AIB’s mortgage arrears improve

State-owned AIB reported an improvement in a number of its key indicators as well as a stabilisation of its mortgage arrears, according to its latest trading update.

"The bank’s trading performance in Quarter 3 to end-Sept 2013 continued to improve in line with expectations, with ongoing progress made in implementing the bank’s strategic objectives and continued momentum in the bank’s operating profile. Overall operating income benefited from positive expansion in Net Interest Margin (NIM) due to ongoing strategic actions to re-price assets and liabilities and the reduction in Eligible Liabilities Guarantee (ELG) costs,” it said in a statement.

“Excluding ELG costs, average NIM for Quarter 3 2013 was in excess of 1.4%, and in excess of 1.6% excluding ELG and Nama senior bonds. Operating expenses, including staff costs, have reduced due to management’s focus on and control of the cost agenda. The bank’s voluntary severance programme is ongoing,” it added.

AIB is 99.8% owned by the Government following a €21bn bailout. The bank said it is on track to return to outright profitability in 2014.

According to the trading update, there are signs of stabilisation in the pace of arrears across its mortgage loanbooks.

“The pace of new impairments in the mortgage portfolios slowed in Quarter 3 2013 and the rate of increase in total mortgage arrears was down significantly versus the first six months of 2013. Overall impairment charges on the bank’s loan portfolios are trending lower in line with expectations.”

The bank said it is continuing to meet the targets imposed by the Central Bank earlier this year for the resolution of mortgage arrears and troubled SME loans.

AIB has completed the divestment of €20.5bn of non-core assets as part of the deleveraging programme agreed with the troika. The prices it secured was within the forecast discounts.

The loan-to-deposit ratio was 104% at the end of September, down from 106% at the end of June. Reliance on wholesale funding fell to €16bn at the end of September compared with $18bn at the end of June. It will take a hit of €60m each year for the next three years on the back of the new bank levy.

“AIB remains committed to supporting the Irish economy through lending to personal, business and corporate customers and the bank will continue to seek opportunities to use available capital to increase lending activity. While the rate of loan redemptions continues to exceed new lending drawdowns, the bank notes increasing levels of activity in respect of new credit demand.”