Proposals to move loans of €24bn

UNDER the NAMA proposals up to €24 billion of loans on property and related sectors including land are being transferred across from AIB’s loan book.

That is the second largest transfer of assets after Anglo Irish Bank.

Figures released yesterday by Finance Minister Brian Lenihan show massive growth in AIB’s exposure to property and construction since the end of 2003.

Back then its lending to the property and construction sector was roughly €11bn. But by end June 2009 that figure has increased to just under €49.9 billion out of a total loan book of €129bn.

Overall 74% of that land and development loan book is in Ireland where the bank expanded rapidly in recent years inspired by the success of Anglo.

The extent of AIB’s exposure to the property sector surprised many who initially thought Bank of Ireland would be in a worse position when all of the bad loans had been totted up.

Because such a high percentage of its exposure is to the Irish market it is likely AIB could take longer to nurse itself back to health.

Experts warn the recovery time is likely to take far longer than will be the case in other countries who went through similar booms.

From the bank’s perspective the transfer of the loans to NAMA should help it to get back to more profitable lending in time.

Overall AIB has a total of €33.9bn loans that are of doubtful quality and of those €10.8bn have been categorised as bad debts with the remainder classified as medium to high risk.

AIB last night said it will require €2bn in fresh capital to meet the more exacting demands of the markets and to “satisfy stakeholders”, and it hopes to achieve that within a year.

It says it will achieve that in a number of ways including the sale of assets and also referred to the fact that a Canadian bank has expressed an interest in taking a minority interest in it post NAMA.


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