March 30 (Bloomberg) -- Allied Irish Banks Plc, 99.8 percent owned by the government, said arrears on domestic home loans more than tripled as the economy remains weak following the collapse of the country’s a real-estate bubble.
By value, about 11 percent of the bank’s Irish owner-occupier mortgages were at least 90 days in arrears at the end of December, up from 2.9 percent a year earlier, the Dublin-based lender said in its annual report today. Arrears on buy-to-let loans soared to 32 percent from 9.6 percent, it said. A large portion of the arrears come from EBS Ltd., the smaller Irish lender which Allied Irish took over last year.
Arrears are likely to rise in 2012 before falling next year, Paul Stanley, the bank’s chief financial officer, said in a telephone interview today. The Irish economy fell back into recession in the fourth quarter, and house prices have slumped 49 percent from their 2007 peak.
The arrears figures “highlight our cautiousness still on the banks,” said Eamonn Hughes, an analyst with Dublin-based Goodbody Stockbrokers, who doesn’t have a rating on Allied Irish.
The lender’s full-year net loss narrowed to 2.29 billion euros ($3 billion) from 10.2 billion euros after a one-time loss on the sale of the real-estate loans to the National Asset Management Agency, the state’s so-called bad bank, wasn’t repeated.
Provisions for bad loans increased to 7.86 billion euros in 2011 from 6.02 billion euros in 2010, when the bank a lost a further 5.97 billion euros on loans it transferred to NAMA.
Allied Irish said March 8 it is planning to eliminate 2,500 jobs, marking the biggest redundancy program in Irish banking history. Ireland has injected 20.7 billion euros over the past three years to bail out the bank and EBS, which it was ordered by the government to take over in July.
Stanley said the lender is “adequately capitalized,” and should return to profitability in 2014. The lender is its talks on moving loss-making tracker loans out of the bank, as the government seeks to further restructure the financial system.
Irish Finance Minister Michael Noonan yesterday laid out plans to defer a 3.1 billion-euro payment to the former Anglo Irish Bank Corp.
“The deferral is a positive,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. “A far greater win would be any announcement of support to remove tracker mortgages from Irish banks’ books, which would be a significant step in returning the banks towards profitability.”
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