AIB Capital Update
(Thomson Reuters ONE) -
Allied Irish Banks, p.l.c. ("AIB") [NYSE:AIB] notes the announcements made today
by the Central Bank of Ireland (CBI) and the Minister for Finance (the
Minister).
Following completion of the Prudential Capital Assessment Review (PCAR) and the
Prudential Liquidity Assessment Review (PLAR), the CBI requires AIB to raise
equity capital of ?9.1bn in addition to the requirement of c. ?4.2bn deferred
from February 2011. Of the total increased capital requirement of ?13.3n an
amount of ?1.4bn may be in the form of contingent capital.
The Board of AIB fully appreciates the continued strong support of the Irish
Government to the bank and its commitment to ensure that all of the capital
required by AIB will be raised. This support reaffirms AIB's central position in
the Irish banking landscape. AIB will continue to work with the State to
determine the optimum sequence to generate the committed capital in line with
the proposals in the Minister's speech.
The significant amount of capital to be raised by the bank is designed to
definitively assure all stakeholders, including depositors, other customers,
staff and investors, that AIB will continue to be a systemic part of the Irish
banking sector.
The very strong capital base that results will enable AIB to provide long term
support to its customers and play an active role in the recovery of the Irish
economy. We are developing initiatives that ensure customers' needs are
facilitated and help businesses and home owners under stress.
The increased capital base will accelerate the bank's own recovery and return to
profitability so that we can reward taxpayers for their investment in AIB.
In addition to the commitments announced today, the Government has reconfirmed
that all deposits remain fully guaranteed by the State under the deposit
guarantee scheme and the ELG scheme.
The capital requirement for AIB has been determined by PCAR base and stress case
scenarios. These scenarios test the bank's capability to absorb future losses in
adverse and extreme conditions but are not forecasts of future performance. The
assumptions and methodology driving the scenarios have been outlined today by
the CBI in its announcement. These industry wide assumptions and methodology
drive capital requirements that are set at levels intended to restore confidence
in the resilience of AIB and the other banks tested, even in extremely adverse
and unlikely future conditions. The minimum core tier one capital ratio required
for banks will be 10.5% in the base case and 6% in the stress case.
AIB's specific and incurred but not reported (IBNR) balance sheet provisions
were c. ?5.2bn and c. ?2.1bn respectively at 31(st) December 2010. These
provisions include a bad debt charge of c. ?4.5bn in 2010. (These figures
exclude both provisions and charges related to NAMA loans, which have been
separately provided for in line with previously announced discounts).
The PCAR stress testing was carried out by BlackRock Solutions on behalf of the
CBI. The approach to determine the bank's capital requirement included (in both
base and stress scenarios) the combined effect of the following:
* An assessment of operating performance and losses that may emerge over the
2011 - 2013 three year period
+
* An overlay from bringing forward an element of losses in the years after
2013 back in to the 2011 - 2013 period
+
* A further overlay buffer for other future losses, events or shocks over the
entire lifetime of loans.
In addition, BlackRock also used the following modelling assumptions:
* Irish residential mortgages
- AIB's arrears profile has been averaged with the overall industry
- negative equity, not unemployment, as the main driver of default.
- assumed widescale repossessions and forced sales, which are not the
practices in Ireland or many other countries, resulting in highly
elevated model loss rate.
* Commercial real estate
- minimal recovery in real estate prices
- modelled rental income declines do not recognise sustainable income
/ cashflow from actual lease agreements.
Accounting rules prohibit AIB and other banks making provisions for future
expected losses. However, as required by the CBI and using the same macro
economic data as used by BlackRock, AIB submitted its own expectation of 2011 -
2013 loan losses. Naturally, this expectation was materially less than the
outcome of the PCAR exercise (copy available atwww.centralbank.ie), given the
key differences between the methodology and assumptions used by AIB and the
above described approach adopted by BlackRock.
Combined provisions and pro-forma core tier one capital* at 31 December 2010,
following required recapitalisation would be c. ?26bn. The core tier one ratio
at the same date would be c. 21%.
The Board of AIB considers these provisions and reserves will represent a highly
prudent and resilient base from which the bank will support its customers and
economic revival.
The CBI also announced today that following completion of its PCAR, AIB is
required to reduce its loan to deposit ratio to 122.5% by the end of 2013.
Proposed combination with Educational Building Society (EBS)
As announced by the Minister today, it is intended that AIB will be combined
with EBS, subject to State aid and any regulatory approvals required. AIB
welcomes this proposal and will update the market in due course as details are
finalised and developed further.
AIB plans to make presentations to analysts and media on 12(th) April which will
incorporate commentary on the bank's 2010 preliminary results to be announced
that day. These presentations will also provide an update on AIB's strategic
review of its business and restructuring plans.
Further information in the form of frequently asked questions and answers and
customer contact numbers are available on our website at www.aibgroup.com.
* includes contingent capital
- ENDS -
For further information, please contact:
Alan Kelly Catherine Burke
General Manager, Corporate Services Head of Corporate Relations and
Communications
AIB Group AIB Group
Dublin Dublin
Tel: +353-1-6412162 Tel: +353-1-6413894
email: alan.j.kelly(at)aib.ie email: catherine.e.burke(at)aib.ie
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originality of the information contained therein.
Source: Allied Irish Banks, p.l.c. via Thomson Reuters ONE
[HUG#1502422]
Unternehmensinformation / Kurzprofil:
Datum: 31.03.2011 - 19:26 Uhr
Sprache: Deutsch
News-ID 53044
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