Monday 20 November 2017

Q&A: How did AIB manage to pull this off?

The results from the State-owned lender managed to beat estimates from the main stockbrokers.

On Tuesday, analysts had been talking about profits of more than €100m. Instead, the bank announced profit before tax of €437m compared with a loss of €838m last year, with €807m in net interest income (up 36pc), €195m in net fee and commission income (up 7pc) and €244m in trading and other operating income (up 73pc).

Operating expenses were €686m (down 9pc).

A dividend of €25m was also received on the NAMA subordinated bond.

That all sounds great. But when will we, the taxpayers, get our money back?

About €20bn was pumped into both AIB and EBS by the State. Chief executive David Duffy said that while the bank is profitable and well capitalised, it was taking the conservative approach and waiting until the stress tests in the autumn before deciding on repayment.

How much is the State's stake worth?

The National Pension Reserve Fund values its stake at about €11bn. The State holds a 99.8pc stake in the bank. Finance Minister Michael Noonan said a profitable bank is a more valuable bank.

So it's clear we're not going to get all of our money back, but has the Government said anything about selling its stake? Might it wait until the bank's value rises to see if the money can be clawed back?

If only we had a crystal ball. In January Mr Noonan suggested he could line up a sale of part of the Government's stake before the next election in 2016. The minister said he could try to "test the market" with a smaller sale in order to establish a valuation for the bank.

Chief executive David Duffy, who took over the top post in 2011, said yesterday the bank will be ready to be sold next year.

Can we finally say that all is fixed in AIB and there's nothing more to worry about?

Yes and no. Analysts will say the bank has turned the corner and is on the road to recovery. The figures bear that out.

Mr Duffy stresses that it's now profitable and well capitalised. The bank said tackling its impaired loan book remained a challenge, however.

The bank's proportion of owner-occupiers in arrears over 90 days stood at 10.5pc at end-June, while 25.7pc of all buy-to-let mortgage holders were behind on payments.

But the amount of impaired loans fell 10pc in the first six months, with the total number of mortgage accounts in arrears down by 6pc.

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