Duffy says AIB will return all bailout funds

AIB chief executive David Duffy believes the bank will successfully return all of the €20.8 billion in bailout funds that it has received from the State since 2009.

"I think we should take the view that it will all be returned," Mr Duffy told The Irish Times yesterday in an online podcast interview.

AIB has been preparing the ground to make the bank a potential investment option for external parties from 2015.

Mr Duffy said it had not discussed “exact timing” for any stake sale with the Government but it would be post the outcome of the European bank stress test results in November.

“You don’t sell the whole bank in one day,” he said.

He noted that the bank was currently valued on the books of the National Pension Reserve Fund at €11.5 billion. AIB has also paid the State €2 billion in various fees since 2008.

“That’s €13.5 billion. Maybe a billion or two in capital that can come back as well. Just imagine we get to €15 billion. Then you sell a portion of it [the bank] and over multiple periods of years your value is increasing and you’re getting dividends in between. We would look to repay the full amount, whatever that time period is.”

Mr Duffy’s comments came on the day AIB returned to profit for the first time in six years. The bank, which is 99.8 per cent owned by the State, recorded a pre-tax profit of €437 million in the first six months of the year, compared with a loss of €838 million for the same period of 2012.

This was aided by a sharp reduction in the level of bad debt provisions, which reduced to €92 million from €738 million.

Total income rose by 36 per cent to €1.2 billion while operating expenses were 9 per cent lower at €686 million. The company reduced staff costs by 13 per cent to €389 million.

Before provisions, AIB’s domestic core bank contributed €622 million to operating profit, with the UK division supplying €84 million. Its financial solutions group, which deals with arrears and loan restructuring, contributed €34 million while the group administration cost €180 million.

In total, the operating profit before provisions was €560 million in the first half of the year compared with €165 million a year earlier.

In terms of outlook, Mr Duffy said he expected the underlying operating performance to “remain profitable for the remainder of 2014”.