AIB slumps to net loss of €741m after Covid-hit year

The bank's CEO, Colin Hunt, said the bank is making progress in a deal that will see it participate in the carve-up of Ulster Bank
AIB slumps to net loss of €741m after Covid-hit year

The 71% State-owned AIB had signed an early-stage agreement with Ulster's parent NatWest to buy €4.1bn of its corporate loans. Photo: Larry Cummins

AIB chief executive Colin Hunt said the bank is making progress in a deal that will see it participate in the carve-up of Ulster Bank, as it posted a net loss of €741m for 2020, reflecting loan losses in the Covid-hit year.

It was revealed last month the Government had marshalled its State-owned banks, AIB and Permanent TSB, to play big roles in the acquisition of the €20bn in Ulster Bank's loan books, after the lender said it was exiting the banking market in the Republic.

For AIB's part, the 71% State-owned bank had signed an early-stage agreement with Ulster's parent NatWest to buy €4.1bn of its corporate loans. Chief executive Colin Hunt said that the deal could be concluded in the coming months. 

In its 2020 results statement, AIB said little new about the deal other than confirming that some Ulster staff will transfer to AIB under the transfer of the loans.

Many experts say the acquisition will only lead to AIB and Bank of Ireland securing even greater power over the banking market. AIB's financial results showed the fallout of the Covid economic crisis on the bank. 

It posted net interest income of €1.87bn, down from €2bn in the pre-Covid year of 2019, and a charge of €1.46bn for expected loan losses, as well as exceptional costs of €215m that included compensation for its part in the industry-wide tracker mortgage scandal. The net loss of €741m for the year compared with a profit of €365m in 2019.

The Covid fallout for its mortgage and business customers showed up in the shrinkage of the AIB's loan book to €59.5bn, after a rise in non-performing loans. Like other banks, AIB said that mortgage lending had held up well, after a widely-feared slide in Irish house prices at the onset of the crisis didn't materialise.

However, AIB said its new mortgage lending tumbled 21% to €2.3bn in the year, although the bank maintained a significant share of almost 28.5% of the home loans market. New lending to small firms was unchanged from 2019, it said.

On the outlook, the bank said the Covid level 5 lockdown had put back the economic recovery but saw the roll-out of vaccines and a large build-up of household savings as the foundation "for a sustained recovery as the year progresses".

Dividends And it said it expected to resume paying dividends to shareholders. The acquisition of broker Goodbody will help it boost its fee income, it said. "While in the near term, uncertainty remains high, overall we remain positive in our return to profitability in 2021 and a resumption of normal dividend distributions in line with regulatory guidelines," the lender said.

"I am pleased to report that the fundamentals of our business remain robust, sustainable, and strong," said Mr Hunt.

At €1.90, shares in AIB fell by over 3% in the latest session to value the lender at €5.25bn but are little changed from a year ago, just before the onset of the Covid crisis. However, the shares are significantly below the Government's IPO price when they were sold at €4.40 four years ago.

Irish bank and property shares have consistently underperformed their European peers in recent years. 

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