AIB to discuss capital structure with Government shortly

AIB chief executive David Duffy said today that the bank would meet with the department of finance before Christmas to discuss its so-called "capital stack" with a view to returning some funds to the State in the near future.

This would include discussions over the contingent convertible capital notes, preference shares and equity held by the State in AIB, which is 99.8 per cent owned by taxpayers and has received a near € 21 billion bailout.

Speaking after the Banking & Payments Federation Ireland’s national conference, Mr Duffy, who is president of the organisation, said he hoped the bank’s full year results next March would show continued momentum in its recovery and that it would then be an “investible proposition”.

He said the timing of a stake sale by the State was a matter for the Government. “The shareholder has to decide. We have not had any discussions yet about any actions about repayment of capital. It will take time and I don’t have any timetable yet from the shareholder. The process is only beginning now that the [European Central Bank] stress tests are over.”

On comments by Central Bank executive Sharon Donnery during the conference that Irish banks needed to be conservative in their approach to provision write backs as the property market recovers, Mr Duffy said this was "absolutely right".

“A great number of our provision write backs [THIS YEAR]were individual restructurings,” he said, adding that the bank remains conservative in its approach.

Mr Duffy said that he “fully” supports the Central Bank’s new rules on mortgage lending in the broadest sense of managing risk. However, the requirement that borrowers should have a 20 per cent deposit to qualify for a home loan might be a “little too high” and there could be “unintended consequences” for first time buyers.

“We [BPFI]will look at submission over the next few weeks to deal with that,” he said.

On the Government’s proposal for mortgage insurance, Mr Duffy said such products had a “varied history” in other markets. “It’s very successful and unsuccessful in various markets around the world.”

Mr Duffy said there hasn’t yet been a flurry of applications from borrowers seeking to secure home loan approvals before the new rules come into play next year.

“It’s hard to say there’s anything exceptional. December might prove to be more busy. It’s been high momentum and volume [FOR NEW LOANS]since August. You may get a spike in December.”