Permanent TSB, AIB, and Bank of Ireland will probably announce 2 billion euros worth of combined loan provisions that have gone bad as a result of COVID-19. This will most likely create 1 billion euros in losses for Ireland’s major banks, Permanent TSB, AIB, and Bank of Ireland. According to the broker Davy, the overall outcome is less dire then it was at the height of the pandemic
Each of the three banks are owned by the Irish government in either a small or large capacity and are getting ready to report the initial effects of COVID-19’s economic fallout on their own loan records. The half-year earnings reports from these banks shall be released within the first week of August.
These earnings reports are hotly anticipated since these are what the bank chiefs will use to determine how fast they expect Ireland’s economy to recover from the economic devastation caused in the wake of COVID-19.
According to Stephen Lyons, a financial analyst at Davy, the bank chiefs may set aside large swaths of loan-loss provisions in 2020. In doing so, the bank chiefs are trying to account for the financial stress caused by COVID-19 on both households and businesses in 2020. Additionally, there also may be a greater financial bounce back for households and businesses in 2021 than was previously thought.
The Irish government’s credit-guarantee scheme could potentially play a sizable part in the recovery of Ireland’s banks and their economy. This is only if the Irish government’s scheme has attractive interest rates as well as terms for both borrowers and lenders, Mr. Lyons stated.
A sizable number of economists and business groups are calling on the Irish government to massively expand its €2bn credit-guarantee scheme to help meet the needs of small businesses that have zero-interest rate loans. This call to action was made after a similar scheme in the UK was overhauled and became a huge success.
The broker Davy predicts that the losses from lenders are based on the early weeks of the COVID-19 lockdown.
According to Davy, the AIB will announce €466 million in impairment charges for the first 6 months of 2020 and a net loss of €170 million. For the full year of 2020, AIB will have impairment charges of €917 million and announce a net loss of €538 million.
The Bank of Ireland will report €290 million in net loss for the first 6 months, and €453 million in net loss along with €1 billion in impairment charges for the full year of 2020.
Permanent TSB will report €26 million in net loss as a result of the first 6 months, and €63 million in net loss for the full year of 2020 according to Davy. Davy also predicts that Permanent TSB will post impairment charges totaling €108 million.
This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.