Pace of new loan impairments has slowed, says AIB

The pace of new impairments on AIB’s loan book slowed significantly during the quarter to the end of September when compared with the same quarter last year, the bank said in an interim management statement yesterday.

However the bank did not disclose figures to illustrate the development.

'Trending lower'
"The pace of new impairments in the mortgage portfolios slowed in Q3 2013 and the rate of increase in total mortgage arrears was down significantly versus the first six months of 2013," the State-owned bank said. "Overall impairment charges on the bank's loan portfolios are trending lower in line with expectations."

The bank said its trading performance in the quarter continued to improve, with ongoing progress made in implementing strategic objectives.

Overall operating income benefited from positive expansion in net interest margins, due to the repricing of assets and liabilities, and the reduction in eligible liabilities guarantee costs. Operating costs, including staff costs, were reduced and a voluntary severance programme is ongoing.

The bank said it continues to meet its targets in relation to the resolution of mortgage and SME customers in arrears, which it said is a key immediate priority. Ongoing progress was being made “with offering solutions” to customers in financial difficulty and who were engaging with the bank.

The bank is currently engaged in an asset quality review and balance sheet assessment programme being conducted by the Central Bank.

AIB estimates a charge of approximately €60 million per year will arise during 2014, 2015 and 2016 as a result of the introduction of an annual banking levy.

Deferred tax
In relation to the proposal to alter the tax provision that currently restricts the use of Irish tax losses carried forward by Nama banks, AIB noted that the change will facilitate a faster utilisation of current deferred tax levels.

It also said discussions with the European Commission in relation to final approval of the bank’s restructuring plan were at an advanced stage.

Davy, in a note on the statement, said the bank’s target of returning to post-provision profits in 2014 looked “very achievable”.