AIB’S IPO has boosted chances of State exit within two years – Byrne

Chief says bank is within ‘touch­ing dis­tance’ of re­pay­ing all of €20bn in­jec­tion

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Dearb­hail Mcdon­ald

AIB is eye­ing a re­turn to pri­vate own­er­ship within two years, ac­cord­ing to its chief ex­ec­u­tive.

Bernard Byrne, who took charge of the coun­try’s largest bank two years ago, says there is a two- to three-year win­dow to cap­i­talise on the suc­cess of last June’s par­tial IPO which saw the Govern­ment sell a 28.8pc stake to in­vestors for €3.4bn.

Byrne, the Pres­i­dent of the In­sti­tute of Bankers (IOB), said AIB is “gen­uinely within touch­ing dis­tance” of re­pay­ing all of the €20bn in­jec­tion poured into the lender in 2010 at the height of the global fi­nan­cial cri­sis.

“Fun­da­men­tally that [a full pri­vati­sa­tion] is an is­sue for the Min­is­ter for Fi­nance,” said Byrne in a wide-rang­ing in­ter­view with the Sun­day In­de­pen­dent.

“It’s a good time. Those in­vestors are still there and there’s a broad pool who didn’t par­tic­i­pate who are in­ter­ested in this story. So there’s an op­por­tu­nity in the shorter term rather than in the longer term to con­tinue to run on it.”

AIB is un­der pres­sure from the Euro­pean Cen­tral Bank to re­duce its ex­po­sure to non-per­form­ing loans (NPLS). The bank wants to cut its NPL lev­els to 5pc by 2019 and re­cently en­tered a deal with the Ir­ish Mort­gage Hold­ers Or­gan­i­sa­tion.

The €100m deal will help keep peo­ple who have fallen into mort­gage ar­rears — and who qual­ify for so­cial hous­ing — in their own homes.

But Byrne warned that the cost of mort­gage credit will rise fur­ther for bor­row­ers un­less lenders are able to re­alise their se­cu­rity, in­clud­ing re­pos­ses­sion of homes.

“We’ve al­ways been will­ing since the very be­gin­ning to write off debt and to right-size debt when gen­uine af­ford­abil­ity is­sues are pre­sented,” said Byrne, adding that the mort­gage-to-rent scheme, whilst help­ful, will not solve all prob­lem mort­gages.

“So­lu­tions like that are help­ful be­cause it means then ev­ery­one can say ‘Well, ac­tu­ally those that aren’t will­ing to en­gage and aren’t ac­tu­ally proac­tive in terms of their en­gage­ment with the se­cu­rity shouldn’t have such pro­tec­tions’.”

Byrne said that AIB, in line with other ma­jor in­sti­tu­tions, is now reg­u­lated from Europe and sub­ject to strict guide­lines on ar­rears.

“By im­pli­ca­tion, the reg­u­la­tor will make it more ex­pen­sive and will re­quire peo­ple to have more cap­i­tal as­so­ci­ated with mort­gage or SMES in the Ir­ish mar­ket if you can’t re­alise your se­cu­rity within a seven-year term.”

Byrne said that AIB, which is still 71pc owned by the tax­payer, is re­struc­tur­ing the vast bulk of its im­paired res­i­den­tial mort­gages on a case-by-case ba­sis, adding that the bank will sell those loan port­fo­lios if re­quired.

“AIB will need to start think­ing about do­ing dif­fer­ent things in a two- to three­year time frame,” said Byrne, who added that the bank is pay­ing back its bailout in a more quickly than en­vis­aged.

“State own­er­ship isn’t nec­es­sar­ily the right own­er­ship model when busi­nesses have to start to think about the next thing,” he said ahead of a ma­jor sus­tain­abil­ity con­fer­ence hosted by AIB. “The fu­ture of the bank is mak­ing sure that we have a proper so­cial li­cence to op­er­ate.”

Bernard Byrne, ceo of AIB, at AIB Bank Cen­tre in Balls­bridge. Pic­ture: Frank Mc­grath

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