Some SMEs still struggling, says AIB chief

Some SMEs still struggling, says AIB chief

By Eamon Quinn

Some SMEs are struggling and lending volumes to exposed firms haven’t picked up as quickly as anticipated, according to Bernard Byrne, the chief executive of AIB.

Mr Byrne said the overall picture is of some pressure bearing down on SMEs as they continue to restructure, particularly in parts of fast-changing retail, while other firms are “doing quite well”.

He was talking to reporters after AIB posted pre-tax profits for the first six months to the end of June of €762m, little changed from a year earlier. The earnings were dominated by a writeback of €130m in provisions and a net gain of €140m from the sale of troubled loans.

The shares, which fell 1% to €4.85, have risen only slightly from a year ago.

Analysts said AIB is making progress towards its goal of returning a significant chunk of its underlying earnings to shareholders. The process could, however, be drawn out, and depends on the approval of regulators who are monitoring the levels of crisis-era soured loans on the books of banks.

Helped by a healthier-than-anticipated economy, AIB said it is on course to meeting the targets for costs and building capital it set ahead of the sale of the initial sale of shares last summer.

The Government still owns about 71% in the bank.

SME lending has become a matter of concern this year. Industry group Isme last month said its regular survey on lending showed a “significant” increase in refusal rates by banks for loans to small firms, even as demand for credit was unchanged.

Mr Byrne said while some SME sectors are “doing quite well”, others, including the retail sector outside the “prime retail” business, was facing longer-term structural issues. “None of which suggests there is any change in terms of economic activity, but certainly some of the sectors” are experiencing some difficulty.

On economic growth, he said: “It is much more broadly based as a general principle but sectoral themes will still play out regardless of that economic buoyancy.”

Mr Byrne suggested AIB would be in no hurry to cut its standard variable and fixed home loan rates following recent mortgage cuts by Ulster Bank and KBC. He said rivals are competing with “teaser” offers, or short-term fixed-rate home loans, to attract new business volumes.

“There is some competitive pressure there. We are not chasing market share at this stage. We are comfortable with our position and comfortable that we are getting the growth that we would expect to see given the strong underlying characteristics,” said Mr Byrne.

On the industry-wide tracker-mortgage scandal, AIB reiterated it will have compensated all affected customers in the next six weeks, but that customers retain their right to appeal.

Owen Callan, an analyst at Investec Ireland, said the earnings came “without surprises”.

Investec is keeping its share price target unchanged at €5.40 despite “the two negatives” in the results, in SME loan growth and the mortgage market, “which is a little more competitive than a year ago”, he said.

The bank is aiming to increase payouts to 50%-60% of annual underlying earnings from the 25% paid out last year, he said.

Headwinds to securing a standard level of dividend payouts include regulators’ scrutiny and wage costs rising to 3% a year, said Mr Callan said.

More in this Section

Holidaymakers can ‘travel as normal’ after BrexitHolidaymakers can ‘travel as normal’ after Brexit

Bank of England to make ‘knife-edge’ rates decision amid cut speculationBank of England to make ‘knife-edge’ rates decision amid cut speculation

Oil price falls as virus fears hit hardOil price falls as virus fears hit hard

Harcourt posts profit of €23m and reduces debtHarcourt posts profit of €23m and reduces debt


Esther N McCarthy paints a pretty picture with her January picks, along with cool ideas for fridges and lunchboxesWishlist: Fridges and lunchboxes make our list of January picks

Maturity isn’t a good fit for every rapper (see: Kanye’s bedraggled coming-to-Jesus phase). But through 2018 it was working a treat for former bad boy — and Ariana Grande’s ex — Mac Miller. But then his story turned to tragedy as that September, the 26 year-old died of an accidental drug overdose.Review: Mac Miller - Circles

The year is 2399, and Jean-Luc Picard dreams of his old ship, destroyed three decades ago, and his dear friend, the android Data, dead 20 years now. Dreams turn to nightmare, and Picard awakens, old and defeated, in his French château.Review: Star Trek: Picard

A Polish prisoner carefully checks there are no guards around before he enters one of the SS cloakrooms in Auschwitz. He takes out a hidden vial and quickly sprinkles its contents on the collars of those hated uniforms, before slipping out again. Within two weeks some of the Germans had come down with the typhoid that was wiping out so many of the prisoners.Gripping account of the hero who volunteered to go to Auschwitz

More From The Irish Examiner