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FOR IMMEDIATE RELEASE
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27 NOVEMBER 2012
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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.
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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.
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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
measures.
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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.
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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.
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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.
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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.
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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.
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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 balances.
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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.
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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.
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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.
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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 limited.
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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.
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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.
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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.
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Enda Johnson
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Niamh Hennessy
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Head of Corporate Affairs & Strategy
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Media Relations Manager
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AIB Group
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AIB Group
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Dublin
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Dublin
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Tel: +353-1-7726010
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Tel: +353-1-7721382
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email: enda.m.johnson@aib.ie
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Email : niamh.n.hennnessy@aib.ie
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