Thursday 23 May 2019

'Stable and robust' funding sees AIB rule out cash call

Joe Brennan

Allied Irish Banks says its funding is "stable and robust" and it will not have to follow the lead of some subprime-stricken banks globally in making a cash call to shareholders.

"Let me assure you that AIB's capital position is solid," group chairman Dermot Gleeson told shareholders at the bank's annual general meeting yesterday. "AIB has no requirement for recourse to shareholders for supplementary capital."

Writedowns

The comments came as Royal Bank of Scotland, parent of Ulster Bank and First Active in Ireland, confirmed it plans to sell £12bn (€14.9bn) of stock to existing shareholders to shore up its ailing balance sheet. RBS has had to unveil £8.3bn of writedowns so far this year stemming from the credit crisis.

AIB reiterated its forecast of a "low single-digit percentage" increase in earning per share this year, following on from a 13pc rise in 2007, as the housing market and wider economy slow. Shares in AIB ended yesterday's session down 0.9pc at €13.03. However, it outperformed Irish banking peers which dropped between 2.1pc and 5.4pc, and the Iseq Overall index, which declined 1.9pc.

The group revealed at the time of its full-year figures in February that it had taken a $35m (€28m) writedown on its $287m portfolio of subprime investments.

Group finance director John O'Donnell said yesterday that while the subprime assets were currently performing well, the bank "may have to make additional provisions".

While AIB only reported €106m of bad debt losses in 2007, equating to 0.09pc of its loan book, it is predicting its provisions will more than double to 0.2pc this year.

Although Mr Gleeson noted that the housing slowdown was contributing to a weaker Irish economy this year, he said the bank was "comfortable with the quality" of loans in the mortgage, property and construction sectors.

The bank previously said that 8pc, or €750m, of its Irish residential development loans were being "actively managed" in order to prevent possible defaults.

Monitored

Group chief executive Eugene Sheehy said yesterday there was "no significant change" in the loans being closely monitored.

Although banks' funding costs remain high as a result of the ongoing credit market uncertainty, AIB decided this week not to go down the route of a number of peers in upping mortgage tracker rates for new business.

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