AIB plans to start discussions with the Department of Finance and its regulators about establishing a dividend policy, now that it has repaid the last of its legacy capital instruments to the State, its chief executive, Bernard Byrne, said on Thursday.
Addressing a press briefing to announce AIB's half-year results, Mr Byrne said the bank's "entire capital stack needs to be rewarded and remunerated, so we need to establish a dividend policy" with the Minister for Finance Michael Noonan and its regulators (the Single Supervisory Mechanism in Frankfurt and the Central Bank of Ireland).
“We would do that in the coming months,” he said, adding: “It’s now the right dialogue to have but we don’t have an answer on it.”
AIB has not paid a dividend to shareholders since September 26th, 2008, just days before the government issued its blanket bank guarantee.
Profits
AIB reported a pretax profit of €1 billion in the first six months of this year, which was €200 million lower than in the same period of 2015.
The bank said its profit was driven by a strong business performance, net provision writebacks of €211 million and one-off benefits including the sale of its share in Visa Europe.
Its net interest margin increased by 16 basis points to 2.08 per cent with continued expansion expected.Impaired loans reduced to €11.3 billion in the period, down €1.8 billion since December 2015.
Flotation
In terms of how long it might take to repay the balance of the money AIB owes the State, Mr Byrne said: “It’s within a five- to 10-year period. We’re in the ballpark in terms of the value of the underlying enterprise and its ability to generate decent capital returns. Then it’s a question for the Minister.”
AIB received a bailout of €20.8 billion. To date, it has repaid some €3.4 billion of capital to the State.
At the end of 2015, the State's 99.9 per cent shareholding in AIB was valued at €12.2 billion by the National Treasury Management Agency.
On the matter of a stock-market flotation of its shares, Mr Byrne said the only issue was around stock market volatility. “That’s obviously the piece where the greatest uncertainty exists right now,” he said. “And that is the piece that is going to be important to the Minister in terms of any consideration of timing.
Apology
AIB apologised for failing to ensure that all of its tracker mortgage customers were on the correct interest rate.
This follows an internal review of its tracker mortgage book, which was ordered by the Central Bank of Ireland last December.
“Our review has found, that in some instances, we were not sufficiently clear with customers or we failed to honour contractual commitments,” Mr Byrne said in his review of the bank’s results.
“On behalf of the bank, I apologise to customers for these failures which should not have happened and which we now intend to put right.”
AIB said it would shortly “commence engagement” with individual customers affected by this review and has set aside €190 million to cover costs associated with the redress.
