Big banks back on the rise

Friday 15 August 2014 14.51
The billions poured Anglo and Irish Nationwide will never be seen again

The billions poured Anglo and Irish Nationwide will never be seen again

By Business Editor David Murphy

The country’s three biggest banks, AIB, Bank of Ireland and Ulster Bank, released financial results this week. All three are making progress (thanks to bailouts from Irish and British taxpayers.)

There are some common themes across all three.

They are making profits, their margins are improving and the amount they are setting aside for bad loans is also declining.

That is good news for bank shareholders. The State owns 14% of Bank of Ireland and 99% of AIB.

Despite all the talk about how much they are lending, their balance sheets are continuing to contract. So their total amount of loans is falling.

This is partly due to people paying off loans faster than consumers and businesses are borrowing.

It is difficult to be critical of that trend because the key problem during the boom was that both categories were taking on too much credit. But productive lending done prudently can help rebuild the economy.

While many aspects of the banks’ activities are improving there continues to be a large number of ordinary families who are suffering for far too long due to the arrears crisis.

But as conditions for the banks begin to improve the prospect of selling the Bank of Ireland stake and virtually all of AIB will become more attractive.

No doubt the management teams at both would love to break free of the shackles of the State. But Finance Minister Michael Noonan should bide his time to get the maximum from both.

While Bank of Ireland trumpets the fact the State has got more than it originally put into the company, the taxpayer’s stake in AIB is valued at €10bn less than the State invested.

As for the tens of billions poured Anglo Irish Bank and Irish Nationwide – that money will never be seen again.

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