Allied Irish Banks expects to bounce back from loss with new lending

DUBLIN (Reuters) - Allied Irish Banks (AIB) expects to return to profit and resume normal dividends this year, it said on Friday, predicting a recovery in lending after reporting that pandemic-related bad loan provisions drove it to a 931 million euro ($1.11 billion) loss in 2020.

The Irish lender, which posted a 909 million euro first-half loss after front-loading most of the provisions, set aside 1.46 billion euros in total to cover potential loan defaults arising from the COVID-19 pandemic, in line with its guidance.

AIB's new lending fell 25% year on year to 9.2 billion euros, against a forecast drop of 30%. Chief Financial Officer Donal Galvin told Reuters the bank expected to regain some of that in 2021 with more than 10 billion euros of new lending.

The company is in expansion mode after it struck a non-binding deal to buy 4 billion euros of Irish corporate and commercial loans from NatWest and acquired leading Irish financial services firm Goodbody Stockbrokers this week.

It said on Friday that it was in advanced discussions with Irish Life owner Great-West Lifeco to establish an AIB-branded life and pensions joint venture, which Galvin said it hopes to launch in the first half of next year.

He added that the deal with NatWest, which is winding down its Irish operations, would be accretive towards 2023 targets but AIB's driving focus is increasing its corporate customer base.

"It's one third of a normal year's new lending, so it's not transformative from a balance sheet (perspective), but in terms of a customer acquisition strategy, we do feel that it is very, very significant to acquire 5,000 customers in one go," he said.

AIB announced plans in December to cut staff numbers by 15% and withdraw from the British market for small and medium-sized business lending as it seeks to meet capital and profitability targets.

($1 = 0.8365 euros)

(Reporting by Padraic Halpin; Editing by David Goodman)