growth."
"Asset quality continued to improve with significant reduction in non-performing exposures [NPEs] putting us firmly on track to reach the milestone of circa 5pc by end 2019.
"We remain focused on our Customer First strategy and in April we were pleased to enhance our customer propositions in both our digital agenda, through our joint venture acquisition of Payzone, and market-leading mortgage offering," he added.
Customer accounts of €68.1bn increased from €67.7bn at December 2018.
Meanwhile, operating costs during the period were up year-on-year, due to wage inflation and investment in loan restructuring.
Shares in AIB were up just under 2pc in afternoon trading in London yesterday.