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Pressure on Irish SMEs as They Restructure

Pressure on Irish SMEs as They RestructurePressure on Irish SMEs as They Restructure

Some SMEs in Ireland are struggling and lending volumes to exposed firms haven’t picked up as quickly as anticipated, according to Bernard Byrne, the chief executive of Allied Irish Banks. AIB is one of the so-called Big Four commercial banks in Ireland.

Byrne said the overall picture is of some pressure bearing down on SMEs as they continue to restructure, particularly in parts of fast-changing retail, while other firms are “doing quite well”, RTTNews reported.

He was talking to reporters after AIB posted pre-tax profits for the first six months to the end of June of €762 million ($889 million), little changed from a year earlier. The earnings were dominated by a writeback of €130 million in provisions and a net gain of €140 million from the sale of troubled loans. The shares, which fell 1% to €4.85, have risen only slightly from a year ago.

Analysts said AIB is making progress towards its goal of returning a significant chunk of its underlying earnings to shareholders. The process could, however, be drawn out, and depends on the approval of regulators who are monitoring the levels of crisis-era soured loans on the books of banks.

Helped by a healthier-than-anticipated economy, AIB said it is on course to meeting the targets for costs and building capital it set ahead of the sale of the initial sale of shares last summer. The government still owns about 71% in the bank.

SME lending has become a matter of concern this year. Industry group ISME last month said its regular survey on lending showed a “significant” increase in refusal rates by banks for loans to small firms, even as demand for credit was unchanged.

Byrne said while some SME sectors are “doing quite well”, others, including the retail sector outside the “prime retail” business, was facing longer-term structural issues. “None of which suggests there is any change in terms of economic activity, but certainly some of the sectors” are experiencing some difficulty.

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