July 26, 2019 / 7:10 AM / 4 months ago

Irish bank AIB profits fall due to exceptional charges, rising costs

DUBLIN (Reuters) - Allied Irish Banks (AIBG.I) reported lower first-half profits on Friday as costs rose and exceptional charges slowed its recovery a decade after Ireland’s banking crash.

Profit before tax was 436 million euros ( £390.46 million ), including exceptional items of 131 million euro. That compared with 762 million in the same period last year.

Chief Financial Officer Donal Galvin told Reuters two exceptional items affected performance in the first half, namely a 35 million euro provision for a tracker mortgage fine and a provision related to a loan documentation issue.

Non-performing exposures (NPEs) fell to 4.7 billion euros or 7.5% of gross loans.

“As we work through the portfolio of non-performing exposures by default we are working with more granular cases and your speed of reduction will change slightly, but we have a fully-functioning non-performing unit that is operating at 100% at the moment,” Galvin said.

He said the bank was on track to hit its target of reducing bad loans to 5% of its total loans by the end of the year, bringing the bank into line with its European peers.

Irish banks are under pressure from the European Central Bank to reduce bad loans which ballooned after Ireland’s property crash. In 2013, AIB’s stock of NPEs stood at 31 billion euros.

AIB’s tier one capital ratio was steady at 17.3%, well above its medium term target of 13%.

Operating expenses of 744 million euros were 6% higher than last year.

“There a number of moving parts in there. We have always flagged there are a number of headwinds,” Galvin said

“Wage inflation running at 3%, depreciation costs, prior year investment spend coming through ... and there is no doubt that some of the additional costs related to regulatory burden are definitely coming through.”

AIB’s share of the fast recovering Irish mortgage market stood at 31.3% in the first half.

Reporting by Graham Fahy; Editing by Mark Potter and Edmund Blair

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