AIB AIB warns of further tracker scandal costs

Brendan Burgess

Founder
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38,102
This is what they say in their results announcement this morning

We expect to incur exceptional costs in 2019 including costs relating to business restructuring projects and the tracker mortgage examination programme as it reaches its final stages.
 

Brendan Burgess

Founder
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38,102
Interesting.

They have not made any provision for the 6,000 borrowers affected by the prevailing rate issue, other than paying them all €1,615 - so that is €10m.

If we are successful in our campaign, they will have a bill of about €25,000 each on average, so that will hit profits by €150m.

Brendan
 

tnegun

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They were adamant at the finance committee that they had already made provision for the tracker payouts in their accounts right? So this would indicate they're now thinking otherwise.
 

October2019

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Or it may indicate that this is the cost for people they agreed to pay out on and not the other 6,000- hope not though!!
 

tonymac

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Brendan calls it accurately regarding the prevailing rate issue and no provision for a proper resoulution to that issue. Obviously nothing on the EBS and provision for anything there either so according to them we are all dead in the water.
 

Brendan Burgess

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38,102
Obviously nothing on the EBS and provision for anything there either so according to them we are all dead in the water.
I don't think that this is obvious at all.

They might be preparing to concede on the EBS issue and not the AIB issue. Who knows?
 

tonymac

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As you say Brendan, maybe they are, hopefully both in due course but the amount of provision as you say wont go near covering the cost of the prevailing rate issue alone. We dont know how many are affected by the EBS issue unless anyone here does so impossible to work out how much that would cost them, a guess would be a lot less than the prevailing rate group.
 

B26354

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We dont know how many are affected by the EBS issue unless anyone here does so impossible to work out how much that would cost them, a guess would be a lot less than the prevailing rate group.
2500 approx. Kissane said it was 3000 in an Oireachtas meeting in March 2018 but 500 EBS customers have since been redressed (see attached statement).
 

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peemac

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Provision reported in July 2018 report was €262m, a €32m increase from end of 2017 figure, so this attention grabbing €265m headline is in reality a 1.1% provision increase on the June 2018 figure.

Or to put it another way - they gave tracker redress to another 50 or so customers.
 

tnegun

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Great work as always Brendan getting the mention in. The article seems to indicate that this is the money they had already provisioned for tracker redress and not additional funds though.
 

Brendan Burgess

Founder
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38,102
It's hard to work out what is going on.

They published the annual report on 1 March last. At that stage, they should have made full provisions for anything of which they were aware at that stage. Colin Hunt, in particular, should have made sure that costs were full provided for, so they won't come out of his period of stewardship.

But since the 1 March, something has happened which has changed their estimates of the total cost. And that figure must be material to be noted as an exceptional item.

There are a few possibilities:
1) They are going to concede on the prevailing rate issue - unlikely as they were rock solid at the AGM. But still possible.
2) The Central Bank has indicated what the fine will be. The max fine is €5m and they should have fully provided for this. I don't think it's a material figure either way.
3) The Appeals Panel has gone rogue and is awarding much higher compensation that AIB planned for. Doesn't seem likely, but again it's possible.
4) They are going to concede on the EBS variable rate issue.
5) They just made a mess of the estimation for last year's accounts.

All of these seem unlikely, but it must be something.

Brendan
 

Mehaul

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It's hard to work out what is going on.

...

There are a few possibilities:
1) They are going to concede on the prevailing rate issue - unlikely as they were rock solid at the AGM. But still possible.
2) The Central Bank has indicated what the fine will be. The max fine is €5m and they should have fully provided for this. I don't think it's a material figure either way.
3) The Appeals Panel has gone rogue and is awarding much higher compensation that AIB planned for. Doesn't seem likely, but again it's possible.
4) They are going to concede on the EBS variable rate issue.
5) They just made a mess of the estimation for last year's accounts.

...

Brendan
It's also quite possible there are other cases still under consideration that they believe will not open the floodgates on the full 6000 that they're now making provision for.

How is the figure of €25k (on average) per claim in the 6000 calculated?
 

Brendan Burgess

Founder
Messages
38,102
The results for the first 6 months were published today

As guided, the first half included exceptional items of €131m which predominantly relate to restitution costs and provisions associated with legacy issues. As we reach the conclusion of the tracker mortgage examination with payments issued to the vast majority of customers, we are now working with the Central Bank of Ireland through the enforcement process. We know that issues may continue to emerge and we are committed to dealing with them in an expedited, transparent and fair way for our customers.

I heard the Chief Executive on the radio and he said that they had provided €43m for regulatory fines, including €35m for the tracker fine, but that they had no idea how much it would be.
 
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Brendan Burgess

Founder
Messages
38,102
I have issued a press release on these accounts to the media. Feel free to forward it to any of your contacts.

AIB’s additional provision of €131m for tracker costs is very hard to understand.


This morning AIB published their accounts for the first six months of the year. These include an additional provision of €131m for tracker related issues.

As at the 31 December 2018, AIB had made total provisions of €263m for the costs of the tracker mortgage examination.

They published these results on 1 March 2019. Under accountancy rules, they should have made full provision for all expected costs at that stage even if they had not been paid out.

And now they provide a further €131m.

So what happened between 1 March 2019 and 26th July which gave rise to a further €131m?

For the first time, they have provided for the fine expected from the Central Bank – €43m in total - €35m of which relates to the tracker mortgage examination.

So where does the extra €90m provision come from?

No new cohorts have been identified - The numbers affected have risen only marginally - 246 more to 12,180

So they must be expecting to pay more to those already identified as impacted.

Could it be that they are providing for the Prevailing Rate tracker mortgage customers?

These 6,000 customers were paid €1,650 each for what AIB classified as a service failure. But AIB refused to give these customers trackers arguing that although they should have been offered a tracker, the prevailing rate would have been so high that they did not lose out by AIB’s failure.

Many of these are now appealing this assessment through the Appeals Panel and the Ombudsman.

If these customers win their case, then AIB would have to pay redress and compensation to these customers. With an average redress and compensation of €20,000 each, this would amount to €120m or thereabouts.

AIB must be asked what event occurred since 1 March 2019 when they published their accounts to give rise to this additional provision.
 
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