Davy expects AIB bad debts to rise
Tuesday, 22 July 2008 18:43
Stockbroker Davy has predicted that AIB will lower its outlook for the year when it announced first-half results on July 30.
AIB has previously forecast low single-digit percentage growth in earnings but Davy says trading conditions have deteriorated. The stockbroker has already forecast a decline of 10% in earnings this year.
Its note also forecasts that the level of bad debts at AIB will rise sharply over the next couple of years as conditions in the Irish property market and the general economy worsen. Davy is now predicting that AIB's charges for bad debts will reach 0.78% of the bank's loan book in 2010. AIB has indicated a level of 0.2% for the first half and the full year.
'How quickly this happens is dependent on how long the banks continue to support struggling property developers. Unfortunately, these results may give us little incremental insight into what is coming down the tracks,' says the report.
- Business Today: Davy analyst Emer Lang says new accounting rules mean that it is harder to predict future bad debts at banks
