Bank of Ireland said it will advance emergency business loans for companies hit by the coronavirus fallout, while rival AIB said there was an increased risk of the outbreak damaging the Irish economy.
The focus of the two main banks comes as the threat of economic disruption has piled on the pressure for the shares prices of Ireland’’s two main banks -- with the shares underperforming a 25-member group of their peers in the eurozone since the start of the year.
Bank of Ireland said its initiative would provide emergency working capital for vulnerable firms, as the effect on its Irish business customers looms larger, including "weaker trading as a result of a reduction in business and tourist travel, supply chain interruption due to the knock-on impacts of a slowdown of production in China, and reduced orders from international customers as the global economy starts to deal with the impact of the virus".
And speaking to reporters after the bank reported its 2019 earnings, AIB chief executive Colin Hunt said it was "increasingly possible" that the fallout from the virus will hit the Irish economy dependent on international trade flows, and hit a number of business areas, "most markedly in the hospitality space". "As of yet, it is unclear how significant the impact from the coronavirus is going to be," Mr Hunt added.
The shares of AIB and Bank of Ireland fell again sharply in the latest session and have now slid 41% and 38%, respectively, since the start of the year.
That performance compares with the 21% drop for the 25-constituent members of their peers in the Eurostoxx banking index over the same period. Mr Hunt said the longer-for-lower interest-rate outlook amid the international coronavirus crisis was dampening the prospects for banking shares.
Meanwhile, Dermot O’Leary said the latest CSO figures showing the economy surged again last year, by 5.5%, could be considered "rear-view mirror material given the ongoing economic effects of the coronavirus on global and domestic activity".
The momentum behind the underlying domestic economy, which grew 3.2% in 2019 when the accounting distortions of the multinationals are stripped out, "may be stalled by virus fears", Mr O’Leary said.
Austin Hughes, chief economist at KBC Bank Ireland, said that growth "will be materially slower this year than last", although "a marked expansion" in Irish-based multinationals producing pharmaceuticals, IT and medical devices could act as a cushion.
At AIB, Mr Hunt said that the bank will be looking to make savings by reducing its headcount from the current number of 9,500 employees in the next three years. The reductions will include staff who have been involved with the bank’s so-called legacy issues -- such as loan arrears and its tracker mortgage investigation.
AIB doubled a provision to €70m to cover the looming fine from the Central Bank for the bank’s part in the industry-wide mortgage scandal. That means its total tracker costs have risen so far to €600m, including the additional €300m cost announced last month to cover 5,900 more wronged customers.
It posted a 2019 profit before exceptionals and tax of almost €1.1bn and recommitted to reducing its share of non-performing loans to below 3% in the coming years from around 5% at present.
