AIB Where is AIB getting the prevailing rates from?

Redman

Registered User
Messages
19
Hi,we are also part of the 4000,got our data request a while back and it was a pile of nonsense ,large sections of our phone conversations were blacked out,anyone else have this issue ?what is it they don’t want us to see ? Have requested an explanation but have heard nothing

Redman
 

Milkof

Registered User
Messages
33
They sent us all our paperwork but conveniently omitted the page with the 3.2 Clause and made it very difficult for us to collect our paperwork. I lodged a complaint in December and have had two letters since telling me they were still 'looking into it'.
 

Andy836

Frequent Poster
Messages
372
Andy836
Can I ask where are you getting AIB COF from please? I would like to check it for Nov 11 when my fixed rate expired - could be useful in my appeal. Thanks
It's in their year end accounts under heading "Average Balance Sheets and Interest Rates". You look for the average rate for total average liabilities.

For 2011 it was 2.3% (page 401 of their 2011 accounts)
For 2012 it was 2.2%
For 2013 it was 1.7%
For 2014 it was 1.3%
For 2015 it was 0.9%
For 2016 it was 0.7%
For 2017 it was 0.4%

There are a couple of arguments they might make against using these figures but none of them really hold any water:
- The more relevant COF rate is the "average rate for interest earning liabilities". Well, that's horse crap, as (i) there's little difference between the two, and (ii) non-interest paying customer accounts are a core part of retail banking & retail funding and profits.
- There needs to be a return on equity/capital and AIB was carrying excess capital at the time. Well, (i) the reason it was carrying excess capital was to cover losses so the capital should've been reduced to a pro forma going concern level, (ii) their argument here is further hampered by the fact that part of their IPO price included an adjustment for excess capital which they intended to return to shareholders (so the excess capital was only temporary).
- A tracker opens them up to interest rate risk which they need to price against. (i) then they shouldn't have offered trackers in the first place. And, (ii) if they want to make that argument they need to provide estimates of the cost of an associated basis swap. I think they would also need to show that they sought to hedge the remainder of their "regular" tracker books or it wasn't a genuine risk they didn't expect to just trade through.

Overall, the most important counter to their argument is the fact that
- They had/have complete pricing power over their SVR mortgage rate,
- Since 2008, AIB's SVR mortgage rate never increased beyond 4.4% (in 2011 it was 3%) (per last post in this thread - https://www.askaboutmoney.com/threads/history-of-aib-standard-variable-mortgage-rate.202173/)
 

Gigi07

Registered User
Messages
13
Thanks Andy 836. That's really useful. I will use this information in my appeal if that's ok. I don't hold out much hope. I think a better route is to start banging on the doors of the politicians.

Milkof,
That's ridiculous that your complaint still hasn't been resolved. However, once they continue to issue holding letters to say they are investigating they are complying with the Consumer Protection Code. I would advise that you gather all the corespondence and log a complaint with the Financial Services Ombudsman. That will get their attention.
 

jpbyrne

Registered User
Messages
31
Milkof - I advise you to lodge a complaint with the Data Protection Commissioner. It can be done very easily on the DPC website. Be sure to say that the documents you received from the Bank in response to your Data Request did not include Part 4 which contains the Tracker wording.
 

Markls15

Registered User
Messages
2
Dear all,

I am also in the same 4000 cohort, but have done a lot of research and gone through items and would like a small bit of help with terms of reference in the AIB accounts:

what does the term "Interest rate spread" mean?
What does the term "Net interest margin" mean?
What does "total average liabilities" mean?
what does "average prime lending rates" mean?

I have every SVR, ECB rate, all the above rates from 2006 to 2016, including every AIB set of financial accounts for the same period, with also the page numbers with all the various rates on same.

thanks.
 

Andy836

Frequent Poster
Messages
372
Dear all,

I am also in the same 4000 cohort, but have done a lot of research and gone through items and would like a small bit of help with terms of reference in the AIB accounts:

what does the term "Interest rate spread" mean?
What does the term "Net interest margin" mean?
What does "total average liabilities" mean?
what does "average prime lending rates" mean?

I have every SVR, ECB rate, all the above rates from 2006 to 2016, including every AIB set of financial accounts for the same period, with also the page numbers with all the various rates on same.

thanks.
Interest rate spread = the credit risk margin above the base rate/cost of funds e.g. for a rate of ECB + 1% the spread is 1%, for Euribor + 2% the spread is 2%, prime + 2% the spread is 2%
Net Interest Margin = Think of it as a Bank's core gross profit - all the interest they make less all the interest the give to depositors and bondholders divided by their average loans for a set period. The formula is [(i) Total Interest Income, minus (ii) Total Interest Expense] / [Average Interest Earning Assets]. For AIB it was 2.58% in 2017 & 2.23% in 2016 (page 37 of their FY 2017 accounts).
Total average liabilities = the average amount of balance sheet liabilities for a set period. AIB gives you these figures in their annual accounts (Note 57, page 369 of FY 2017 accounts). For 2017 it was €78,279mm and 2016 was €85,781mm. If they didn't give the numbers you could estimate it by taking the balance at the end of the previous year with the balance at the end of the current year and divide by 2. For FY 2017 that would be ~€79,462mm = [(€76,450mm at Y/E 2017 plus €82,474mm at Y/E 2016)/2]
Average prime lending rates = AIB doesn't use this anymore. They were historically the base rate for personal lending so your overdraft or car loan would be priced at "Prime + 5%" where prime is the base rate and 5% is the spread. AIB's current "prime rate" is 0.125% [ https://aib.ie/our-products/loans/Personal-Lending-Interest-Rates ] It's also listed in their annual accounts - 0.13% for 2016 & 2017 (Note 57, page 368 of their 2017 Accounts).
 

Markls15

Registered User
Messages
2
thanks for that, still a tad confused, so which one is applicable for the margin that the banks use?
 
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