AIB delivered a double whammy to investors yesterday with massive loan losses pushing the bank to its worst-ever interim loss and operating profits coming in well below expectations.
The bailed-out bank racked up bottom-line losses of just over €2bn for the six months to June, sharply worse than the €872m losses in the same period in 2009.
The losses came as the bank took a €2.2bn hit on debt being transferred to the National Asset Management Agency (Nama), but the group's underlying performance was also sharply worse.
Yesterday's figures show core operating earnings for the first half of 2010 came in at €604m, some €455m behind the previous year's figures and also well below analysts' expectations.
"The results highlight starkly the pressure on pre-provision operating profits," Davy's analyst Emer Lang said in a dispatch to clients, noting her forecast of €700m in pre-provision earnings.
AIB managing director Colm Doherty said the lower earnings were "materially impacted" by the level of provisions made on AIB's non-Nama loan book, where close to €1.1bn was written off.
"From a group-wide perspective, we would be of the view that provisioning charges have peaked on the non-Nama portfolio," Mr Doherty told analysts.
Yesterday's figures show some 29pc of AIB's Irish loans are now classified as "criticised", up from the 24pc in that category at the end of December.
Mr Doherty said the most important indicator within the "criticised" portfolio was the percentage of loans "on watch" or showing early signs of stress. That percentage stayed unchanged at 10pc for the second half of the year.
Within the more advanced categories, "vulnerable" loans rose from 6pc of the Irish portfolio to 8pc, while "impaired" rose from 8pc to 10pc.
"We're seeing a slowdown in the run into the impaired category," Mr Doherty stressed, while analysts said the impairments were in line with expectations.
Across divisions, AIB's Capital Markets made pre-provision operating profits of €307m, while the UK division made €111m. Some €197m was recorded by international operations, largely AIB's majority stake in Poland's Bank Zachodni.
The Irish business made pre-provision operating profits of €170m and losses of more than €1.7bn after impairments and Nama writedowns were taken.
Mr Doherty stressed that AIB's Irish mortgage portfolio was performing "much better than our peers", while the bank has seen "some stabilisation" in the cost of customer deposits.
Several analysts, however, remained unconvinced by the fundamentals. "The operating performance was poorer than expected and that's raised concerns," said one.
"They've got a lot of one-offs and exceptionals in there, so the picture is really unclear, and they spent hardly any time dealing with the Irish economy which is what seems to be dragging the numbers down."
In the hours after the results were released, shares in AIB collapsed as much as 13pc. Mr Doherty said he wasn't concerned by the fall and expected the price to recover when the markets had the chance to "digest" the figures.
Others suggested the half-year results may not have been the only mover of the stock. "The focus was less on the results and more on the disposals and capital raising," said Bloxhams analyst Kevin McConnell.