Details of the new AIB debt write-down scheme

The information available at present is limited and the only thing we were able to obtain in terms of hard fact is that people on trackers won’t lose their tracker in this process.

Background info:   This is a variant of our split product and it can provide for upfront partial compromise of principle debt and a right sizing of the loan. It will contain features that incentivise and reward repayment of the loan B in advance of maturity.  It will also provide an opportunity for the customer to earn a ‘reward’ in the form of principle debt reduction if they keep to the terms of their A loan.     There is security of tenure built in as a feature for as soon as the borrower lives in the property.   Key details:     This is not a self-selected product. It will suit a certain, limited cohort of borrowers for which standard forbearance does not work. If standard forbearance works it will not be offered.  This split represents a final attempt to keep people in their homes where there is …

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AIB Rate hike: where is it now and where is it going?

AIB have announced an increase in their Standard Variable Rates (SVR’s) as well as in their Loan to Value Standard Variables (LTV-SVR’s: which are tiered variables based upon your loan to value), effective from August 10th. Caroline Madden of the Irish Times and Charlie Weston from the Independent both carried the story today, this comes only days after Allied Irish Bank announced that they lost over €2,000,000,000 in the first half of 2010.

Their SVR now stands at 3.25% but where is it headed? For that it is important to look at several different factors, firstly, their cost to income ratio has gone from 48% in 2009 to 63% for 2010. That means that it is costing them €63 to turn over €100 in income, this is a 32% increase on last year in costs which is a bad indication.

There are a multitude of factors playing into this:

1. Guarantee/ELG costs: …

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ALLIED IRISH BANKS, P.L.C. INTERIM MANAGEMENT STATEMENT

Trading conditions in the year to date remain challenging, particularly in Ireland. Conditions have improved in Great Britain and our Capital Markets and Polish businesses are performing well. In the US, M&T reported strong results in the first quarter of 2010.

OPERATING PROFIT Please note that all trends in this update are in constant currency terms.

A combination of factors is placing downward pressure on our net interest margin and / or operating profit before provisions this year. These factors include: •    Highly competitive and uneconomic market repricing of customer deposits •    The elevated cost of wholesale funding and the higher cost of the Government Guarantee •    Reduced income on capital and increased interest payments on higher yielding bonds following the two capital exchanges successfully completed in the past year •    NAMA administration costs and reduced income from NAMA loans •    Targeted loan volume reductions outside Ireland to reduce our loan to deposit ratio

Positive factors, including loan repricing across all portfolios and a reduced impact or non recurrence of   some of the above factors, are expected to have a …

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