Bank’s SME approvals rise 52% to €5.6bn

AIB approved €5.6bn in credit to the SME sector in the year to the end of November, 52% more than in the first 11 months of 2013.

As further progress on the sale of the bank was reported over the weekend, AIB said yesterday that it has seen a “significant uplift” in the SME market during 2014, approving almost €600m worth of SME loans in November alone.

“Recent economic indicators point toward rising business and consumer confidence, leading to increases in domestic demand,” AIB said.

It noted a particular rise in credit demand in the areas of agriculture (as farmers invest in their operations ahead of the planned removal of milk quotas next year), transport, retail, and hospitality (on the back of the recent significant increase in foreign visitors to Ireland as well as the rise in pub and hotel sales).

According to Ken Burke, AIB’s head of business banking, the latest approval figures are a reflection of the increasing demand for credit across the economy. He added that AIB is optimistic about the outlook for the broader SME sector.

“We are backing SMEs who have persevered during difficult times and we have been rolling out a series of initiatives to support our customers, such as delivery within 48 hours of credit decisions for SME loans up to €30,000. We have equipped our staff with in-depth sectoral knowledge to enhance their understanding of our customers’ needs,” he said.

The bank launched a number of successful funds during 2014. Its €500m agri fund was launched in April and, by the end of November, around €250m had been utilised. An export fund was launched in June, with €25m having been approved in loans by the end of September.

AIB also launched a €200m energy fund to support the investment in renewable energy such as wind farms and anaerobic digesters. As of the end of last month, €80m of credit had been approved for such projects from this fund.

Last February saw the launch of AIB’s €350m residential property fund and the bank said it has an active pipeline of over €170m in customer projects.

“AIB is also seeing an uplift in construction activity in the residential and commercial real estate sectors. This activity is in response to the underlying shortage in the supply of properties.”

Meanwhile, it has been reported that the Government is set to appoint advisers in the coming days to help implement a strategy for selling the State’s 99.8% stake in AIB.

It has been speculated that the strategy will advise on a 20% sale of the State’s shareholding within the second half of 2015, thus allowing for the bank to return to the official list of the Irish Stock Exchange and attract further external investment.

A tiered, rather than single, sale of AIB is also the preferred option of managment. AIB chief executive David Duffy told the Oireachtas Finance Committee in November that much better visibility on the bank’s true value will be available over the next 12 months. He also said that AIB will return the full €21bn it owes the State in bailout costs over time.