AIB poised to repay €20bn bailout but warns of rising credit costs
AIB is “within touching distance” of repaying all the €20bn stuffed into the bank by the taxpayer during the financial crisis, according to chief executive Bernard Byrne.
But he has also warned that the cost of credit could increase for borrowers if banks are unable to effect repossessions of assets, including homes, when customers default.
Some 19pc, or €12.1bn of AIB’s loans, are classed as non-performing. That’s well above the European Union average of 5.4pc and the bank is under pressure to reduce the figure.
“If, long term, people form the view that, actually you can’t exercise security, then fundamentally the cost of credit just rises,” Mr Byrne said in an interview with the ‘Sunday Independent’.
AIB has already established an agreement with David Hall, of the Irish Mortgage Holders Organisation, to support a not-for-profit mortgage-to-rent scheme, called ICare. It’s also available to customers of EBS and Haven, both units of AIB.
Only borrowers who qualify for social housing because of their low incomes are eligible for the scheme, however. They will also have to undergo an affordability test before being accepted.
Under the ICare scheme, homeowners will lose ownership of their properties, but all their mortgage debt will be written off. They then become a long-term tenant in the home.
AIB is providing an initial €100m for the scheme.
Mr Byrne also said that the State has a two-to-three-year window to successfully exit its involvement in the lender, having sold a 28.8pc stake in the bank for €3.4bn during the summer as the bank returned to the stock market.
Mr Byrne said that ideally the State will have completely exited its involvement in AIB within that time as the bank plots “doing different things”.