Mortgage war hits AIB share as it rules out loan sell-off
AIB’s share of the new mortgage market slipped last year as an intensifying price war corroded the State-backed bank’s dominance of the sector.
The weakening hold on the home loans market was laid bare in AIB’s first annual results since last year’s €3.4bn initial public offering.
Despite an improvement in margins and a sharp fall in impaired loans, the bank’s share of new residential mortgages shrank to 33pc, from 37pc at the half-year point. According to analysts, the fall implies a decline in its fourth quarter performance.
Speaking to journalists yesterday, AIB CEO Bernard Byrne said the most recent quarterly market share figures were not included in the 2017 results and said the bank had not “set a target on market share”. But a fall in residential lending – the bank issued €500m fewer home loans in 2017 than in 2016 – comes as Bank of Ireland makes strong gains. Its annual results showed Bank of Ireland’s market share rise to 27pc for the full year and 29pc in the last three months of 2017.
Analyst Owen Callan at Investec said AIB’s figures indicate market share of about 30pc by mid-year. But the bank’s savage reduction in non-performing exposures, cut by €3.9bn to €10.2bn last year, beat expectations and leaves AIB on course to meet tough new ECB targets by the end of 2019.
Chief financial officer Mark Bourke said the rapid cure rate was largely due to restructurings, with 1,000 problem loans a month being ‘treated’ by AIB’s distressed credit division of 1,500 staff.
Management steered clear of any commentary on their €3.7bn Project Redwood loan sale but ruled out a sale of impaired home loans, noting the political climate and saying it was not essential to the bank’s strategy.
AIB’s profit before tax from continuing operations slipped by 23pc last year to €1.3bn, mainly due to the absence of last year’s one-off Visa Europe sale. The 2017 dividend is slightly below market expectations at €326m, but up 30pc on 2016.
Net loans to customers remained static at €60bn, but AIB said its earning loan book expanded €1.6bn, helped by the run-off of its tracker mortgage book.
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