AIB shares fall over bad debt

Shares in Allied Irish Banks have fallen in early trade in Dublin after the lender said it would take a €4.3 billion bad debt charge this year due to the worsening economic climate.

At 11.45am shares in AIB were down 8.8 per cent at €1.05 having rebounded from earlier falls of over 20 per cent after it issued a revised estimate of impaired loans in a management update after markets closed last night.

AIB issued the statement ahead of meetings tomorrow where shareholders will vote on a €3.5 billion State recapitalisation and on the re-election of its board.

Shares in Bank of Ireland, which also dropped in early trade, were up almost 5 per cent at €1.20 while Irish Life and Permanent shrugged off early losses to rise over 8.5 per cent to €2.93.

Davy analyst Scott Rankin said in a note to investors that while the increase in impaired loans was a “big move in just over two months” he believed the market had already priced this in.

He added the fact operating profits were ahead year-on-year was a pleasant surprise.

“Based on our current estimates, Allied Irish Banks will need an equity injection of €1.5 billion on top of the €3.5 billion in preference stock (and €1.5 billion from disposals/buybacks), which will give the government a share of 64 per cent.”

The management update comes less than a fortnight after AIB chairman Dermot Gleeson, chief executive Eugene Sheehy and finance chief John O’Donnell said they will be leaving their positions.