By Padraic Halpin
DUBLIN (Reuters) - Allied Irish Banks (I:AIBG) (AIB) set aside 210 million euros ($227 million) in the first quarter to cover expected loan losses, as the number of repayment breaks for coronavirus-hit customers rose to almost 55,000 last week, the lender said on Tuesday.
Ireland plans to gradually ease weeks of stay-home measures to slow the spread of the virus from next week, but the shutting down of all but essential services has forced the country's two largest banks, AIB and Bank of Ireland (I:BIRG), to grant around 140,000 loan breaks in Ireland and neighbouring Britain.
Initial three-month breaks agreed by AIB in Ireland include 19,972 mortgages, 13,831 for businesses and 18,696 personal loans, with a further 5,000 modifications put in place for UK customers. It said it expected to see a larger expected credit loss charge in the second quarter.
AIB's shares, which have more than halved in value since Ireland reported its first coronavirus case at the end of February, fell by almost 15% on Monday after Bank of Ireland reported a 241 million euro first quarter loss driven by a similar impairment charge.
AIB said 106 million euros of its impairment charge related to changes in its macroeconomic assumptions, with 50 million due to a recategorisation of some 500 million euros of loans in a riskier category.
Its non-performing loan exposures rose to 3.6 billion euros from 3.3 billion at the end of 2019, with the main component a change to its default definition.
AIB, 71% owned by the state following the global financial crash a decade ago which hammered Irish banks, said its fully loaded core Tier 1 capital ratio fell slightly to 16.2% from 16.4% at the end of last year, the highest of any Irish lender.
Unlike Bank of Ireland, which reduced costs by 3% year-on-year in the first quarter, AIB said it saw modest cost growth in the three months to the end of March and expected to incur exceptional costs in 2020 of 150 to 175 million euros related to a probe into an overcharging of customers a number of years ago.
However, it said medium-term targets announced on March 6, a week before Ireland began to gradually shut the economy, remained appropriate. That included returning costs to 2019 levels by cutting staff by at least 15%.
Ireland's largest mortgage provider said new lending fell 12% year-on-year in the first quarter, mainly due to lower international lending and that its net interest margin, a metric showing the profitability of that lending, fell to 2.19% from 2.25% at the end of December.