AIB loses €758m in first half of year

State-owned AIB made a post provision loss of €758m for the first half of this year, which is down from €1,054m for the same period last year.

Provisions for the bad or impaired loans for the first six months of this year was €738m, which is a 53% drop on the second six months of last year and a 24% reduction compared with the same period in 2012.

Pre-provision operating profit was €162m, which is an improvement of €272m compared with the same period last year.

There was an improvement in some of the key metrics. The net interest margin — which is the difference between the interest rate AIB applies to it loans and what it pays on its deposit accounts — was 1.28%, which is up from 1.20% for the same period last year. The target is for a net interest margin of roughly 1.33% by the end of the year, said AIB acting chief financial officer, Paul Stanley.

The average net interest margin among AIB’s peers across the EU would be between 2%-2.5%.

Similar to the other Irish banks, AIB has been attempting to re-price its products in an effort to return to profitability. It has made a series of rate hikes on its variable rate mortgages and lowered the rates on its deposit accounts.

Customer deposits increased by €1.2bn from the end of December to the end of June. Funding from the ECB and the Central Bank fell by 20% to €18bn over the same period.

The bank said that it divested non-core assets as part of its deleveraging programme ahead of schedule and below projected losses on the sale of these assets.

The loan to deposit ratio is now 106%, which is down from 115% at the end of last December.

During the credit fuelled boom years, AIB borrowed heavily from the short-term wholesale money markets to finance its mostly property development and mortgage lending.

When the financial sector imploded in 2008, its loan-to-deposit ratio was just under 180%.

As well as repricing it loan and deposit books, it has been reducing its headcount in an effort to return to profitability. Over the 12 months to the end of June, roughly 2,300 staff members have left the bank.

Operating expenses, including exceptional items, were down 14% on the year and staff costs were down 16% over the same period.

AIB’s core tier-one capital at the end of June was 15.1%, which is unchanged from year earlier levels.

It met all its mortgage and SME lending targets over the past year.