Tuesday, March 2, 2010

Economics 02/03/2010: AIB 2009 results

AIB's bad fortunes:
  • Pre-tax loss of €2.656bn for 2009;
  • €5.35bn in bad loans provisions - 4.05% of customer loans base
  • ROI operations losses of €3.5bn
  • Total criticised loans up to €38.2bn (24.9% of customer loans base), compared to €15.5bn (11.7%) at the end of 2008
  • Criticised loans increase - 23% outside ROI, 77% within ROI
  • Mortgages 91+days overdue are at 1.96% (December 2008 0.7%) and this does not account for re-negotiated mortgages
  • Post-Nama, expects ROI loans to fall to €58bn (55% of the total loans held), composed of €27bn mortgages, €6bn in personal loans, €12.8bn of property loans, €12.6bn other loans
But the real beefy stuff is on pages 111 and 15 of the report (here). Hold on to your seats, folks - from the realistic folks who brought you a dividend in 2008 (as the Titanic was gliding along the iceberg's first bump):

Page 11: Loans and receivables held for sale to Nama €23.195bn, with Provisions at €4.165bn
implying an 17.96% net discount on loans transferred to Nama (the second table below).

Aha, not 25%, or 30% or 35%, but 18%. And as far as those 'Good Loans' that Minister Lenihan wanted to buy go? That's categories 1-3 loans above, or a whooping total of €21mln. Impressive risk hedging by Nama is expected. Oh, don't take my word for this - here is how the Nama portfolio from AIB will look like:
So wait a second, folks, AIB will dump 63% of their impaired loans into Nama, but will provision for a haircut of 18% on these? Their own debt is now being settled at 50 cents on the Euro with private bondholders, while the Irish taxpayer is expected to settle at 18 cents?!

And have a laugh - page 15: ROI Nama-bound loans provision is 16.6%, UK Nama-bound loans are 5.1% and overall impairment charge due to Nama (remember, this accounts for risk-weighting changes) of 14.54% (Table at the bottom of page 15).

It's a free lunch -Frank Fahey-style - except for the bank!
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