AIB mortgage arrears cases slow as market picks up pace
THERE was further good news for the housing market yesterday as AIB reported that growth in new mortgage arrears cases has slowed.
The new data was revealed just a day after international credit rating agency Moody's said Ireland's housing market may have hit bottom and be on the way up. In an interim statement, the state-owned lender said the pace of growth in mortgage arrears was down "significantly" in the third quarter.
The bank added that losses from bad loans "are trending lower in line with expectations", after declining 16pc to €744m from a year earlier.
"This is positive – but not unexpected," said Merrion Capital analyst Emmet Gaffney. "AIB tends to mirror Bank of Ireland, just six months behind, so there's no great surprises"
"AIB is certainly benefiting from the recovery in Dublin property prices," he added. "The Dublin market has definitely bottomed out and is on the up, while the rest of the country is very close to bottom."
Rating agency Moody's said on Wednesday that Ireland is at the end of the housing crash – with price falls and arrears both bottoming out. Moody's opinion carries special weight with many international money managers relying on its assessment before making their investment decisions.
The interim management statement noted that the bank's net interest margin, the difference between the rate at which it borrows and lends to customers, widened to more than 1.4pc in the third quarter as the bank cut deposit rates and raised lending costs.
Operating expenses, including staff costs, were further reduced.
Its voluntary severance programme is continuing, it said.
Management also said they were in "advanced" talks with the EU on the AIB's restructuring plan. This approval process is a legacy of the 2010 bank guarantee. Bank of Ireland's restructuring plan has already been approved, and sources say AIB's is only a matter of time. But questions still remain over troubled Permanent TSB, whose plan is also still awaiting approval.
They added that the bank will take a hit of about €60m a year in 2014, 2015 and 2016 as a result of an annual banking charge introduced by the latest Budget.
No further trading updates will be given until March, when the bank is due to release its full year 2013 results.