Allied Irish Banks BK32 AIB - Interim Management Statement

  Allied Irish Banks (BK32) - AIB - Interim Management Statement

RNS Number : 0709S
Allied Irish Banks PLC
27 November 2012






                      Allied Irish Banks, p.l.c. ("AIB")

                         INTERIM MANAGEMENT STATEMENT


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 
capital assumptions.

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 
Contribution Scheme.

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.


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 
economic stabilisation.

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
Dublin                               Dublin
Tel: +353-1-7726010                  Tel: +353-1-7721382
email:         Email:

                          Forward-looking statements

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 
is based.

                     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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