Allied Irish Banks (BK32) - AIB - Interim Management Statement
RNS Number : 0709S
Allied Irish Banks PLC
27 November 2012
FOR IMMEDIATE RELEASE 27 NOVEMBER 2012
Allied Irish Banks, p.l.c. ("AIB")
INTERIM MANAGEMENT STATEMENT
UPDATE ON RESTRUCTURING
Substantial progress has been made in the second half of 2012 in restructuring
the bank and implementing our revised strategy and cost efficiency initiatives
to ensure a reduction in the bank's operating cost base of c. €0.4bn by 2014.
The core business environment remains challenging although there is continued
evidence of stabilisation.
n Non core deleveraging of €17 billion has been achieved to the end of
October 2012, which is 83% of the Central Bank of Ireland's end 2013
deleveraging target of €20.5bn. Overall cumulative discounts are within PCAR
n The design and build phase of our Mortgage Arrears Resolution Strategy is
now through the pilot phase and our Mortgage and SME arrears strategies have
been finalised. We have a dedicated unit working with customers in difficulty
and we expect to make significant progress in the implementation of solutions
for customers in difficulty in the next 6-12 months.
n Internally, the bank's new organisational structure has been implemented,
allowing staff to better engage with and support our business and retail
customers while enabling the bank to implement necessary cost reduction
n Over 1,000 staff have departed AIB under the Voluntary Severance Programme,
which includes an Early Retirement Scheme, with c.1,700 staff expected to have
departed by the end of December 2012. The minimum target of 2,500 voluntary
staff departures is expected to be achieved by 2014.
n In consultation with our staff and Unions we are implementing the Pay &
Benefits changes announced in June. These announced measures include up to 15%
pay cuts at senior levels, pay freezes at more junior levels and the transfer
of all staff who are members of a Defined Benefit Pension scheme to a Defined
n 45 sub-office closures and 6 branch amalgamations in the Republic of
Ireland will have been completed by end November, and 8 branches and 4
sub-offices will have closed in AIB UK by the end of December. An additional
16 branches are expected to close in the Republic of Ireland in 2013.
Additional services are being offered through An Post in affected areas.
TRADING & FUNDING UPDATE
n Continued management focus on Net Interest Margin (NIM) has led to a
reduction in overall pricing of our deposits in both the Irish and UK markets
which, coupled with ongoing repricing of our loan assets has had a positive
effect in arresting the decline in NIM. A further positive effect of product
repricing is expected to flow through in 2013. However, the continued lower
interest rate environment remains challenging, impacting yields earned on
capital and free funds and the pace of deposit repricing.
n The cost of the Eligible Liabilities Guarantee (ELG) is trending lower year
on year as the quantum of covered liabilities continues to reduce following
the withdrawal of AIB UK from the scheme in August 2012. Liabilities covered
by ELG stood at €32 billion at end of October compared to €40 billion at end
December 2011. AIB is prepared for the expiry of the ELG.
n Customer accounts continue to increase notwithstanding outflows of €1.4bn
as a result of the announced closure of AIB's operations in Isle of Man and
Channel Islands. Balances have increased across all business segments and AIB
UK's withdrawal from the ELG has had a negligible overall effect on deposit
n Ongoing progress in deleveraging and growth in customer accounts has seen
continued improvement in the loan to deposit ratio which reduced below 120% at
the end of October (including loans held for sale) from 125% at end of June.
Arising from these balance sheets movements our reliance on ECB funding has
continued to reduce since end June.
n AIB notes the recent improvement in market sentiment towards Irish
issuers. The bank will re-engage with the market in a balanced and measured
manner which is consistent with our strategy to ensure viable funding levels
whilst building confidence with external investors.
n We note Fitch's recent revision of the outlook on AIB Group's long term
Issuer Default Rating from negative to stable. This is the first positive
revision for AIB in almost four years and is reflective of further signs of
n We are ahead year to date, of both our SME lending target of €3.5bn set by
the Government and our internal new mortgage lending target of €1bn. We have
sanctioned 23,040 credit facilities to SME customers to the value of €3.4bn
and €1.1bn in lending to 5,922 mortgage customers in the year to date to
September. However, new customer lending demand remains muted in the current
challenging economic environment and therefore overall credit growth is
n The intense focus on cost reduction and the benefits of the cost
initiatives will predominantly be reflected in the 2013 cost base, reflecting
timing and implementation of our cost saving actions.
