Sunday 22 July 2018

AIB dividend on the cards but no relief yet for those who lost trackers

‘We’re going to start communicating with customers next month.’ AIB chief executive Bernard O’Byrne said regarding the tracker mortgage controversy
‘We’re going to start communicating with customers next month.’ AIB chief executive Bernard O’Byrne said regarding the tracker mortgage controversy

Donal O'Donovan and Charlie Weston

The State looks set to recoup further cash from AIB through dividends even if a planned stock market sale continues to be delayed.

AIB chief executive Bernard Byrne said yesterday that the bank will begin discussions on dividend payments with the Central Bank and with the Department of Finance after paying back its State rescue loans. The bank will have a "clear dividend policy", prior to any share sale, he said.

With AIB 99.98pc State-owned, the Government will be the only substantially beneficiary, if dividends are resumed prior to a share sale.

Bernard Byrne was speaking after AIB announced a profit for the first half of the year of €1bn. That was down from €1.2bn in the same period in 2015. However, stripping out one-offs, the underlying profit held steady at around €500m.

Repayment by the bank yesterday of €1.8bn in rescue loans plus interest means a total of €6.5bn of AIB's €21bn rescue has been recouped for taxpayers.

Even with the State's shares in the bank valued at more than €10bn, it leaves a shortfall that Mr Byrne said could be made up over time, including from shareholder dividends.

The decision on how and when to recoup cash from taxpayers would be determined by the Minister for Finance, he said, but could be done over five to 10 years. "We're in the ballpark," he said after being asked if all of the cost of the rescue could be recouped.

Meanwhile, bank customers who lost AIB tracker mortgages will have to wait months before they get refunds and compensation. The bank is to write to up to 3,000 AIB and EBS customers in the coming weeks telling them they are being restored to tracker rates, but it could be next year before these people get refunds.

And it is estimated that up to 60 mortgage holders may have lost homes because of the overcharging.

The bank has set aside €190m to cover the cost of restoring its customers to the low-cost tracker rates, refunding them overcharged interest costs and paying compensation.

Bernard Byrne said the bank will start writing to customers in the coming weeks informing them that they are to be put back on tracker mortgages that were wrongly taken from them.

It is part of an industry-wide review that was ordered by the Central Bank last December.

The AIB chief executive revealed little detail about the track redress scheme. He said it will the end of this year but substantial progress is made.

"We've about 630,000 contracts that we've had to get through and look at. We haven't talked about customer numbers," he said. "We've looked at progress and the fact that we're going to start communicating with customers next month."

The difference in repayments between a tracker and a variable rate can be around €300 a month for the same-sized mortgage.

Mr Byrne would not say how many people had lost their homes as a result of being refused a return to a tracker.

Some 22 people who were denied a tracker by Permanent Tsb lost their homes as a result of similar overcharging. AIB has twice as many tracker-refusal cases, implying as many as 60 people lost homes from its decision to remove the option of trackers from customers. Mr Byrne declined to provide numbers yesterday.

He dismissed suggestions it was unacceptable for a State-rescued and owned bank to fail to provide more details on the tracker overcharging.

And he refuted suggestions that the bank had previously denied it had a problem with taking trackers off customers who were entitled to them.

Last October the Central Bank launched an industry-wide review of the wrongful removal of valuable tracker mortgages.

AIB is understood to have 300 staff now poring over all of its mortgage contracts to work out who is due to have a tracker restored and get compensation, with oversight provided by consultancy firm KPMG.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business