AIB on brink of paying ‘prudent dividend’ to State, says chairman

AIB is close to being in a position to pay a "prudent dividend" to the State, its chairman Richard Pym told the Institute of International and European Affairs on Friday.

Mr Pym said many of AIB’s legacy problems have been largely sorted, to the point that the State, which owns 99.9 per cent of the bank, could sell its equity stake whenever it deemed fit while the board can consider paying a dividend for the first time since the crash.

“The State can now sell its remaining equity shares whenever it wants and it is now beginning to approach the time when the board will be in a position to begin examining the issue of a prudent dividend in consultation with our regulator,” he said.

AIB received a €20.8 billion bailout from taxpayers following the global financial crash, and has so far repaid about €3.3 billion from redeeming preference shares and contingent capital notes held by the State.

Mr Pym said the non-performing loans on AIB’s balance sheet were now “contained and well-provided for”, the capital base was “restored” and “State capital subscribed in the past is being repaid and replaced by private capital”.

“We are very much open for business and we have shown in many instances in recent years how we are supporting the economy and I am delighted that our reputation is growing, in a positive way,” he said.

A spokeswoman for the bank declined to comment on the likely timing or scale of any dividend payment. However, it is understood that a payment could be announced within the next six months and make AIB the first of the three domestic banks to declare a dividend since the crash.

Bank of Ireland had previously indicated its intention to pay a dividend for full year 2016 but market analysts are now questioning this in light of the recent Brexit result, given the bank's exposure to the UK market.

Brexit

Mr Pym also addressed the issues about Brexit facing Ireland and the financial sector here. "There are short-term risks, long-term opportunities and change to be faced up to," he said. "The British economy, apart from the weakening of sterling, has held up well since the referendum. Brexiteers have celebrated this as proof of being correct all along.

"However, this is really like one of those cartoons with Wile Coyote chasing Road Runner over the edge of the cliff. Momentum carries the creature forward for a while, but then gravity has its inevitable victory. The British currently have no strategy for what they want from the EU exit."

Mr Pym said Britain’s exit from the EU would be a long process. “If anyone thinks this can be concluded in two years they need to think harder,” he said.

The AIB chairman said the EU “might yet reshape itself in a way that the UK can be more easily accommodated”. Otherwise, the UK would end up out of the single market and out of the customs union.

Opportunities

Mr Pym said Brexit offers significant long-term opportunities for Ireland, which he predicted would become even more attractive as a centre for foreign investment.

"The British exit opens up massive opportunities for an English-speaking business platform within the European Union. Ireland is generally business-friendly, has favourable corporate tax rates and a clean judicial system. The country also has a brilliant system for welcoming foreign firms," he said.

Mr Pym said limiting factors were underinvestment in infrastructure and housing, with poor public transport in Dublin.

He also suggested that we need to improve our language skills, citing an example from having chaired a bank in Sweden.

"From Stockholm we lent to Sweden, Norway, Finland, Denmark and Germany, the staff speaking all the languages and recording their conversations on the computer files in English notes.

"So a Swedish member of staff would speak Finnish to a customer in Helsinki, and simultaneously write notes of the conversation in English on their screen. That is how you maximise the opportunity of the single market and cross-border trade. I wonder whether foreign language skills can be improved here to maximise on our chances of success."