Dáil Éireann Debate, Tuesday - 16 April 2013
272. Deputy Pearse Doherty asked the Minister for Finance his assessment of the performance of Allied Irish Banks, in which he owns 99.8% of the shares, which reported its results for 2012 on 27 March 2013. [16532/13]
View answer273. Deputy Pearse Doherty asked the Minister for Finance his assessment as to the reason Allied Irish Banks, in which he owns 99.8% of the shares, predicts that it will return to profitability in 2014 but that Permanent TSB, in which he owns 99.5% of the shares, predicts that it will take five years to return to profitability. [16533/13]
View answerI propose to take Questions Nos. 272 and 273 together.
The results show that, while 2012 was clearly another challenging year for AIB, the management team is making progress in restructuring the bank and is targeting a return to profitability at the pre provision level during 2013 and at the pre-tax level in 2014. The results also show that the bank posted operating losses, before exceptional items, of €2.8 billion in 2012 – an improvement of 65% over 2011 where operating losses of €8.1 billion were recorded. The full year 2012 loss (including exceptional losses such as deleveraging) before tax was €3.8bn (compared to €5.1bn in 2011).
The size of the losses highlight the scale of the challenges facing the bank, however, it is essential that the management continue to reduce costs and return the bank to profitability on behalf of the shareholders – the Irish taxpayer. This is why the Government has sought a reduction of 6-10% in payroll costs following the Review of Remuneration Practice and Frameworks at the Covered Institutions.
Dealing effectively with customers in difficulties must be prioritised in 2013 and the new Central Bank targets on mortgage arrears will ensure that the banks take real steps to help their customers.
The bank must also begin to look forward and to continue to lend to households and businesses. In this regard I would expect to see SME lending continue on an upward trend. AIB approved €4.8 billion in SME lending in 2012 – 37% ahead of the €3.5 billion target. A lending target of €4 billion has been set this year and I would expect that AIB continue to view this target as a minimum not a maximum. The bank has also set mortgage lending targets of €2bn for 2013 – an increase of €500m over new mortgage lending in 2012.
The Deputy should be aware that AIB and PTSB's businesses are not directly comparable as AIB provides a range of services to retail, SME and corporate customers while PTSB is a more focused provider of services to retail customers. In simple terms PTSB is forecast to take longer to reach profitability as the drag of low yielding trackers on its business performance is much more material than in the case of AIB. In its restructuring plan submitted in June 2012, PTSB forecast that the retail bank Strategic Business Unit would be profitable in 2016, though recent indications are that this could be accelerated.
