Allied Irish joins rivals in front-loading coronavirus provisions


By Padraic Halpin

DUBLIN, Aug 6 (Reuters) - Allied Irish Banks AIBG.I (AIB) joined rivals in pointing to some recovery as the economy emerges from lockdown after posting a 909 million euro ($1.1 billion) first-half pretax loss, mainly due to provisions for customers affected by the pandemic.

Ireland's largest mortgage lender took a 1.2 billion euro charge and, like its rivals, said it expected that to represent the significant majority of its provisions for the year as a whole, before returning to more normalised levels in 2021.

Chief Financial Officer Donal Galvin said AIB had extended 25% of the 64,000 payment breaks introduced since March for those hit by the COVID-19 pandemic, 27% had returned to normal repayments and 48% were still in the initial three-month phase.

He said that outcome was a little better than expected and that there was also slightly more business activity than anticipated during the pandemic, despite a 27% year-on-year fall in new lending.

"Card spend (by AIB customers) in 2020 is now above this time last year and has been since June. As a proxy for overall activity, that's reason for optimism," Galvin told Reuters in a telephone interview.

"Between June and July, mortgage applications were in line or higher than 2019 and that's a very positive sign. What we are hearing from that industry is that things look to be normalising quite quickly."

Ireland's other dominant lender, Bank of Ireland BIRG.I, said it was seeing signs of recovery from the crisis in mortgage applications and business loan volumes in July, sending it and AIB's shares higher on Wednesday.

AIB's shares opened 4.5% lower at 1.14 euros on Thursday, erasing the gains.

The bank said its core Tier 1 capital ratio - a key measure of financial strength - rose slightly to 16.4% from 16.2% at the end of March, the highest of any Irish lender.

A day after a new Bank of Ireland voluntary redundancy scheme was met by political and trade union opposition, AIB said it had suspended a similar scheme announced just before the pandemic hit for the rest of the year.

($1 = 0.8423 euros)

(Reporting by Padraic Halpin; Editing by David Clarke)

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