AIB posts after-tax loss of 741 million euros amid Covid challenges
AIB reported an after-tax loss of 741 million euros for the year ended December 31, due to an expected credit loss charge of 1.46 billion euros and one-off items of 215 million euros .
But he said he plans to return to profit and resume normal dividends this year as he anticipates a resumption in lending.
AIB chief executive Colin Hunt said the € 1.46 billion provision was “prudent, conservative, comprehensive and forward thinking”.
“But even after taking this very substantial provision, which is at the top of the European range, we still have one of the strongest capital ratios in Europe,” Hunt said on Morning Ireland.
“We have a core capital ratio of 15.6%, one of the best you can see, and it really boosts our confidence in the future,” he added.
AIB said the difficult operating environment for European banks remained in 2020 with the continued decline for a longer interest rate environment and the uncertainties created by the Covid-19 pandemic.
The bank said it has granted 66,000 payment interruptions to its customers to help them support them during the Covid-19 crisis, adding that 88% of them have returned to normal.
Her total income declined 12% for the year, which she said reflects a 10% drop in net interest income (NII) and a 19% drop in other income.
Customer deposits rose 14% to € 82 billion last year, with growth in savings due to Covid-19 restrictions adding to excess liquidity.
AIB said its new mortgages in Ireland were cut by 21% in the year to € 2.3 billion and its personal loans were 10% lower than the previous year.
Despite the various challenges of Covid-19, AIB said the Irish mortgage market remained resilient in 2020 and after a good start to the year its market share stood at 28.4%.
Amid high uncertainty from the pandemic, AIB said it had temporarily changed its credit policy to protect customers from unsustainable debt until their situation was further assessed.
“Although there is a delay in withdrawals, our new application pipeline has returned to pre-Covid-19 levels,” he added.
Meanwhile, his new lending to Irish SMEs during the year was broadly stable in 2020 compared to 2019. He said SMEs continued to face many challenges, including the impact of Covid- restrictions. 19 and the uncertainty of Brexit and that the sector continued to receive government support.
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The AIB lowers the threshold for negative interest rates
AIB CEO Colin Hunt also confirmed today that AIB plans to lower the threshold at which negative interest rates will apply to deposits.
He said AIB shielded clients from the impact of negative rates from 2014 to 2018, when it first applied them to businesses and non-bank financial institutions.
Since then, the cohort of customers with negative rates has grown, he added.
“Today, all customers, businesses, businesses, individuals are subject to negative interest rates on balances greater than 3 million euros,” he told RTE News.
“And over the next two quarters, we will reduce that threshold for all clients to 1 million euros. It will be in place by the end of the third quarter of this year, excluding charities.” Mr Hunt added.
Last month, AIB announced the potential acquisition of a € 4 billion portfolio of productive business and commercial loans and the transfer of employees to AIB within Ulster Bank’s commercial franchise directly involved in the business. day-to-day management of the loan portfolio.
Speaking on Morning Ireland, AIB chief executive Colin Hunt said the bank hopes to complete negotiations and its due diligence in the coming months.
“We may have these assets on the balance sheet and welcome 5,000 clients into the AIB group by the end of the year,” said Colin Hunt.
“This will put AIB’s position as Ireland’s premier investment and corporate bank beyond debate, without a doubt,” he said, adding that due to the strong capital position in which the bank is located, it is able to carry out this transaction and other transactions.
Regarding the liquidation of Ulster Bank in the Republic of Ireland, Mr Hunt said AIB was not interested in acquiring any aspect of this business, beyond the € 4 billion in business loans. and the businesses it is buying.
Mr Hunt said AIB remains committed to its branch network here, despite a decision earlier this week by competitor Bank of Ireland to close 88 branches.
AIB is currently in the process of closing five branches across the country, but Mr Hunt said the remaining branches remain “of vital importance”.
“I want to deliver our services to our clients the way they want them to be delivered,” he said.
“The vast majority of transactions, everyday transactions, that the bank performs on behalf of customers are now done online,” he said.
“But that in no way diminishes the importance for us of this network. Sustainable communities are one of the strategic pillars of the group and we believe that it is really important to be fully integrated in the communities we serve”, he added. said the CEO of the bank.
Mr Hunt also confirmed that the bank intends to stick to its goal of reducing its workforce by 1,500 as part of its strategic plan.
Earlier this week, AIB also announced a deal to buy brokerage firm Goodbody for 138 million euros.
Colin Hunt said AIB will ensure that existing compensation structures at Goodbody remain intact, adding that existing compensation structures at AIB remain, including the salary cap and restriction on bonuses.
A very small number of staff will move from AIB to Goodbody, with no more than 30 over the next two years, he added.
“As they move into Goodbody, primarily from our areas of corporate finance management, it’s appropriate that the compensation structures apply to them. But the reason we’re doing the deal again relates to to filling product gaps, ”said AIB’s CEO. declared.
AIB also said today that it is in “advanced discussions” with Great-West LifeCo of Canada, owner of Irish Life, to establish a joint venture that will enhance its life insurance, retirement and retirement offerings. saving.
Colin Hunt said there are a number of gaps in the services AIB offers its clients, which focus on savings, investment, pensions and life.
He said the joint venture that AIB hopes to develop with Great-West Life is very much designed to fill these gaps.
“We are still in negotiations – exclusive talks at this point – but we plan to conclude them in the next few months,” Mr Hunt said.
The deal will then go to regulatory approval and, hopefully, pending the successful conclusion of negotiations and the regulatory approval process, AIB intends to bring it to market in the first half of the year. next year, Mr Hunt said.
Looking ahead, AIB said that while short-term uncertainty remains high, it remains broadly positive for a return to profitability in 2021 and a resumption of normal dividend distributions in line with regulatory guidelines.
AIB chief executive Colin Hunt said the bank’s results were shaped by Covid-19, but added that “the fundamentals of the business remain robust, sustainable and strong.”
“We entered this crisis from a position of capital strength which, through our cutting-edge digital technology, has enabled us to deliver unprecedented levels of support to our customers, our communities and the economy as we do so. mattered the most, ”said Colin Hunt.
“Now, I look forward with confidence as we execute our 2023 strategy at a sustained pace, as evidenced by our growth initiatives announced this year. We remain driven by our ambition to be at the heart of our clients’ financial lives while creating sustainable value and returns. to our shareholders, ”he added.
AIB announced in December its intention to cut its workforce by 15% and withdraw from the UK small and medium-sized business lending market as it seeks to meet its capital and profitability targets.
When asked if he thinks AIB takes too much over a bank course, the CEO replied that he didn’t think so, adding that 2020 is about two things for AIB.
“One was to support our customers in a time of great uncertainty, but 2020 was also about preparing for the post-Covid environment change,” he said.
“We announced our strategy in December. We made it very clear what we were going to do and we have been planning this for some time. We have come out of the planning phase, we have come out of the strategic formulation phase and we are now in execution and we are implementing this plan at a steady pace and I am really delighted with that, ”he said. -he adds.