July 29, 2016 / 9:06 PM / a year ago

Allied Irish says stress test not reflective of current performance

DUBLIN (Reuters) - Allied Irish Banks ALBK.I (AIB) said the methodology behind Friday’s European Union stress tests that showed it to be the second worst performer among 51 banks did not reflect its current financial performance.

The European Banking Authority (EBA) test looked at how banks could withstand a three-year theoretical economic shock. AIB only fared better than Italy’s Monte dei Paschi (BMPS.MI), with a core equity capital ratio of 4.31 percent under the adverse scenario.

    The state-owned lender had flagged ahead of the results that the static balance sheet methodology would cost it 300-plus basis points in capital, for example, by assuming it would carry 1.6 billion euros of costly contingent capital notes throughout the stress period whereas in fact they matured this week.

    “AIB is well-capitalised and capital accretive. The results published today are point in time projections based on prescribed stress assumptions and should not be treated as indicative of the future financial performance,” AIB said in a statement.

    Reporting by Padraic Halpin; Editing by Rachel Armstrong

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