Wednesday, August 5, 2009

Economics 05/08/2009: AIB Statement

AIB’s half-year report to June 30:
  • a loss for the period €786 million;
  • impaired loans at 8.1% of total loans;
  • criticised/troubled loans were at 25% of total gross loans (or in other words, counting the roll overs of the past, AIB is not pushing for ACC Bank levels of stress, which should really make a day for the jokers of the CBFSAI who, as retired Mr Hurley would say ‘rigorously stress tested the bank’);
  • bad debt charge of €2.4bn, 3.58% of average customer loans, of which ROI loss was €1.5bn and operating profit was down 33%;
  • the bank said it expects customer loan demand to remain weak and deposits hard to get;
  • AIB said the establishment of Irish "bad bank" NAMA will be a material event that will influence the future outlook for the bank;
  • Costs are 7% lower, and so is income, cost income ratio down from 49.2% to 48.3% (37.5% headline) – an idiocy for a bank operating in the severely contracted growth environment that can only be explained by a side-room deal with the government not to lay off workers in exchange for recapitalisation injections

Now to my favorite – the denial of the obvious. A year ago almost to date, I recall AIB’s Eugene ‘Can’t See Anything Wrong With Me Self’ Sheehy said that Ireland does not have a problem with mortgages arrears. Oh, yes, he did.

So crunching through the report data, table above shows changes in impairments across the book. Home mortgages are recording a pretty hefty rise in arrears. And the table below shows just how severe is the problem in ROI.

Note the increase in the relative importance of defaulting mortgages in Ireland in qoq terms – from 66.26% of the total impaired mortgages pool to 80.2%!

And for overall stressed and impaired loans:


MK1 said...

Hi Constantin,

The AIB figures show that they are marking some loans down. However, we know from the Carroll case that they are not marking down loan values in a mark to marlket scenario. Indeed, with Carroll, our sick banks are rolling up interest payments and are in fact giving a lifeline by further credit to pay off trade creditors.

One area which is a bone of contention I have had for decades. Our so-called 'systemically important banks', such as AIB have been leaching off Irish industry and commerce. They have a licence to do it and are still doing it. This is demonstrated by their operational banking profits. It has ever been thus.

What are your thoughts on that?

I think the credit bubble burst has presentd us with tow major opportunities which have yet to be grasped:
1. Root and Branch reform of our banking sector and the operators within it with the aim of providing a competive marketplace
2. Root and Branch reform of the public sector

Indeed, any area which is producing excessive profits or monetary reward should be addressed vigourously and rectified and reformed.

A simple example, the excessive profits that Dublin Port makes, the excessive profits that NTL make, the excessive remuneration Hospital Consultants get, Politicians get, Solicitors get, Pharmacies get (even Pat Kenny has twigged that one as it was obvious) and even Lecturers get!

This place is badly ill .....


Anonymous said...

Not badly ill, terminally. We cant survive as currently structured.