AIB to return to profitability within two years, says CEO Duffy

AIB has reported an after-tax loss of €2.3bn for 2011, but chief executive David Duffy said it remains on course to return to profitability within the next two years.

Last year’s loss was considerably down on the €10.2bn shortfall reported in 2010, with management enthusing about “significant progress” being made during the 12 months.

During that period, the company exceeded its own deleveraging targets and grew customer deposit levels, particularly during the second half of the year — a trend which has continued into the first quarter of 2012.

It also fully integrated the EBS business into its group structure, started an aggressive cost reduction programme, and boosted its capital position — with its core tier-1 ratio rising from 4% to almost 18%.

The bank’s impairment provisions — to cover loan losses — amounted to €7.9bn; which included equal provisions of €1.6bn for its mortgage book and loans to the SME sector. The overall impairment charge was up from a total of €6bn in 2010 and is expected to “materially reduce” this year.

Management revealed, however, that it expects its loan losses — including mortgage arrears levels — to have largely peaked in 2011.

Nearly 8% of the bank’s owner-occupier mortgage customers here were in arrears for more than 90 days, as of the end of last year.

In the buy-to-let sector, that figure was nearly 21%. Management declined to speculate on the possible transfer of its non-profitable tracker mortgages to the Irish Bank Resolution Corporation, as has been mooted, but did say that it has changed its policy on debt forgiveness, saying it is now opposed to the idea.

AIB’s operating profit, before impairment provisions, amounted to €68m last year; down from €658m in 2010. This was due to a 22%, or €519m, drop in income, coupled with a 4%, or €71m, rise in operating costs.

“Our plan is to return to sustainable profitability by 2014. Achieving this will be key to our ambition to provide an opportunity to attract private investment and return value to our principal shareholder,” Mr Duffy said yesterday.

“We believe we are positioning AIB to emerge strongly as the economy recovers,” he added.