AIB’s first quarter income up by 18% due to higher interest rates

May 3, 2024

AIB said its total income increased by 18% in the first quarter of the year on the back of the higher interest rate environment and after what it called “a very strong first quarter performance”.

In an interim management statement ahead of its AGM today, AIB said its Net Interest Income was 27% higher in the first quarter of 2024 compared to the same time last year.

This was mainly due to higher interest rates, an increase in average loan volumes and the slower than anticipated pace of deposit migration, it added.

AIB said its full year 2024 NII guidance of over €3.65 billion assumes an ECB deposit rate of 2.75% by the end of the year.

The bank’s other income decreased 14%, which it said reflected lower income from forward contracts as the majority of Ulster Bank loans have been onboarded. There were strong performances across fee-based lines.

It also said its operating costs were up 7%, on the back of higher wages and general inflation, the introduction of variable pay and health insurance and higher staff numbers given the enlarged group.

It added that it expects costs for full year 2024 to increase by 6-7%.

AIB said that total new lending of €2.8 billion in the first three month of the year was broadly in line with the same time last year.

The bank noted that the Irish mortgage market performed well and its new mortgage lending in Ireland was €0.8 billion, which resulted in a market share of 35.4%.

Meanwhile, green lending in the first quarter accounted for 34% of new lending with €12.5 billion of new green lending since 2019.

The lender also said its asset quality remains “resilient”.

“However we are ever vigilant with careful management of the loan book as we monitor the impact of inflation and higher interest rates,” it said, adding that non-performing loans came to €2.1 billion or 3% of gross loans, up slightly from €2 billion at the end of December.

AIB chief executive Colin Hunt said that with continued momentum across the business and the embedding of its strategic priorities, it is confident in the outlook for 2024.

“AIB continues to be in a position of strength with a robust balance sheet, stable deposit base and growing loan book enabling us to support our customers and the wider economy,” the CEO said.

“We are well on track to deliver sustainable returns for our shareholders guided by our medium-term target of a RoTE of 15%,” he added.

The bank said asset quality remains resilient but it recorded a small net credit impairment charge in the first three months of the year.

It also put aside around €100m during the period as an early recognition of the revised bank levy.

“We expect bank levies and regulatory fees for full year 2024 to be c. €145m,” it said.

Shareholders in the bank today will vote on a €1 billion share buyback plan to lower the State’s shareholding in AIB.

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