AIB Cuts Bad Loan Levels as Bank Sees `Solid' Performance

(Bloomberg) -- AIB Group Plc is making steady progress in cutting its ratio of soured loans closer to the average of other European banks.

The Dublin-based company’s non-performing loan ratio in the first half of the year fell to 12 percent of gross lending from 16 percent at the end of last year, it said in a statement on Friday. It remains focused on reaching the “normalized” levels of other lenders by 2019 as Irish banks come under pressure from the European Central Bank to slash their bad or doubtful loans closer to the region’s average of just over 5 percent.

“We have had a solid first half of 2018 and remain on track to meet our stated medium-term targets,” Chief Executive Officer Bernard Byrne said. “The overall economic backdrop continues to be favorable.”

AIB has been selling assets and expects to do at least one more loan sale to help get its bad-loan ratio down to about 5.7 percent, Chief Financial Officer Mark Bourke said in a phone interview. AIB, which is 71 percent owned by the government, is “ready” if Ireland decides to reduce its holding, Bourke said.

Pretax profit was 762 million euros ($887 million), little changed from a year earlier and boosted by a 140 million-euro gain on divested loans. The net interest margins was stable at 2.5 percent.

The lender had a 32 percent share of the Irish mortgage market, a key revenue driver, while new lending overall grew by about 500 million euros. Its fully loaded CET1 capital ratio, an important measure of the bank’s ability to absorb losses, stood at 17.6 percent.

AIB shares gained 0.73 percent to 4.94 euros at 8:11 a.m. in Dublin.

To contact the reporter on this story: Peter Flanagan in Dublin at pflanagan23@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Jon Menon, Geoffrey Smith

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