AIB HALF-YEAR REPORT:SHARES IN AIB fell sharply yesterday as the bank reported increased losses in the first half of the year, with bad debts increasing over the period.
The bank’s stock fell as much as 13 per cent in early trade before regaining some ground to trade 5.5 per cent down at 93 cent by the close.
AIB recorded a pretax loss of just over €2 billion for first half of the year, with its Irish operations posting a €2.3 billion loss before provisions.
It warned it would need continued Government support and called for an extension to the State bank guarantee scheme, which is due to expire in December.
AIB’s managing director Colm Doherty said withdrawal of the supports could create “systemic” problems. Mr Doherty said the bank was losing money on mortgages and would have to “reluctantly” raise interest rates.
Rates are likely to rise by half of a percentage point within the next few weeks, he said.
AIB’s operating profit before provisions and losses incurred from transferring loans to the National Asset Management Agency (Nama) was €976 million, down 42 per cent.
A €963 million writedown on the first tranche of loans transferred to Nama reduced this to €13 million for the six-month period. This compares with an operating profit before provisions of €1.7 billion in the same period in 2009. The bank made a provision of €2.3 billion for “impairment of loans and receivables” which included €1.2 billion related to loans that have been identified for potential transfer to Nama.
“The six months to June 30th, 2010, was a very difficult period for AIB and our customers. A significant level of credit losses was experienced in the period in addition to the loss on transfer of the first tranche of loans to the National Asset Management Agency,” the bank said in a statement.
Impaired loans amounted to 15.6 per cent of total loans. However one-third of loans were “criticised” indicating some level of problem with their repayment.
The bank must raise €7.4 billion by the end of the year to meet new capital standards laid down by the Financial Regulator. AIB is disposing of stakes in MT Bank in the US and Bank Zachodni WBK SA in Poland as part of its plan to raise the capital. It said plans for the sale of assets outside Ireland are at “an advanced stage”.
Mr Doherty said he expects the bank to sell its Polish and UK units by the end of September.
In the UK, AIB’s units incurred a £55 million (€66.4 million) loss in the first six months of 2010.
Its Polish unit posted a profit of 560 million zloty (€25 million).
AIB said its pension deficit increased to €943 million at the end of June. This compares with €714 million on December 31st and €1.26 billion in June 2009.
The bank reduced costs by 5 per cent, but its cost-income ratio rose from 48.3 per cent to 62.7 per cent.
2010 2009
INCOME
€1,997m €2,78m
LOSS BEFORE TAX
€2,027m €872m
LOSS PER SHARE
163.7 c 43.2 c
