Further branch closures on cards

AIB plans a 0.5% increase in its standard variable rate mortgage and to close 45 sub-offices this year, the amalgamation of six branches in the final quarter, and a further 16 branch closures in 2013.

The announcements coincided with the release of the bank’s financial results for the first half of this year.

AIB posted an operating loss before exceptional items of €1.1bn for the first six months of 2012 compared with an operating loss of €3bn for the first half of 2011.

Total operating income for the first half of this year was €771m, down from €851m in the same period last year. The bank attributed lower income to lower loan levels and elevated costs of deposits and funding.

The credit provision charge was €900m for the first half of this year compared with a €3bn credit charge for the same period in 2011.

Arrears on private residence mortgages over 90 days including impaired loans increased to 9.4% of total mortgages at the end of June.

The tier one capital ratio was 17.3% at the end of June, well above the 10.5% stipulated by the Central Bank. The loan to deposit ratio is 125%, down from 138% at the end of 2011. Over 70% of its €20.5bn three-year deleveraging programme is completed.

AIB chief executive David Duffy said: “The half year results for the bank are broadly in line with our internal expectations and we are encouraged by the sharp decline in the levels of provisions relative to previous periods. Ultimately, our plan is to return to sustainable profitability by 2014. Achieving this will be key to our ambition to attract private investment and return value to the taxpayer as principal shareholder.

Goodbody Stockbroker’s analyst Eamon Hughes said the market was looking at the level of impairment charges. “The rate of increase is starting to slow, which is broadly in line with expectations.”

AIB announced plans to shave €350m from the cost base by 2014. This will be achieved mainly through cutting 2,500 workers. The bank aims to complete a 1,700 employee redundancy programme by the end of 2013.

“The decisions announced today in relation to branch closures and mortgage rates are necessary to create the capacity for AIB to provide credit to the Irish economy at sustainable levels. It is important to note that AIB will continue to have the lowest standard variable rate in the domestic market following the increase,” said Mr Duffy.