‘Impossible to say’ how long the process will take, committee told
AIB chief executive David Duffy has stressed that the bank will return the full €21bn it owes the State in bailout costs, but added it is “impossible to say” how long the process will take.
Addressing the Joint Oireachtas Finance Committee yesterday, Mr Duffy said that despite no legal requirement to do so, full repayment will be made. “It will take time, but that is our expectation,” he said.
Asked about the timetable for a sale of the bank by the Government, which currently owns 99.8%, Mr Duffy said the hope is to make AIB investable and ready for market inside the first quarter of 2015.
However, he stressed that the process will be dependent on first determining the bank’s capital requirements and true capital structure.
The timing of a sale will be “entirely” down to the shareholder, but before that, the bank needs to “fix the capital architecture”, Mr Duffy said.
Management is due to meet with the Department of Finance to discuss the reorganisation of its capital structure in the coming weeks and discuss the return of some of the funds invested by the State.
While AIB also has to pay the Government any excess capital that it holds above legal requirements by the end of 2016, Mr Duffy told the committee the bank is “open” to making repayments prior to that date, but noted such a decision is one for the Government, not the bank.
Mr Duffy said much better visibility will be available on AIB’s value over the next 12 months, noting the bank still has a large amount of non-performing loans and the economic recovery is still in the early stages.
He said the bank should have “a much better feel” on its valuation by the middle of next year, as profitability and loan/operating performance improves further.
He added that he is “very confident” of a “very positive outcome” for AIB’s current financial year.
He said management’s main job is to maximise the value of the bank’s assets in order to facilitate a return of the bailout funds.
In terms of the sale process, Mr Duffy said he would prefer the Government’s stake to be sold via a series of steps to a series of investors rather than in one overall sale.
He added that this hasn’t been discussed as yet with the Government. He also said no discussions had taken place regarding the European Stability Mechanism taking a stake in the bank.
Also appearing at yesterday’s meeting, chief financial officer Mark Bourke said visibility on AIB’s ownership future is beginning to come into focus as it has only recently ceased balance sheet shrinkage and is just approaching stable levels of asset stocks and lending, sustainable profit levels, and internal capital generating capability — all of which will drive valuations.
Management also said that “strategic defaulters” are still an issue, despite progress being made on arrears levels. It added that by the end of next year, all arrears cases will have been offered a resolution, with most likely to be accepted.
“With mortgages in arrears, increased customer engagement is evident and the overall economic upturn means we are now seeing a reduction in mortgage arrears and in the overall levels of impaired loans,” Mr Duffy said.
“While the bank has made progress in recent years, we recognise that a number of challenges lie ahead and that overall personal and business debt levels and the number of impaired loans in the economy are still elevated.”
He also defended the large number of senior staff being paid over €100,000 per year, saying top talent is needed to drive the bank’s recovery and said talent costs money.
He noted, however, that in his three years at the helm, the number of people within AIB earning such levels has shrunk by 40%.
© Irish Examiner Ltd. All rights reserved