AIB 2009 Interim Results – another ghost to haunt the ‘Hall of Shame’

It never ceases to amaze me how these devious hypocrites that run banks present results against a context of factors that are inflicted on them and the existence of which have nothing to do with their own delinquency.  It is as though they are the hapless victims of injured innocence.

The 2009 Interim Results at AIB are the latest case in point.  They report an operating loss of €872 million compared to a profit of €1.27 billion in June 2008. Deposits are down to €83 billion from a high of €93 billion in December 2008, having been €81 billion in December 2007.  No less than 37% of the AIB loan portfolio is in construction and property; a further 24% in residential mortgages – amounting to €31 billion in Ireland. Of this €31 billion, only €14.6 billion is declared ‘satisfactory’; the remainder is either impaired, vulnerable, or ‘on watch’. 

The Ireland impaired element relates to 13 contractors while the vulnerable and ‘on watch’ element relates to 74 contractors.  The small number of individuals involved there must have meant fabulous savings on the annual AIB Christmas card circulation.  The property and construction loans criticised are 67% of all Irish loans, while the land and development loans criticised are 74% of all Irish loans in this category.

The amount of impaired residential mortgages in Ireland has more than doubled from €148 million last December to €322 million.  AIB has a home mortgage book in Ireland of €26.5 billion and the outstanding value of all home mortgages at the end of June 2009 was €148.1 billion including securitized mortgages, according to Central Bank data.

A mere 5% in manufacturing and 11% in services.  The AIB search for authentic value-added opportunities knew no bounds.

The diabolical outcome is attributable to a Pandora’s Box of explanations -  “recessionary conditions continuing”, “weak customer loan demand”, “assets quality weakens” etc etc as if the management of this wretched bank was not the central architect of much of this mess along with Bowler’s Irish Life & Permanent and Boucher’s Bank of Ireland, the yahoos at ACC, Fingleton’s Irish Nationwide Building Society and EBS.  At least the chairman of EBS, Mark Moran and the finance director, Alan Merriman promptly resigned in March after their genius resulted in a loss of €32.8 million at EBS in 2008.

Sheehy advises that “overdependence on the construction industry is rapidly diminishing”.  Oh dear, how come?  This junkie must be on a 12-steps recovery programme because the construction industry was bloated to death by all the Irish banks and their hero, Sean Fitzpatrick.   Boucher almost climbed a tower crane to advocate on behalf of Sean Dunne’s planning application for Ballsbridge and Bowler’s so sad outfit provides a subversive deposit in Anglo Irish Bank so that the mascara in its 2008 annual report did not run.  The moral I guess is that you cannot make money from a corporate corpse, unless you’re an undertaker. 

Sheehy, in a display of low peasant-cunning,  remarks about the ‘solid operating performance’, even though operating profit in Ireland is down 33% to €394 million and bad debts amount to over €1.9 billion!  Yikes!!  He reports impaired loans in Ireland of €8.51 billion – 10.9% of advances and a provision against profit of €1.79 billion in respect of these. There is a provision of €17.1 billion in respect of development and land in Ireland.  He concludes by telling his shareholders and the Irish taxpayers who were obliged to provide €3.5 billion that future prospects are enhanced by “a firm resolve to manage our business efficiently”.  What bishops gave him that line – because he and his blundering band of incompetents have certainly sodomised the Irish economy - one more medallion in the AIB Hall of Shame:

March 1985: Insurance Corporation of Ireland €357 million bailout
(CEO: Gerry Scanlan)

May 1988: 2.2 million Dana Petroleum shares, failed share issue; underwriting loss – shares put into staff pension account (CEO Gerry Scanlan)

October 1990: Internal Auditor of AIB reassigned and to report to Brian Wilson, General Manager for Ireland (CEO Gerry Scanlan)

February 1991: DIRT evasion exposed and denied. £90 million settlement in 2000 (CEO Gerry Scanlan)

1989 – 1996 Faldor Investment scam - £48,000 in artificial deals connected to AIB Investment Managers’ own funds

April 1998: media report that AIB had 53,000 bogus non-resident accounts (CEO Tom Mulcahy)

June 2002: $691 million foreign exchange fraud perpetrated at Allfirst, an AIB subsidiary in Baltimore, Maryland (CEO Michael Buckley)

2004: Overcharged on the purchase of 3 million foreign drafts; cost of refunds €50 million Other overcharging episodes related to variable rate mortgages (Surplus Builder), 34,000 student and graduate loans, overdraft limit amendment fess affecting 24,000 customers, charges connected to the early termination of finance and leasing transactions affecting over 900 customers, to mentioned just some.  (CEO Michael Buckley)

March 2006: Scanlan and three other senior AIB executives cited by the Revenue Commissioners for income tax evasion.

