AIB today reported a loss before tax of €3.8bn in 2012, down €5.1bn
in 2011. The State-owned bank said its operating loss - - before exceptional
items - came to €2.8bn, down 65% from the figure of €8.1bn in 2011.
There was a 70% reduction in bad debt provisions from €8.2bn in 2011 to
€2.5bn in 2012.
The bank said that 9.1% of its Irish owner-occupier mortgages are more than 90
days in arrears, while 17.7% of buy-to-let mortgages are more than 90 days is in
arrears. While arrears increased last year, the pace of increase slowed compared
AIB said about 2,000 staff have been trained specifically to engage with, and
help, customers dealing with financial stress. It noted that the ongoing
difficult economic environment, especially in Ireland, continued to impact
The loan to deposit ratio of 115% at December 2012, a 23% reduction from December
David Duffy, AIB chief executive, said:
“AIB has now
largely completed the restructuring phase of its strategic plan as the bank
targets a return to sustainable profitability and growth during 2014. While 2012
was another very challenging year for the Group, a number of important steps
were taken to position the bank for recovery over the longer term. We continued
to make progress on restructuring our balance sheet and undertook a number of
strategic initiatives which will reduce the bank’s cost base over time. Progress
was also made in reorienting the organisation to be better aligned with the
needs of our customers.
“Assisting both SME and mortgage customers in difficulty will continue to be a
major priority for this year. AIB intends to meet or exceed the recently
announced Central Bank of Ireland 2013 sustainable mortgage solution targets as
part of ongoing efforts to deal effectively and quickly with customers in
AIB Group FY12 First Glance – NIM stabilising, bad debts lower yoy but still
elevated: Eamonn Hughes of Goodbody comments - - "AIB reported an FY12 pretax loss of €3.83bn and €3.65bn at the net level. Prior
to non-core items, this compares to the underlying €8.4bn loss in 2011 (reported
net loss of €2.3bn).
Net interest income in the period pre ELG costs was €1,494m which compared with
€1,838m in FY11 and was modestly behind expectations. ELG costs in FY12 were
€388m vs €488m in FY11. The net interest margin was 1.22% which compares to
1.24% in H112 and 1.40% in FY11. This implies a H2 margin of 1.20% with the
company indicating stabilisation in late 2012.Non-interest income was €318m
compared to €438m in FY11.
Operating costs were 1% higher at €1,739m excluding
net restructuring costs of €198m (was €211m in H112). This drove an operating
loss of €315m compared to a €68m surplus in FY11 (and €116m loss in H112). The
underlying bad debt charge on the loan book was €2.43bn versus €8.16bn (784bps)
in FY11 whilst there were also €1,057m of disposal and AFS losses (€622m in
The net interest income and costs figures look to be broadly as we anticipated.
Whilst arrears are slowing, impairments look higher than expected as the bank
continues to cleanse its balance sheet ahead of 2013/2014 and de-levers a little
faster than anticipated. The margin stabilisation is a helpful sign, but bear in
mind the turnaround here is likely to trail BOI (started earlier on deposits
re-pricing and has benefit of UK mortgage loan book where it has put through
Eamonn Hughes and Colm Foley commented on yesterday's report from PermanentTSB
Banks ptsb underlying FY12 PTP loss of €980m narrows from €1.45bn in 2011:
- - "Permanent TSB (ptsb) yesterday reported an FY12 pre-tax loss of €922m and a
€999m loss at the net level. Prior to some non-core items, we estimate the
underlying pre-tax loss is €980m in FY12 compared to the underlying €1.45bn loss
in 2011 (and reported net loss of €428m). The H1/H2 split at the net loss level
in FY12 is €566m/€433m. But this is skewed by exceptionals, so the underlying
adjusted H1/H2 split at the pre-tax loss level is €458m/€522m respectively, so
some deterioration in the second half (margins and uptick in credit charge on
non-core loan book).
It is clear the bank struggled on the net interest margin in 2012 and
particularly in H212 which will likely impact run rates into early 2013. Lower
deposit rates will be important for its profitability, but it needs to continue
chasing deposits to improve its funding metrics (get the 191% LDR substantially
lower and net stable funding ratio up from 67%). The credit charge remains
unchanged in H2 on H1 in the core Irish mortgage book which is disappointing and
indicates continued strains in the legacy loan book. A similar bad debt charge
in 2013 to the 2012 outturn would see the bank hit the PCAR adverse loan loss
BOI has already reported so the read-through is limited and we get results from
AIB today (more detail in separate commentary). Losses are anticipated to mount
at ptsb with the CEO indicating yesterday that the bank is unlikely to be
profitable until the back end of 2016. We see BOI modestly profitable in 2014
and AIB in 2015."
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