AIB sets aside extra €40m to cover tracker mortgage scandal

Economic recovery helps bring bank to strong performance in 2017

AIB’s pretax profit was €1.3 billion, down from almost €1.7 billion a year earlier, with overall profit at €1.1 billion for 2017. Photograph: Paul McErlane/Reuters

AIB’s pretax profit was €1.3 billion, down from almost €1.7 billion a year earlier, with overall profit at €1.1 billion for 2017. Photograph: Paul McErlane/Reuters

 

AIB has set aside another €40 million to cover the cost of its tracker mortgage redress scheme and expects to have made payments to 95 per cent of impacted customers by the end of this month.

The majority State-owned bank made a provision of €190 million in 2015 to meet the costs of the programme, which was mandated of all lenders in the market by the Central Bank of Ireland.

This comprised €105 million in customer redress payments and €85 million for “other costs”.

The bank has now set aside another €30 million to cover the cost of customer redress, and €10 million for other costs. Some 500 AIB employees are dealing with the issue.

Customer redress

On a conference call with media on Thursday, AIB chief executive Bernard Byrne said this additional provision was the bank’s best estimate of the total cost of the tracker issue, but was subject to sign off by the Central Bank.

He said 95 per cent of customers would have received their redress by the end of this month with the balance to get theirs in the second quarter of this year.

“We are nearing the end of the programme,” Mr Byrne said.

The bank’s annual report shows that €95 million had been paid in redress to 4,100 customers by the end of 2017. The balance of €40 million will be paid this year.

Late last year, AIB identified another 4,900 customers who were impacted by the issue and would be paid compensation.

AIB is expected to be the subject of enforcement proceedings by the Central Bank in relation to the tracker issue. Mr Byrne said it had yet to receive any notice of this from the regulator.

Falling profits

Earlier on Thursday morning, the bank reported profits fell slightly in 2017, but net interest margin rose as the ongoing economic recovery helped boost its figures.

Pretax profit was €1.3 billion, down from almost €1.7 billion a year earlier, with overall profit at €1.1 billion for 2017.

Net interest margin was 2.58 per cent, a rise of 35 basis points year on year.

The bank described the year as “pivotal”, as it undertook an IPO, and said its full-year dividend for 2017 would be €326 million, a rise of 30 per cent.

Its share price closed down just more than 2 per cent in Dublin on a truncated day of trading due to heavy snowfall and the expected arrival of Storm Emma.

New lending

New lending rose by 13 per cent to €9.4 billion for the year, with new loans spread across all sectors. Mortgage lending rose 17 per cent, while personal lending climbed 16 per cent and business lending was up 15 per cent.

Impaired loans, meanwhile, fell €2.8 billion to €6.3 billion, bringing the total reduction since 2013 to €23 billion, or 78 per cent.

Net interest income rose 8 per cent to €2.2 billion.

Total operating expenses for the year were €1.4 billion. Credit provision writebacks were €113 million.

“Against the backdrop of an improving Irish economy, these strong results confirm that we are generating significant amounts of capital and on track to meet our medium-term targets on a sustainable basis,” said Mr Byrne.