Gleeson defends €150m loss

THE €150 million loss recorded by AIB on the sale of British asset management arm Govett was defended by chairman Dermot Gleeson at the bank's annual general meeting yesterday.

Mr Gleeson told shareholders Govett was "certainly not one of our greatest investments". But he added that AIB's decision to cut its losses was one of a number of tough decisions taken by management last year that were right for the group's long-term future.

"All of these adjustments cost money. But they put AIB in better shape than ever before," said Mr Gleeson, who was chairing his first AGM since taking over from Lochlann Quinn last year. Mr Gleeson predicted double-digit earnings growth in the year ahead as the benefits of last year's decisions began to flow through.

Last year also saw AIB complete the merger of its troubled Allfirst subsidiary in America, where rogue trader John Rusnak racked up almost $700 million losses, with regional bank M&T. Mr Gleeson said the merger was "an enormous coup" that gave AIB an alliance with one of North America's leading regional banks.

Chief executive Michael Buckley denied the fall in net interest margins, which reflect the difference between the price at which the bank borrows money and the rates it charges on loans, was caused by more intense competition. The fall in margins arose because the bank grew its lending book more quickly than it was able to source additional customer deposits, Mr Buckley said.

A report issued by Davy stockbrokers yesterday backed up Mr Buckley's view of mortgage competition. Davy analyst Scott Rankin said he did not expect Irish lenders' margins to fall from levels of 1.3-1.5% towards the British norm of 0.75%.

Mr Gleeson denied the bank had sacrificed credit quality to achieve strong growth in mortgage lending last year. He said AIB was "extraordinarily careful" about lending and had put in place stringent systems to evaluate the ability of borrowers to repay loans.

The meeting, which lasted longer than most Irish AGM's at more than three hours, was punctuated by contributions from a small number of shareholders who were unhappy with the board's performance. But motions to remove the directors from office were rejected by more than 96% of shareholders.