Ireland’s largest bank AIB suffers first-ever full-year loss of $3.25 bln as bad debts soar

Irish bank AIB suffers $3.25B loss in 2009

DUBLIN — Ireland’s largest financial institution, Allied Irish Banks PLC, reported its first-ever full-year loss Tuesday as bad debts soared amid the recession.

AIB said it suffered a net loss of euro2.4 billion ($3.25 billion) in 2009, compared to a euro772 million profit the previous year.

The banking group’s income fell 4.1 percent to euro4.86 billion. It cut operating expenses 15 percent to euro1.9 billion, chiefly by trimming 1,600 staff from the 25,000-strong payroll.

The Dublin-based bank with divisions in Britain and Poland said it wrote off euro5.4 billion in loan losses, 4 percent of its total lending book, chiefly in its core Republic of Ireland market.

It also said euro38.2 billion in loans, representing 29.4 percent of its remaining portfolio, were experiencing difficulties. In 2008 those figures were euro15.5 billion and 11.7 percent.

In coming months AIB plans to transfer ownership of euro23 billion of its failing land and development loans to the government’s new “bad bank,” the National Asset Management Agency, following the European Union’s approval last week for the emergency measure.

NAMA is buying impaired loans from five Irish banks, but at hefty discounts reflecting sharp falls in Irish property values, in a bid to remove toxic debt from their books.

AIB said its outlook is uncertain, in part because the EU has yet to approve the government’s 2009 bailout terms for AIB and Ireland’s No. 2 Bank of Ireland. Both received euro3.5 billion government investments in mid-2009 and, in exchange, are supposed to pay taxpayers annual cash dividends of euro280 million.

But EU authorities are still mulling whether either bank should be paying any dividends to the government given their heavy losses and need for billions more in extra capital. AIB’s first dividend to the government is due in May.

If the EU blocks payment of the AIB dividend, the bank would be obliged to pay the government instead with new shares equivalent to 15 percent of the company, further diluting the value of AIB stock. AIB already is planning to issue new shares to existing shareholders in a bid to drum up cash.