Wednesday 21 February 2018

AIB reliance on central bank funds up €10bn in five months

Anglo Irish Bank. Photo: Ray Cullen
Anglo Irish Bank. Photo: Ray Cullen

Laura Noonan

AIB's dependence on last-resort central bank money shot up by more than €10bn in the last four and a half months, as €12bn of the bank's deposits walked.

The figures, revealed yesterday, mean Ireland's three quoted banks have upped their reliance on central bank funds by more than €30bn since June, according to analysis from stockbrokers Davy's.

AIB's interim management statement also confirmed that its upcoming rights issue will now be for €6.6bn, and not the €5.5bn initially planned, after the bank "halted" plans to sell its UK division.

The State has promised to underwrite the issue, but AIB's shares were briefly trading within half a cent of the 50c offer price yesterday, suggesting private participation may come back into play.

"In common with its peers, stabilising the funding situation appears to be the greatest challenge facing AIB at present," said NCB's Ciaran Callaghan last night, pointing out that the deposit outflows represented about 18pc of AIB's total deposit book.


Last week, Bank of Ireland admitted it had lost €10bn in corporate deposits over the August/September period; while Irish Life & Permanent lost about €600m. AIB's fall was also largely weighted towards corporates and the August/September period.

As the deposits fell, AIB's reliance on facilities from the central bank had risen to €27bn by Tuesday -- at the half-year point AIB said its central bank deposits were in the "high single digit" billions.

Reducing banks' reliance on central bank funds is a key aim of officials from the International Monetary Fund, the European Central Bank and the European Commission who are trying to conceive a bailout.

"We note discussions that may impact the banking sector are ongoing," AIB said, adding that the outcome "is expected to be important in determining market sentiment and conditions".

Write-downs have been a core feature of AIB's recent results announcements -- the bank yesterday said there had been a "slowdown in the pace of increase" in criticised loans in the quarter to September 30.

"That trend reflects the significant portion of the book already criticised rather than an improvement in the quality of the book or operating conditions," the bank stressed.

Similarly, AIB has seen an increase in domestic mortgage arrears but the rate of increase was "lower than in the previous quarter". Some 2.6pc of AIB's owner occupier mortgages are now in arrears of more than 90 days, up from 2.1pc at the end of June.

On the trading front, AIB said operating income declined in the year to September 30, "mainly due to lower business volumes, an increase in Guarantee costs of about €190m and a lower net interest margin".

"We are continuing to improve margins across our non-NAMA loan portfolios and deposit margins, particularly in our Irish franchise, have stabilised in recent months," the statement added.

Irish Independent

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