AIB at the Oireachtas Committee

Brendan Burgess

Brendan Burgess

Founder
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52,079
David Duffy introductory statement

Rate cuts benefit 146,000 customers. (They have a much higher proportion of non tracker customers)

We will treat all customers , including those on arrears, on an equitable and fair basis, irrespective of position in society.
 
Michael McGrath

Ownership of AIB. What are your views on how the state can maximise the return on the state's investment of €21 billion?

Duffy
I expect that we will return the full amount, over time.

At the end of this year, we will be well capitalized and profitable, so we will be investable?

We need to talk to the Central Banks as to how capital will be treated?

Our obligation is to be ready to be sold - the Department will determine how and when it is sold?

We have not had a discussion about the possible sale or even about dividends.

We have had no discussions about retrospective capitalisation by the ESM.

The best way to proceed is to sell pieces of the bank over a period of time. But the Department of Finance may have another view.

We won't form an opinion of how and when to sell. We will just get it ready.

The value today is probably around €10 billion, depending on co cos etc.
[ BB note: the market cap is €56 billion]

McGrath

Do you intend to market your new rates to customers of other lenders?

Duffy: We are advertising our products nationally.

40% of all mortgages issued by AIB are at the one year fix of 3.5%

We will target everyone, not customers of particular banks
 
Senator Paul Coughlan

I expect you to make a full return to the taxpayer

Will you beat €1 billion in profits for the full year.

Duffy
I can't answer that due to listing restrictions.

But things are progressing well in the second half.
 
Kierán O'Donnell

Has the board discussed how to give back the €21 billion?

Duffy: The board discussion is a macro one. How do we position ourselves in the market?

O'Donnell
How do you see the valuation changing over the next 5 years?

We don't want to jump the fences too early.

Duffy:

We don't think you can answer that question today. We want to see how the next 12 months turn out e.g. arrears and provisions. The economy is in an early recovery.

Third question of next year, we will know a lot better.

O'Donnell
Why did you reduce the mortgage interest rate? BoI and Ulster have much higher NIMs but still not high enough. I welcome the reduction.

Duffy:
Two reasons
1) To treat customers fairly - our funding has improved, so we want to share that with our customers
2) With regard to the margin - we can cut interest rates and still exceed 2% NIM.

O'Donnell

You expect the SVR to fall.
I think that BoI and UB should be cutting their rates.
The lack of competition

The interest rates in the North are significantly less for lower LTV mortgages. Why is that the case for AIB?

There is competition in the North but not down here.

The banks here are ripping off customers.

Byrne
The banks in the North are competing on just that rate. It's a teaser rate. There are very few loans issued at that rate.
 
Pearse Doherty

I welcome the reduction in mortgage rates, but it's a lot less than your cost of funding.

According to your plan, you will be making a return of the capital surplus at the end of 2016. Will you be paying anything before that?

Duffy: That is a decision for the shareholder.

Doherty: Will you be paying the dividend on the €3.5 billion in cash

Burke: We are discussing that with the Department
Duffy: Until the stress tests were passed, we had to pay by means of a scrip issue.

Doherty: Are you including the €1.6 billion for the guarantee in the €21 billion you want to return.

Duffy: We want the bank to be worth €21 billion, so we won't be including the €1.6 billion

Doherty: The Minister is going to apply for retrospective capitalisation, so the ESM may become the owner of AIB. What implications will that have for you.

Duffy: I don't think that would affect us that much. The ESM would only hold the shares temporarily. We still want to get the bank ready for sale.

Doherty: You have claimed that one in 5 borrowers is a strategic defaulter. What is the percentage today?

O'Connor: Many people are still prioritising paying unsecured debt.

Duffy: We have been successful in getting people out of arrears

Doherty: How many PIAs have you approved

Duffy: We approved 50 out of 57, where we are the controlling creditor.

We voted yes in 34 out of 45 where we were not controlling.
 
Paul Socialist

The Central Bank proposed restrictions

Duffy: We support them. They probably should be phased in to avoid unintended consequences
 
Senator Seán Barrett

The proposals from the CB are out since 7 October, you must have formed some views?

Are you saying " We agree but not now"

Duffy: I am absolutely supportive of those limits.
When I was a younger person, I was subject to those limits.
It's a matter of execution. We are trying to map out the unintended consequences.

Barrett: Banks should support rules which minimise bank busts.
 
Spring

Sorry , I am late in, so you might have covered these

4 issues
Mortgage arrears and IMHO
Capacity of AIB to deal with An Post -
Your own balance sheet.
The sale of AIB

IMHO
Are you getting value for money? I am getting good feedback.

Brendan O'Connor: Good relationship. 1,300 have reached long term solutions. It's an engagement channel - no difference from any other channel. There is no special product.

It probably gets better results on intractable cases. They give them a lot of one to one attention.

Provisions
Burke: We have reversed some provisions on home loans arrears
 
Lucinda Creighton

The banks need to get behind the Central Bank's proposals.

Variable Mortgage Rates - Did you include a clause that linked the change in interest rates to market conditions?

Byrne: Every other institution has its own language. I don't think you could extrapolate the wording in the other case to our situation.

Creighton : What determines mortgage rates

Byrne: There is generally a reference to funding costs
 
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