FITCH Ratings cut its outlook for Allied Irish Banks’ credit rating to ‘negative’ from ‘stable’ yesterday over increasing fears the bank’s bad loan losses will rise as the economy deteriorates.
The credit agency has a long-term debt rating on AIB of ‘AA-’, which is three levels below its highest ‘AAA’ stance.
The ratings agency said it would review the ratings of other large Irish banks in the coming days.
“At end 2007, loans to the higher-risk construction and property sectors composed 36pc of [AIB’s] loan portfolio,” Fitch said. “A further 23pc of the portfolio was composed of residential mortgages, a traditionally stable form of lending.”
At the end of last year, overall impaired loans accounted for just 0.8pc of the total loan book. And while Fitch said this figure should rise as the economy worsens, AIB’s robust earnings should help it to manage higher loan loss charges.
AIB’s bad debt charge equated to only 0.09pc of the group’s €137bn loan book last year, but the banking group expects that the hit will more than double this year to 0.2pc.
**Outlook for AIB is hit by fear of loan losses **
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