New AIB chief executive Colin Hunt has signalled the lender cannot rule out further sales of soured loans following a farmers’ protest at its annual meeting.
The protest by the powerful business group IFA, which spilled inside the lobby of a Dublin hotel hosting the shareholders’ meeting, was significant because AIB, the 71%-owned by the Government, is a major lender to farmers and dairy processors.
IFA representatives called for farming loans to be excluded from the €1bn sale of non-performing loans to the vulture fund Cerberus that AIB announced at the start of the month.
Speaking to reporters at the AGM, Mr Hunt said a meeting with IFA leaders has been agreed in the coming days but he said the bank needs to deal with soured loans on its books to ensure the bank’s full financial health.
The lender had reduced its non-performing loans from over €30bn in 2013 to about €6bn at the end of last year and it was “abundantly” clear it needed to use the period of economic growth to strengthen the bank, Mr Hunt said.
Mr Hunt told shareholders there was “an overriding need” to reach the European norm of non-performing loans, currently 3.5%, which means the lender will continue to assess soured loans in the coming years. Loan sales were the least preferred option and the lender would continue to engage with customers, he said.
AIB and other Irish banks have long said they have the support of the Central Bank and other European regulators for sales of soured mortgage loans.
However, the lenders have faced calls by debt advocates to review sales of all types of non-performing loans, including buy-to-let loans, to vulture funds.
A feature of AIB’s latest transaction is that a tenth of the customer loans are tied to the family home because the investment property is secured on the main home.
Following the sale, AIB will cut its exposure to non-performing loans to around €5bn, or 8% of all loans.
A year after Finance Minister Paschal Donohoe vetoed an AIB proposal for a share-based incentive plan, the issue of pay for top executives and other banking staff continues to rumble.
Ahead of the publication of a Government study on Irish bankers’ pay, Mr Hunt widened the debate by saying the existing cap of €500,000 affects few people but that the absence of incentives hits 24,000 staff working at AIB, Bank of Ireland and Permanent TSB.
The new chief executive reiterated the argument that it faces difficulties in retaining staff as it competes with new Brexit arrivals who have no pay and incentive restrictions.
At the meeting, veteran consumer advocate Brendan Burgess said AIB should “be commended” for offering some of the lowest rates in the Irish market.
However, Mr Burgess said the lender was denying proper compensation to 6,000 customers who should have been part of the redress scheme under the tracker mortgage scandal.
Mr Hunt said all potential groups who would qualify for compensation had been assessed under the auspices of the Central Bank investigation.
He told shareholders the bank was becoming stronger by adding to its capital and was paying out €461m in dividends. AIB’s balance sheet was in good shape to prepare for “whatever lies ahead” with Brexit.