n Bad debt provisions for 2012 will materially reduce from elevated levels in
2011. Arrears in our Irish Mortgage and SME portfolios have increased, however
the pace of increase in criticised loans is slowing. Although economic
conditions remain challenging, we have seen signs of a stabilisation in
underlying economic indicators, including house prices. We have materially
accelerated the rate of engagement with customers in difficulty and are now
providing forbearance and restructuring options to customers to ensure
sustainable repayment schedules. c. 70% of mortgage customers with revised
terms are adhering to the new conditions. The outlook for 2013 and beyond will
be influenced by the domestic and international economic environment, however,
we expect bad debt provisions to continue to trend lower year on year and to
return to more normalised levels over time.
n AIB remains well capitalised, notwithstanding the continued impact of
overall losses which is partially offset by a reduction in Risk Weighted
Assets driven by a reduced balance sheet size. We continue to assess the
impact of Basel III on capital ratios and are actively evaluating and
developing a number of mitigating actions to protect regulatory capital.
For further information please contact:
Enda Johnson Niamh Hennessy
Head of Corporate Affairs & Strategy Media Relations Manager
AIB Group AIB Group
Tel: +353-1-7726010 Tel: +353-1-7721382
email: firstname.lastname@example.org Email: email@example.com
This update contains certain "forward-looking statements" within the meaning
of Section 27A of the US Securities Act of 1933, as amended, and Section 21E
of the US Exchange Act of 1934, as amended, regarding the belief or current
expectations of the Group, AIB's Directors and other members of its senior
management about the Group's financial condition, results of operations and
business of the Group and certain of the plans and objectives of the Group,
including statements relating to possible future write-downs or impairments.
In particular, certain statements with regard to management objectives, trends
in results of operations, margins, risk management, competition and the impact
of changes in Financial Reporting Standards are forward-looking in nature.
These forward-looking statements can be identified by the fact that they do
not relate only to historical or current facts. Forward looking statements
sometimes use words such as 'may', 'could', 'would, 'will, 'aim',
'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal',
'believe', or other words of similar meaning. Examples of forward-looking
statements include, among others, statements regarding the Group's future
financial position, income growth, business strategy, projected costs, capital
position, estimates of capital expenditures, and plans and objectives for
future operations. Because such statements are inherently subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking information.
These forward-looking statements are not guarantees of future performance.
Rather, they are based on current views and assumptions and involve known and
unknown risks, uncertainties and other factors, many of which are outside the
control of AIB and are difficult to predict, that may cause actual results to
differ materially from any future results of developments expressed or implied
from the forward-looking statements. Factors that could cause actual results
to differ materially from those expressed or implied include, but are not
limited to, economic conditions in Ireland and international economic and
sector-specific conditions, including volatility in the financial markets; the
default of a major market participant or negative developments affecting one
or more Irish financial institutions; unfavourable economic and market
conditions in the Irish property sector; the ability of AIB to access
sufficient funding to meet regulatory requirements and its liquidity needs;
the uncertainty over the terms of an extension to the eligible liabilities
guarantee scheme (the "ELG Scheme") and the market reaction to the removal of
government guarantees; changes in AIB's credit ratings or the sovereign
ratings of Ireland and other countries; customer and counterparty credit
quality; AIB's commitments and restrictions under the Credit Institutions
(Financial Support) Scheme, the National Pensions Reserve Fund Commission
Investment, the National Asset Management Agency bank asset acquisition
programme and the ELG Scheme; non-trading interest rates; market risks, as
well as risks related to interest rates, foreign exchange rates and commodity
and equity prices; changes in applicable laws, regulations and taxes in
jurisdictions in which AIB operates; risks related to the E.U. restructuring
plan; the valuation of certain financial instruments; a change in control;
natural and other disasters; and effective management of capital.
AIB cautions that the foregoing list of important factors is not exhaustive.
Investors and others should carefully consider the foregoing factors and other
uncertainties and events when making an investment decision based on any
forward-looking statement. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this update may not
The forward-looking statements speak only as of the date of this update.
Except as required by the Central Bank of Ireland, the Irish Stock Exchange,
or applicable law, AIB does not have any obligation to update or revise
publicly any forward-looking statement, whether as a result of new
information, further events or otherwise. AIB expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statement contained in this update or incorporated by
reference to reflect any change in AIB's expectations with regard thereto or
any change in events, conditions or circumstances on which any such statement
This information is provided by RNS
The company news service from the London Stock Exchange
IMSBKODQABDKODB -0- Nov/27/2012 07:01 GMT
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