AIB WILL FOLLOW RIVALS ON MORTGAGES - AIB has reported pre-tax losses of just over €2 billion for the first half of this year, The worst in the bank's history.
€963m of the losses result from the discount on loans it has transferred to NAMA, but it has set aside €2.3 billion for other troubled loans on its books. Irish taxpayers hold an 18.6% stake in AIB as a result of the state's €3.5 billion bail-out of the bank.
AIB needs a further €7.4 billion to meet new regulations on capital reserves set down by the Financial Regulator.
AIB managing director Colm Doherty said the bank would 'reluctantly' have to follow other banks in raising mortgage rates, as it was currently losing money on mortgages.
He said raising capital took time, and the bank was restricted in what it could say on possible sell-offs of assets at the moment. But he said he hoped to be able to disclose some news in September. He said he was not aware of any talks with foreign banks about a possible investment in AIB.
Mr Doherty said AIB would be a smaller bank after it sold off assets, and it would have to address its cost structure, but would not be drawn on what form the re-organisation would take.
He said he expected the EU to sign off on AIB's restructuring plan before the final three months of the year.
Mr Doherty defended the bank's record on lending to small businesses, saying AIB had sanctioned 23,000 loans in the first six months of the year. But he said demand from businesses for loans had fallen.
Oliver Gilvarry of Dolmen said the figures seemed to be worse than expected. He said 'criticised' loans were around a third of the loan book, and the bank was still suffering from poor credit quality and big loan losses.
He said the State would be involved in recapitalising AIB, and the only question was the extent of this.
The analyst said AIB would have to adjust its costs as it would become smaller. He pointed to a drop in its net interest margin - the difference between what the bank earns in interest and what it pays out. Mr Gilvarry also added that the bank was also having to pay higher costs for the bank guarantee scheme.
