April 27, 2017 / 6:58 AM / 3 months ago

Allied Irish margins up, bad loans fall ahead of potential IPO

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DUBLIN, April 27 (Reuters) - Allied Irish Banks improved its capital position, cut its bad loans and increased the profitability of its lending in the first quarter in what could be the state-owned lender's last update to investors ahead of a planned initial public offering.

Ireland has appointed a number of investment banks to act as bookrunners and global coordinators for the potential sale of a 25 percent stake in AIB and has said the nearest window to sell the shares would be between mid-May and early July.

The bank, which last month became the first Irish-owned lender to announce a resumption of dividend payments since the 2008 financial crash, said on Thursday that it had made a good start to the year, showing the ongoing success of its strategy.

The 99.9 percent state-owned lender said it had achieved a 10 percent increase in new lending drawdowns, with growth across all business as its share of Ireland's sharply growing mortgage market rose to 38 percent from 36 percent in December.

Its net interest margin - showing how profitable its lending is - rose to 2.46 from 2.42 percent in the fourth quarter. Its core tier one capital ratio - a measure of financial strength - increased to 16.0 from 15.3 percent.

Impaired loans fell by 0.5 billion euros to stand at a still high 8.6 billion euros.

It also said the impact of Brexit had been modest to date on the Irish and UK economies and that new lending trends had improved in its smaller UK business, up 17 percent year on year.

AIB's potential IPO, which was held back last year by unfavourable market conditions and is "not inevitable yet", according to the finance minister, would be one of Europe's largest bank listings since the 2008 financial crisis.

The bank, whose 21 billion euro taxpayer bailout that began almost a decade ago was the biggest for any Irish bank still trading, was valued at 11.3 billion euros at the end of last year, meaning a share sale may yield around 3 billion euros.

One of the country's two dominant banks, AIB executives have said they have encountered "huge interest in the Irish story" from investors.

Reporting by Padraic Halpin; editing by Jason Neely

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