AIB signals cost-cutting plan

AIB has given its clearest signal yet that significant cost and job cuts will be on the agenda for Ireland's largest bank this year.

It follows the announcement of a record €2.4bn loss for 2009 - the first annual loss in AIB's history.

AIB managing director Colm Doherty said once the bank receives approval for its restructuring plan from the EU it will announce a cost reduction programme to reflect falling revenues, massive loan losses and a shrinking Irish economy.

"The only way we can deal with that is to cut our costs," Mr Doherty said.

"I know what we need to do… As the shape of AIB becomes clearer, I will be able to define that action plan for both my staff and for the public at large at that point in time."

The bank’s annual report revealed that provisions for bad loans soared to €5.4bn in 2009 – with €3.4bn to be transferred to the Government’s National Asset Management Agency (Nama).

AIB said 2009 had been a very challenging year and the operating environment continued to be difficult.

AIB currently has more than €38bn of what the bank calls "criticised loans" on its books, ranging from loans in arrears to loans about which management is concerned.

Mr Doherty had earlier warned that customers and home-owners face price rises across AIB's range of financial products.

“We are currently paying more for the money that we borrow than we are charging our customers and ultimately that’s unsustainable," he said.

“I think it is inevitable, unfortunately, that pricing right across the product range, including mortgages, will have to go up in Ireland in 2010.”