Mortgage arrears at AIB still on the rise

MORTGAGE ARREARS at AIB continue to rise, the bank has disclosed. Ahead of today’s publication of the Personal Insolvency Bill, which will facilitate debt writedowns by indebted individuals, chairman David Hodgkinson told shareholders at yesterday’s agm that he expects arrears to continue to rise for the rest of this year, before hopefully stabilising in 2013.

According to the bank, 7.7 per cent of mortgages, or almost eight mortgages in every 100, were in arrears of 90 days or more as of the end of the first quarter, up from 6.9 per cent at the end of 2011.

When looked at in terms of value, 17 per cent of AIB’s mortgage book is now in arrears, up from 15 per cent last December.

Much of the problem is in the bank’s buy-to-let book, where, on a value basis, more than one-third is now in arrears.

Mr Hodgkinson also said that the bank was “aggressively targeting measures aimed at reducing the group’s overall cost base”, as part of its restructuring programme, which is designed to “prevent a repeat of the disastrous and far-reaching issues of recent years”.

This cost-cutting programme includes a redundancy programme for 2,500 employees, as well as the closure of the bank’s defined benefit scheme, reductions in salaries, and the removal of legacy benefits across the organisation.

However, the Irish Bank Officials’ Association (IBOA) yesterday said that staff were “virtually unanimous” in rejecting the cuts.

It noted that an “overwhelming majority” would be prepared to join in litigation to prevent the implementation of the proposals, while a “substantial majority” would take industrial action if the bank attempted to impose these changes without proper negotiation and agreement with the union. Ahead of the shareholders’ meeting, there was a small protest outside.

Looking ahead, Mr Hodgkinson noted that the board had been “working extensively” on its strategy for the bank, and it expects to finalise this and communicate its plans during July.

He added that he expects the bank to return to profitability during 2014, “implementing multiple funding strategies to access medium and long-term markets in alignment with sovereign objectives, and attracting external investment into the bank”.

The bank has committed to lending at least € 1 billion in new mortgages this year, and Mr Hodgkinson said the bank now had a 35 per cent market share of sanctioned mortgages. Its sanctions are 86 per cent higher than this time last year and it is approving 70 per cent of all applications received.

The bank has a €3.5 billion lending target for small and medium-sized enterprises for 2012, as agreed with the Government, and it aims to increase by 20 per cent the new customer lending it injects into the economy.

At the AGM, shareholders overwhelmingly voted to re-elect seven directors: Simon Ball; Bernard Byrne; chief executive David Duffy; chairman David Hodgkinson; Jim O’Hara; Thomas Wacker; and Catherine Woods.

Mr Hodgkinson indicated that the bank will now seek to recruit “a number” of additional new non-executive directors.

Mr Hodgkinson also acknowledged the bank’s gratitude for the support of the Government, and said that the bank only exists today because of this support.