Photographer: Crispin Rodwell/Bloomberg

AIB Profit Soars as Irish Election Weighs on State Share Sale

  • CEO says he's `not too worried' if state share sale delayed
  • Pretax profit rises 72% to 1.9 billion euros in 2015

Allied Irish Banks Plc’s profit soared last year as the government-owned lender released money previously set aside to cover bad loans.

Pretax profit rose 72 percent to 1.9 billion euros ($2.1 billion), driven by a 925 million-euro write back of loan impairment provisions taken during the financial crisis. The bank took a 250 million-euro charge for restructuring and customer redress on legacy issues including mortgage borrowers being on the wrong interest rate.

While Ireland’s outgoing finance minister, Michael Noonan, had said he aimed to sell a 25 percent stake in the third quarter, the government lost its parliamentary majority in elections on Feb. 26, casting doubt on when the state will start divesting its shares. Noonan’s Fine Gael party is scrambling to form a government, with the only two-party alliance possible between his group and traditional rivals, Fianna Fail.

‘Private Hands’

“The right place for AIB is in private hands,” Chief Executive Officer Bernard Byrne said in a phone interview. “The timing of this is beyond our control, given market volatility and a government not being in situ. If it slips by three to six months, we’re not too worried about that.”

Byrne said the bank is ready to return to equity markets, having paid an initial 1.6 billion euro installment in December on its 21 billion-euro bailout during the financial crisis. Impaired loans fell by 41 percent last year to 13.1 billion euros as the bank restructured soured loans and the economy continued to recover from a real-estate crash.

While “encouragingly” the rate at which impaired loans declined “increased as the year progressed, the stock remains elevated at 18.7 percent of gross loans,” said Stephen Lyons, an analyst at Dublin-based securities firm in a note to investors.

Included in the one-time charge is 105 million euros for redress and compensation for customers who had interest rates that didn’t match their contracts or “where the group will offer revised terms” on mortgages, AIB said. This comes amid an Irish central bank review of rates that track the main European Central Bank rate. It took a further 85 million-euro charge to cover the accounting and tax impact and other costs linked to the review.

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