Allied Irish 2012 Loss Widens on Decreasing Bond Buyback Gains

Allied Irish Banks Plc (ALBK), which cost taxpayers about 21 billion euros ($27 billion) to rescue, said its annual loss widened as a decline in bad loan losses failed to offset dwindling gains from buying back its own debt.

The net loss increased to 3.65 billion euros in 2012 from 2.31 billion euros in the year-earlier period, the nation’s second-largest lender by assets said in a statement today. Bad loan provisions fell 70 percent to 2.53 billion euros last year. The 2.1 billion-euro gain from buying back junior bonds at a discount in 2011 wasn’t repeated.

“AIB has now largely completed the restructuring phase of its strategic plan as the bank targets a return to sustainable profitability and growth during 2014,” Chief Executive Officer David Duffy said in the statement.

Duffy, who has held the job for almost 16 months, is implementing more than 2,500 job cuts, cutting executives’ pay and selling loans to help return the lender to profit and attract investors in 2014. Allied Irish plans to restructure almost all of its troubled residential mortgages by the end of year, Duffy said in an interview last month.

The bank is beginning to offer struggling borrowers split mortgages, where repayments on a portion of the loan are put on hold until the debtor’s circumstances improve, and the lender writes off irrecoverable loans, he has said.

The pace of arrears growth in the Irish mortgage book “slowed when compared with 2012,” Allied Irish said, echoing comments from other lenders, such as Bank of Ireland Plc and Permanent TSB Group Plc, within the past month.

Mortgage Arrears

By value, the level of Irish owner-occupier residential mortgages at least 90 days in arrears rose to 14.9 percent at the end of 2012 from 10.8 percent a year earlier. Buy-to-let loans behind in repayments increased to 43.6 percent from 31.3 percent, the bank said.

While Allied Irish’s net interest margin, the difference between the rates at which it funds itself and lends to customers, narrowed to 0.91 percent from 1.03 percent in the year-earlier period, it expanded in the fourth quarter from to the previous three months. The margin has contracted from 2.21 percent in 2008.

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