AIB SEES FURTHER ASSET QUALITY DETERIORATION - AIB Group has reported a pre-tax loss of €0.9 billion euro for the first six months of its financial year. The bank says its asset quality deteriorated further in the period, mostly in its property portfolios. Criticised loans, or loans that are being watched closely by the bank, have increased to 25% of customer loans, 8.1% of which are impaired. In the six month period, customer loans decreased by 2% and customer deposits fell by 12%. AIB says its operating environment continues to be extremely difficult.
Eugene Sheehy, AIB's outgoing chief executive, says that he does not know exactly what amount in loans would be sent to NAMA from AIB. He says that loans under €5m may not go to NAMA, and when those are excluded from AIB's land and development book it amounts to about €16 billion and 660 customers.
On whether mortgage rates could increase, Mr Sheehy says the situation is under review as the the bank's net interest margin declines. He says the bank's business is diversified, with more than half of its business outside Ireland and that 88% of the bank's loans can be 'repriced'. He adds, however. that the bank is very aware of its customers' stresses.
Mr Sheehy says the bank is on track to meet its commitments to the Government under the terms of its recapitalisation in lending to small business this year. He says that AIB had 'sanctioned 30,000 facilities' in the year so far. That means it has processed either renewals, extensions or new applications for loans since the start of the year, amounting to €1.3 billion.
AIB has €15 billion extended to the SME sector, giving it a 40% market share in lending to small business. Mr Sheehy says AIB is meeting eight out of ten requests from businesses. He says that while European Investment Bank funds are available for SMEs, they can not be used for working capital, which is what SMEs need the most.
Mr Sheehy says he believes the bank can meet its €1.5 billion target without selling overseas assets. It had been thought that to raise additional capital AIB would need to dispose of its shareholdings in M&T Bank in the US and Polish Zachodni Bank.
He also says that AIB has a 17% market share in mortgages. He says the flow of new business to AIB has increased to 33% in the first six months of the year.
