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AIB warns of increased hit from Covid-19 after €210m blow in Q1

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Warning: AIB CEO Colin Hunt

Warning: AIB CEO Colin Hunt

Warning: AIB CEO Colin Hunt

THE hit to AIB's loan book from the Covid-19 lockdown will likely be bigger in the second quarter of the year than the €210m estimated for the first three months, the bank has warned.

Shares in AIB continued to fall yesterday, down more than 4pc, but the pace of decline slowed after the bank confirmed a provision of €210m to reflect the anticipated hit from Covid-19 in the first three months of the year.

The impact on credit quality is likely to be even bigger in the second quarter, which has overlapped with the worst of the economic shutdown, the bank said.

In further bad news for shareholders, including the State, the bank expects to incur exceptional costs in the range of €150-€175m this year, including from the ongoing tracker mortgage scandal. Provision had previously been made for the tracker costs.

AIB said yesterday that the value of payment breaks now being taken up by 55,000 customers is €3.26bn.

Around 8pc of mortgage borrowers and 11pc of small business customers have availed of breaks - which can run for as long as six months, according to a trading update from the group. At the end of the payment break, affected customers will have an option to extend the term of their loan or make higher repayments to catch up on interest bills.

The bank said its customers are spending an average of 28pc less due to Covid-19.

AIB said 700 bigger clients in its Corporate, Institutional and Business Banking (CIB) segment have requested a modification of their existing banking facilities.

AIB said its fully loaded core tier one capital ratio fell slightly to 16.2pc at the end of last year, well above regulatory obligations and the highest of any Irish lender. CEO Colin Hunt said the bank's capitalisation was critical to its ability to support individuals and businesses through the crisis.

Irish Independent