€10.2 billion losses but AIB ‘on road to recovery’

AIB management says the bank is on the road to recovery though it has reported an annual loss of €10.2 billion for 2010 and announced 2,000 job cuts.

Its 2010 financial results published yesterday showed last year’s loss was significantly up from the €2.3bn loss in 2009, with operating losses up to €12.1bn and losses per share stretching from 215.2c to 564c.

Executive chairman David Hodgkinson admitted the bank “owes its survival to the Irish taxpayer”, but added that the company — which still needs €13.3bn in extra capital after having been propped up by enough state aid to give the Government a near 93% stake — is now in recovery mode and should see significant financial growth in the next two years.

“The worst is over for AIB and its stakeholders. The road to recovery is under way and is clearly signposted,” he said.

He added that the plan now is to build a bank “fit for the future”. That will see AIB split between core and non-core interests and, essentially, halved in size. Despite plans to shed 2,000 more staff in the coming 18 months, the bank said its restructuring will support economic growth and job creation in the long-term.

The bank is targeting a return to profit by 2013.

Mr Hodgkinson said after the latest capital requirements are met, AIB will be “one of the best capitalised banks in any country around the world,” adding that he is “convinced the bank can and will recover”. He said AIB’s market position will be strengthened through its merger with the EBS, which is set to keep its brand identity.

AIB’s loan book dipped in value to €94bn last year. While the level of loans on its books that are classed as satisfactory also fell, that level still tops 70%. Mortgages comprise the bulk of its loan book and management said the bank was open to the idea of debt forgiveness to some borrowers who are in danger of defaulting.

The bank added that 8% of its total loan book is vulnerable, with 13% impaired — both figures slightly up on the previous year. Lending to SMEs was largely unchanged last year — that loan book only slightly down in value at €17.6bn.

However, the level of satisfactory loans to SMEs has fallen from nearly 70% to under 60%.

That said, management declared the bank open for business and ready to talk to any customer — retail customers looking to buy a home, companies, or customers in difficulties with their loans.