July 27, 2018 / 7:44 AM / 2 months ago

UPDATE 1-Allied Irish profits steady as big dent made in bad loans

* H1 pretax profit 762 mln eur vs 761 mln year ago

* Non-performing exposures fall to 12 pct of total book (Adds details, CFO quotes, share price)

By Padraic Halpin

DUBLIN, July 27 (Reuters) - Allied Irish Banks (AIB) reported steady first-half profits, lower bad loans and higher lending and capital on Friday as it continues to recover a decade after the country’s banking crash.

The Irish government sold a 29 percent stake in AIB last year in Europe’s largest initial public offering (IPO) and the bank said it was firmly on track 12 months on to hit all the targets promised to investors.

“I think what you can clearly see is the continued emergence of the underlying bank and looking at that underlying business, it’s very healthy,” AIB Chief Financial Officer Mark Bourke told Reuters in a telephone interview.

AIB reported a pretax profit of 762 million euros versus 761 million a year earlier. Shares in the bank, which were refloated on the stock exchange at 4.40 euros, were 1.1 percent higher at 4.95 euros by 0720 GMT.

Non-performing exposures (NPEs) fell to 7.5 billion euros from 9.2 billion euros three months earlier, boosted by the sale of a 1.1 billion euro portfolio of bad loans in May. In 2013 its stock of NPEs stood at 31 billion euros.

Irish banks are under pressure from the European Central Bank to reduce bad loans which ballooned after Ireland’s property crash. AIB’s bad loans accounted for 12 percent of its loan book at the end of June.

Helped by the euro zone’s fastest growing economy, new term lending rose by 15 percent to 5 billion euros while its share of the fast recovering and more competitive Irish mortgage market slipped a touch to 32 percent from 33 percent last year.

Tier one capital ratio rose to 17.6 percent from 17.1 percent at the end of March, well above its medium term target of 13 percent.

Bourke said plans to eventually return excess capital to shareholders were still on track after regulators forced lenders to set aside an extra buffer for the first time but warned any increase in those demands would force a review.

Another challenge is retaining staff while the government maintains a cap on pay and a ban on variable pay and share-based remuneration. [nL8N1RW5TK[

AIB Chief Executive Bernard Byrne told the Financial Times on Friday that a “mid-teens” percentage of its 200 most senior managers had left in the last year, many hired by companies bulking up in Ireland ahead of Brexit.

“If you do have to pay up to retain someone, and that happens all the time, the only way you can is permanently, giving yourself a structural disadvantage,” Bourke said. (Editing by Jason Neely and Adrian Croft)

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