Friday 15 December 2017

AIB profit boosts hope of cash for taxpayers

Pictured are AIB CEO David Duffy and CFO Mark Bourke speaking at the announcement of their results for the half year this July
Pictured are AIB CEO David Duffy and CFO Mark Bourke speaking at the announcement of their results for the half year this July
Colm Kelpie

Colm Kelpie

AIB is ready to be sold in 2015 after surprising the market by reporting a larger than expected profit for the first half of this year.

The bailed-out lender will wait for the outcome of European-wide stress tests later this year before repaying any money to the State, but the bank is ready to be sold, its chief executive David Duffy said.

He was speaking after the State-owned lender reported profits before tax of €437m compared with a loss of more than €800m in the same period last year. It's the first profit for the bank since the crash.

Analysts said the results beat expectations and claimed the bank was continuing to "turn the corner" and benefit from an improving economy.

AIB has cost taxpayers more than €20bn and Mr Duffy said nothing will be done to repay the State before the outcome of the autumn's stress test check-up by the European Central Bank.

He said the bank was well placed to pass the health check.

"We area a profitable bank, we are heavily capitalised in our view, but this is a first-time unknown process. Let us be absolutely clear what their results are and then we sit down with the minister at that stage," Mr Duffy said. "It's innate conservatism."

The boost in profits was attributed to increases in net interest income, net interest margin and other income while costs fell.

Bad loans fell by about €2.9bn, or 10pc, since December, while the number of mortgage accounts in arrears dropped by 6pc, with total accounts in arrears for owner-occupier mortgages down 9pc.

The bank flagged its return to profitability in May, highlighting a big fall in impairment charges, which fell to €92m in the six months to June from €738m in the first half of 2013.It said it expects to maintain underlying profitability.

Bank of Ireland, which publishes its half year results tomorrow, said in March that it is profitable.

The State values its investment in AIB at about €10bn. Finance Minister Michael Noonan said yesterday that he would be prudent on the state's stake, and will examine all opportunities.

"We continue to believe that the bank is turning the corner and benefiting from the rebound in the domestic economy," said analyst Ryan McGrath of Cantor Fitzgerald said..

"Significant challenges remain, most notably regarding the simplification of the capital structure and loan book contraction. We remain confident that AIB is in a strong position to comfortably pass the upcoming European banking stress tests."

Stockbroker Davy said a partial repayment to the State was now increasingly likely. "This in turn raises our expectations for State aid repayment, with a partial repayment of the preference shares now increasingly a possibility to supplement the expected re-financing of the CoCo in Q4," said analyst Emer Lang.

"The much better than anticipated income and impairments trends provide a substantial upwards bias to estimates while the latter is also helpful for sentiment in the sector, AIB does have a higher sensitivity to this line item given its large stock of provisions and coverage level," said Goodbody's Eamonn Hughes.

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