AIB posted their interim report today, and the results do not look good. AIB lost €700m according to their half-year report today, and that’s only the start of the bad news. AIB have also set aside €1.2 billion to cover any potential loan losses resulting from COVID-19.
When questioned about the AIB’s interim results, Chief Executive Officer Colin Hunt said that their financial report was heavily shaped by the pandemic. He did state that the €1.2 billion expected credit loss charge in the first half of 2020 represents a large majority of the bank’s ECL charge for the full year of 2020. [1]
AIB’s net interest income also fell 8% during the first half of 2020 relative to the first half of last year. AIB’s net interest income for the first half of 2020 is now just €967 million. The first half of 2020’s net interest margin is 2.10%, which is 0.15% lower than the net interest margin of quarter 4 2019 (2.25%). This lower net interest margin for the first half of 2020 is mainly a result of excess liquidity. [2]
The pre-provision operating profit of AIB for the first half of 2020 was €0.4 billion, and the loss after taxes was €0.7 billion. These losses across the board as well as the projected €1.2 billion ECL charge is due to worsened economic predictions as a result of the COVID-19 pandemic. [2]
AIB unfortunately has reported lower new lending across all their sectors as a result of the COVID-19 pandemic. New lending for AIB was reduced by €1.6 billion (-27%) down to €4.4 billion, and retail banking new lending was reduced by 13%. [2]
In terms of good news, AIB has continued to have their management focus on cost discipline. In the first half of 2020 costs were only €747 million, which meets trends set back in the first half of 2019. AIB also reported a 6% decrease in FTE employee numbers compared to June 2019. [2]
There is more good news for AIB during this pandemic though, as they do have a strong capital position. The interim report from AIB has stated a CET1 (FL) of 16.4%. The pro-forma CET1 (FL) accounts for 15.6%, which is significantly above the bank’s target of more than 14% CET1. As it currently stands, the bank’s transitional CET1 ratio (20.2%) is over twice the 2020 regulatory required amount. [2]
This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.
References:
[1] https://www.rte.ie/news/business/2020/0806/1157614-aib-sets-aside-1-2-billion-to-deal-with-loan-losses/
[2] https://uk.advfn.com/stock-market/london/aib-AIBG/share-news/AIB-Group-PLC-AIB-Half-Year-Financial-Results-2020/83011970