AIB’s head office in Ballsbridge, Dublin, was bathed in glorious sunshine yesterday, allowing the bank to bask in the glow of a stellar set of results.
We knew from earlier gui- dance that AIB had returned to the black in the first half of this year but not by how much.
The pretax surplus of €437 million was well north of any of the analysts' forecasts. Davy had pencilled in an operating profit of €66 million, while Merrion Capital was predicting an underlying profit of €230 million.
While its operating income was up by 36 per cent and costs were 9 per cent lower, the eye-catching number in the results published yesterday was the reduction in bad-debt provisions to €92 million from €738 million a year earlier.
There were other impressive numbers. In the space of 12 months, AIB’s net interest margin rose by 32 basis points to 1.6 per cent, while the cost-income ratio fell by 27 points to 55 per cent.
A voluntary severance programme reduced the headcount by 3,679 over the past two years without a day being lost to industrial action.
In the space of 2½ years, AIB chief executive David Duffy has ticked most of the boxes necessary to get the bank back to normalised lending and put it in a position to come out from under the skirt of the State, its 99.8 per cent shareholder.
There are still hurdles to be cleared. Unlike Bank of Ireland, it has not achieved the 2 per cent net interest margin it is seeking, while its total loan book continues to shrink.
It also has to navigate the pan-European stress tests being run in advance of the Single Supervisory Mechanism being established in November.
No matter how many times Duffy expresses his confidence that AIB has sufficient capital on its books and will pass the tests, nobody will believe it until the results are published.
Mortgage arrears and SME debt remain big issues for the bank.
Its new group finance chief, Mark Bourke, said yesterday that it would take 10 to 12 years to work through its €13 billion book of tracker mortgages, which must be a considerable financial drag on the business.
Still, Duffy can be happy with the progress made by AIB on his watch.
If the recent economic recovery is sustained, AIB could have many more days in the sun in the years ahead.