Of course, the hinges on the Hall of Shame were crafted from the ‘special relationship’ between AIB, Charles Haughey and Des Traynor.

Overcharging at AIB - 'my personal experience'

Mr Eugene McErlean, former Group Internal Auditor of AIB Plc, from 1997 to 2002 presented to the Oireachtas Joint Committee on Economic Regulatory Affairs yesterday, March 24th. He told the Committee that the Financial Regulator knew about the overcharging of customers in AIB in 2001 and conducted an investigation in this in 2002 but failed to protect customers. He described how €65 million was liable to be paid as restitution to AIB customers who had been overcharged. He also related how a branch manager charged a customer for playing golf for 3 hours’ management time and how the overcharging regime never involved large individual sums so customers were never really in a position to argue. That is until they overcharged me!

When it comes to bank overcharging my antennae is particularly sharp when the subject is AIB Bank. My own experience predates the inauguration of the Irish Financial Regulator. I started a £14,000 20-year mortgage with AIB in 1978 that was fully discharged on schedule and with no missed payments. I recall one February day in 1999 looking at my AIB current account bank statement on the internet and being horrified to discover a debit for a £50 ‘Mortgage Closure Fee’. I instantly called the account officer at the Bankcentre branch in Ballsbridge where my account was maintained. I told this person outright that I was not paying this charge. She advised me that “everybody pays this charge” to which I again responded that “I am not”.

The branch manager then came on the line. I had never met him and I had the impression that he was busily scanning my account history on a computer before he began to converse with me. When he did so I said “you know why I’m on the line. I am not paying this charge”. He responded that I had “operated a very disciplined account” which was the case and still is, to which I replied “yes, so disciplined that the bank never has to spend as much as 32 pence on a stamp to recover a mortgage instalment over the previous 20 years, a period when interest rates were so high that the Government had to subsidise them. You have had this account for 25 years and you can have it for a further 25 seconds while you’re making up your mind about this charge”. He immediately took the only course open to him and dropped the charge.

This incident coincided with the attendance of former Taoiseach, Charles Haughey, at The Moriarty Tribunal and an examination of his relationship with AIB. He owed AIB over £1 million in 1979 when he was elected to the office of Taoiseach.. Haughey had received £750,000 from an unidentified source to help defray this debt and he apparently offered to arrange a £10 million deposit from a source in the Middle East in exchange for offsetting the balance of the debt. But Haughey never repaid a sum of £110,000, on which there was to have been no interest charged, as an element of an overall settlement. Mr Justice Moriarty found that AIB had settled a £500,000 overdraft owing by Haughey shortly after he became Taoiseach on favourable terms and that AIB had shown extraordinary deference to Charles Haughey in their dealings with him. Haughey, it appeared warranted special treatment because he was, as AIB would see it, a KBI (key business influencer). It also coincided with the announcement by AIB of record profits of £800 million+ for 1998.

My fingers were dancing with rage and I decided to write to the Chief Executive of AIB, Tom Mulcahy. The gist of what I said to him was that I was not a KBI but I would consider myself an LLP (loyal little peasant). I stated that this charge was immoral and that I would welcome a debate with him on one of the talk shows on RTE Radio 1; that if he had any balls he would have sent me a case of wine to thank me for my trouble-free business over 25 years rather than imposing this awful immoral charge. Three days later a 6-bottle case of wine arrived at my home from Mitchells Wine Shop, then located under the old railway arches in Harcourt Street!

The upshot is that:

• The charge was instantly removed from my account
  
• The charge, as then defined, was eliminated from AIB’s charge tariff
  
• The charge was one of those rogue charges similar to those described by Mr McErlean in his evidence on 24 March 2009, ten years later.