Allied Irish makes profit for first time since bailout
First Trust parent Allied Irish Banks has made a pre-tax profit of €437m (£346m) for the first half of the year, its first in five years. The bank said its results represented a €1.3bn (£1bn) improvement in performance compared with the first half of last year with funding and capital positions stable and improving.
AIB last reported a full-year profit in 2008 as the financial crisis was hitting.
The expected move to profit marks a milestone as it moves towards repaying an Irish state bailout next year – the €20bn (£16bn) cost to the taxpayer was the most given to a bank that is still in operation.
Its results make First Trust the third of Northern Ireland's four main banks to mark a return to the black, with Bank of Ireland due to give its first half results tomorrow.
Last week, Ulster Bank announced a profit of £55m in the first six months of 2014, while Danske Bank reported profit of £45m.
AIB added that it approved a total of €5.6bn (£4.4bn) in lending in the period, a 33% hike year-on-year, of which about €4.6bn was lending approvals to the Irish economy.
Total impaired loans decreased by about €2.9bn (£2.3bn) or 10% since December 2013 while the total number of accounts in arrears in the Irish residential mortgage portfolio declined by 6%.
In the period, the total accounts in arrears for owner occupier mortgages was down 9%.
"Our mortgage arrears and overall levels of impaired loans are reducing and our performance in the first half of the year saw a material reduction in provision charges," said David Duffy, the bank's chief executive.
"As the Irish economy and the bank recovers, we remain focused on growth and maximising value for the Irish state, as 99.8% shareholder, and all other stakeholders over time."
AIB's core Tier 1 capital ratio, a gauge of its financial strength, was 16.1% while its net interest margin – an assessment of the profitability of its lending – rose to 1.6%.
However, while Mr Duffy said he believed the bank's profitability is sustainable, challenges remain including the shrinking of its net loan book.
Commenting on house prices in the Republic, Mr Duffy said that he does not believe a bubble exists but added that there is a supply issue in the capital.
AIB said its total operating income rose by 36% to €1.24bn (£0.98bn) in the six months, while operating expenses fell 9% to €686m (£543m) – partly due to cost cutting measures.
Commenting on the results, the Republic's Finance Minister Michael Noonan said the return to profitability is very good news from the perspective of the Irish taxpayer, as a profitable bank is a more valuable bank which will, over time, allow the Irish state to maximise the return on its investment in the bank.
"The Government will continue to examine all opportunities to ensure a favourable outcome for the taxpayer," he said.
"But we will be prudent to ensure the taxpayer yields the full benefit of this return to profitability."