€3.8bn loans for 10 major clients

THE TOP 10 developers at AIB moving to the National Asset Management Agency (Nama) had loans of €3.8 billion last September, of which almost a quarter were “non-performing”, the bank said in a shareholder circular.

AIB said that €2.9 billion of the loans, which Nama intends to purchase before January 31st, 2010, were classified as “performing” at the end of September 2009.

The bank said it plans to sell €24.18 billion in development and associated loans to Nama and may receive about €17 billion in return. Among the loans being sold are about €13.6 billion which are forecast to be performing at the end of the year, down from about €17.5 billion at the end of June 2009.

The bank expects non-performing loans to total €10.5 billion at the end of the year, up from about €6.7 billion on June 30th.

AIB’s risk-weighted assets, which will determine the amount of capital that the bank must set aside, are estimated to drop by €22.4 billion to €108.8 billion following the Nama loan transfers.

The bank said it may incur a €4.254 billion hit in its capital reserves as a result of losses from Nama’s purchase of its loans, based on the agency’s average industry discount of 30 per cent.

The loans-to-deposits ratio – a key measure showing a bank’s reliance on outside funding – will fall to 129.5 per cent from 156 per cent following AIB’s participation in Nama, the bank estimates.

Shareholders in AIB must approve the bank’s participation in Nama at an extraordinary general meeting on December 23rd. Analyst Eamonn Hughes at Goodbody Stockbrokers, which is owned by AIB, revised upwards his forecast on the discount to be charged by Nama on the bank’s loans from 28 to 33 per cent.

The bank needs €2 billion in additional capital for a core equity capital ratio of 4 per cent, he said in a note to clients, and €4.1 billion to reach a core tier one ratio of 8 per cent over the medium term.