AIB chief ‘confident’ about profit rebound even as reopening slows

AIB's chief executive, Colin Hunt, will tell the Oireachtas finance committee on Wednesday he is confident the bank's return to profit at the start of the year will continue as the rollout of Covid-19 vaccines and economic rebound gather pace.

The comments, contained in an opening statement seen by The Irish Times, come even as the reopening of the economy has stalled, with the Cabinet agreeing on Tuesday to postpone the reopening of indoor dining, originally planned for next Monday, as the highly transmissible Delta variant of the virus spreads.

"In spite of the fallout of Covid-19 and the sustained low-interest environment, the group returned to profitability in [the first quarter of] 2021 and we are confident this recovery will continue as the wider population is vaccinated and the economy returns to solid growth," Mr Hunt said in his prepared statement. "As we emerge from the pandemic, it is imperative that AIB remains resilient and well-positioned to support Ireland's economy."

Almost 90 per cent of the nearly 80,000 temporary payment breaks granted to borrowers affected by the Covid-19 economic shock last year have returned to full repayments of principal and interest. While the three State-backed banks set aside a combined €2.7 billion of loan impairment provisions last year, making them among the most cautious in Europe as their loan-loss prediction models were skewed by experience of the financial crisis, analysts say it will be later this year, or 2022, before there is a spike in loan defaults, after multibillion-euro Government supports are tapered.

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‘Human misery’

“While the human misery caused by the Covid-19 pandemic can never be calculated, the ultimate cost of the monetary shock to the global economy has yet to be fully assessed,” said Mr Hunt. “As with the rest of the country, the pandemic crisis – coupled with the uncertainty of Brexit – tested the resilience of the banking sector at every level.”

Mr Hunt has been active in recent times on the deals front, even as Covid-19 has hit lending and business activity. Last week, AIB agreed to enter a life assurance and pensions joint venture with Canada Life at an initial investment of €90 million, while it confirmed on Monday it is going ahead with the purchase of €4.2 billion of corporate and business loans from Ulster Bank, which is exiting the market.

AIB's planned €138 million takeover of Goodbody Stockbrokers was approved by the Competition and Consumer Protection Commission (CCPC) on Friday.

Pay restrictions

The transaction, which remains subject to approval from the Central Bank, protects bonuses for staff of the securities firm. It will also see 30 AIB corporate finance and wealth management staff transfer to Goodbody Stockbrokers by the end of next year and benefit from the brokerage's variable pay policy.

“Let me again use this opportunity to nail the canard that the acquisition of Goodbody was a means of circumventing the government pay restrictions. Nothing could be further from the truth,” said Mr Hunt. “The remuneration arrangements at Goodbody are entirely separate and ring-fenced from those at AIB and the Government restrictions on pay remain fully intact at the bank. In order to streamline and avoid duplication, a very small group of employees from the bank will transfer to Goodbody.”

None of these can receive remuneration that exceeds the Government pay cap, he said. In addition, apart from this group, Goodbody will not be permitted to hire anybody who has worked for AIB in the course of the previous two years.