Tuesday 28 January 2020

AIB on brink of return to bond market for first time since crash

Donal O'Donovan

Donal O'Donovan

AIB has mandated four banks to arrange a three-year "covered" bond that will mark its return to the debt markets for the first time since the banking crash.

Yesterday the bank reported signs of increasing stabilisation in its core business environment, in an interim management statement.

Deutsche Bank, HSBC, JPMorgan and UBS have been hired by the state-owned lender to arrange and auction a three- year, euro-denominated "covered" bond transaction that will be secured on Irish mortgages.

The Irish Independent reported last week that AIB was poised for a return to the markets after updating its covered bond programme earlier this month.

The bank is keen to tap into a wave of investor appetite that has seen sentiment in the bond markets swing dramatically back in Ireland's favour after most borrowers had been locked out of the international markets for more than two years.

Bank of Ireland successfully raised €1bn on the bond market two weeks ago in its first bond deal for two years. The ESB, Bord Gais and the State have all successfully raised money on the markets this month.

Yesterday, in its interim management statement, AIB said targets to lend €3.5bn to small and medium business and to advance €1bn in new mortgages were being met.

The bank has almost completed sales of €17bn of non- core assets ordered by the Central Bank, it said.

The amount of money set aside to cover bad debts will be "materially lower" this year than in 2011 and is expected to return to more normalised levels "over time", the bank said.


The key "net interest margin" (NIM) measure of the difference between what the bank pays to borrow and what it charges to lend is being tackled and an erosion of the NIM has been halted thanks to lower interest being paid to depositors and the repricing of some mortgages, the bank said.

It added that substantial progress had been made in the second half of 2012 in restructuring the bank and implementing its our revised strategy and cost efficiency initiatives to ensure a reduction in the bank's operating cost base of about €0.4bn by 2014.

It said the core business environment remained 'challenging'.

Irish Independent

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