Inside the world of business
AIB update shows why IMF is here
UNLIKE BANK of Ireland and Irish Life & Permanent, AIB did not hold a conference call after the publication of the interim management statement yesterday.
No surprise there - no bank would want to come out publicly to field questions in the same week that the International Monetary Fund arrives in town to discuss a possible €100 billion bailout for the Irish banks.
There is little to cheer at AIB. The bank experienced a €13 billion run on deposits since the start of the year. Most of this, €12 billion, went since the end of June - that's almost €2.7 billion a month since the middle of the year.
This pushed the bank to rely more heavily on the drug of cheaper central bank funding as access to the private debt markets was cut off over fears about Ireland and the state of its lenders. This meant that the bank's net interest margin - where a bank makes its operating profits - held up well during the third quarter of the year but the bank said this would be squeezed as it intended to borrow from the costly debt markets when conditions improve.
The bank did not disclose where it was drawing its funding from but said that, in aggregate, its borrowing from monetary authorities had risen to €27 billion at the end of September from less than €10 billion at the end of June.
AIB will also end up even deeper in State hands - the taxpayer is expected to own about 94 per cent eventually - as the Government underwrites an even larger sale of new shares that few private investors will want to touch.
The bank is increasing the capital-raising target in a planned rights issue by €1.2 billion to €6.6 billion. The increase is due to the decision to postpone a sale of the UK business.
Mortgage borrowers are also finding life difficult. Arrears of 90 days or more at AIB rose to 2.6 per cent of mortgages from 2.1 per cent in just under five months.
Worse is to come. AIB said it was revisiting its bad debt estimate for loans that are not moving to the National Asset Management Agency under its new boss.
The bank's trading update stands as an illustration of why the IMF, the European Commission and the European Central Bank are here.
AIB's capital, funding and bad debt are deteriorating fast as the Government moves effectively to nationalise a fourth bank.
Yesterday was the final day AIB could have published the update under stock exchange rules as it had to issue a statement on its trading six weeks before the end of its financial year.
It's little wonder why they left it so late and that it was the last of the banks to publish.
Cowen's forecast a little too sunny at T2
MUCH TO Declan Collier's relief, there was no Ryanair-sponsored white elephant to spoil the opening of Dublin airport's Terminal 2. Michael O'Leary opted instead for a dodgy-looking undertaker's outfit and a cheap coffin to illustrate the death of Irish tourism.
O'Leary's publicity stunt was almost lost amid the noise that surrounded the visit of the Taoiseach.
Brian Cowen fielded a handful of questions from the scrum of international media on entering the shiny new building before giving a 15-minute speech to the 450 or so assembled guests.
It included the usual bluster about Ireland being in charge of its own destiny, in spite of the IMF having set up camp here to negotiate a bailout for our banjaxed financial system.
The Taoiseach put a brave face on matters. He restated the Government's desire to boost visitor numbers to this country to eight million by 2015, which he said would create 15,000 jobs. There was talk of reducing costs to achieve this. Was this a nod to Ryanair that the air travel tax might be scrapped?
Probably not.
Cowen said T2 would show the world that Ireland was still open for business. But his forecast for traffic at Dublin airport next year was a little wide of the mark. He said T2 would handle "close" to eight million passengers in its first full year of operation (in 2011), adding that it would cater for 40 per cent of the airport's traffic.
Do the maths and this would give Dublin airport a throughput of 20 million passengers. Given that Dublin will handle about 18.5 million passengers this year, this would be quite an achievement, especially as Ryanair and Aer Lingus are reducing capacity.
The DAA is planning for a little more than 19 million passengers next year. Clearly, one of the Taoiseach's advisers got their sums wrong. No change there, then.
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