AIB's IPO has boosted chances of State exit within two years - Byrne
Chief says bank is within 'touching distance' of repaying all of €20bn injection
AIB is eyeing a return to private ownership within two years, according to its chief executive. Bernard Byrne, who took charge of the country's largest bank two years ago, says there is a two- to three-year window to capitalise on the success of last June's partial IPO which saw the Government sell a 28.8pc stake to investors for €3.4bn.
Byrne, the President of the Institute of Bankers (IoB), said AIB is "genuinely within touching distance" of repaying all of the €20bn injection poured into the lender in 2010 at the height of the global financial crisis.
"Fundamentally that [a full privatisation] is an issue for the Minister for Finance," said Byrne in a wide-ranging interview with the Sunday Independent.
"It's a good time. Those investors are still there and there's a broad pool who didn't participate who are interested in this story. So there's an opportunity in the shorter term rather than in the longer term to continue to run on it."
AIB is under pressure from the European Central Bank to reduce its exposure to non-performing loans (NPLs). The bank wants to cut its NPL levels to 5pc by 2019 and recently entered a deal with the Irish Mortgage Holders Organisation.
The €100m deal will help keep people who have fallen into mortgage arrears - and who qualify for social housing - in their own homes.
But Byrne warned that the cost of mortgage credit will rise further for borrowers unless lenders are able to realise their security, including repossession of homes.
"We've always been willing since the very beginning to write off debt and to right-size debt when genuine affordability issues are presented," said Byrne, adding that the mortgage-to-rent scheme, whilst helpful, will not solve all problem mortgages.
"Solutions like that are helpful because it means then everyone can say 'Well, actually those that aren't willing to engage and aren't actually proactive in terms of their engagement with the security shouldn't have such protections'."
Byrne said that AIB, in line with other major institutions, is now regulated from Europe and subject to strict guidelines on arrears.
"By implication, the regulator will make it more expensive and will require people to have more capital associated with mortgage or SMEs in the Irish market if you can't realise your security within a seven-year term."
Byrne said that AIB, which is still 71pc owned by the taxpayer, is restructuring the vast bulk of its impaired residential mortgages on a case-by-case basis, adding that the bank will sell those loan portfolios if required.
"AIB will need to start thinking about doing different things in a two- to three-year time frame," said Byrne, who added that the bank is paying back its bailout in a more quickly than envisaged.
"State ownership isn't necessarily the right ownership model when businesses have to start to think about the next thing," he said ahead of a major sustainability conference hosted by AIB. "The future of the bank is making sure that we have a proper social licence to operate."
Sunday Indo Business