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Allied Irish Banks said in its interim update Wednesday that it now anticipates full-year loan-loss provisions will be about EUR 5.3 billion, up from the EUR 4.3 billion it had forecast in May, because the quality of its loan book has continued to deteriorate. It said, however, that the majority of the loans responsible for the increase were loans that are likely to be transferred to the National Asset Management Agency. AIB also recanted its earlier guidance that the loans it plans to transfer to NAMA are likely to require less than the 30% systemwide average discount. AIB's core Tier 1 ratio was stable at 8.5% at the end of September, and we think the bank is almost certain to need more capital to make it through the downturn. We continue to see AIB's outlook as highly uncertain, and we're leaving the bank unrated for the time being.

AIB also announced management changes. Dan O'Connor, who became nonexecutive chairman in July, will become executive chairman as he takes on the roles of both chairman and CEO. Current CEO Eugene Sheehy will retire at the end of the month. The day-to-day task of running the bank will be taken on by Colm Doherty in the role of group managing director. AIB said that the appointments were part of its plan to attract new external talent, which leaves us scratching our heads. O'Connor has been a board member since 2007 and Doherty has worked for AIB since 1988. AIB has several key positions yet to be filled, and we'd strongly prefer that its next external candidates actually come from outside the troubled bank.

Erin Davis is a Morningstar stock analyst.

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Financial Information for Allied Irish Banks PLC