AIB has raised its full-year net interest income forecast and now expects it to exceed €3.7 billion, driven by deposit growth continuing to outstrip the bank’s expectations.
The net interest income upgrade amounts to about €100 million. Customer deposits rose by €4.4 billion – or 4 per cent – between December and September, AIB said in a trading update on Tuesday.
The bank now sees full-year deposit growth amounting to 4 per cent – double the rate executives had expected at the start of the year, and up from the 3 per cent forecast in August.
Tens of billions of euros of excess deposits are stored with the Central Bank of Ireland, earning the European Central Bank’s (ECB) official 2 per cent rate.
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While AIB’s gross loans rose by only €900 million – or 1.2 per cent – to €72.2 billion in the first nine months of the year, chief executive Colin Hunt told analysts on a call that he remains “very comfortable” it will see 3 per cent growth for the year as a whole amid a “strong” loans pipeline for the last few months of the year.
Still, the bank has ceded market share in new mortgages in the first nine months of the year, coming in at 31 per cent – down from 36 per cent a year earlier.
Bank of Ireland has maintained its share at 41 per cent, while PTSB saw its slice of activity rise to about 20 per cent from 16.3 per cent, according to figures reported by both lenders last week.
AIB’s net interest income for the first nine months fell by 10 per cent to €2.8 billion, in line with expectations, as the effect of lower ECB interest rates was partially offset by higher average loan and customer account volumes.
“Net interest income has remained resilient throughout the interest rate cycle due to the growth in our loan book and deposit base,” said Mr Hunt.
Shares in the bank were up 1.7 per cent at €8.15 at 9.35am in Dublin.
AIB said on Friday it had spent €390 million buying back stock warrants that the State continued to hold in the bank after selling its remaining shares in the lender during the summer. The deal brings the total that the State has recovered from the bank’s €20.8 billion crisis-era bailout to almost €20.2 billion – leaving a shortfall of a little over €600 million.
Mr Hunt insisted AIB will bring costs back below €2 billion next year – despite its commitment to increase salaries and ongoing inflation – as it continues a policy of not replacing most of the staff that are retiring or quitting naturally. Total headcount fell by 3 per cent in the 12 months to September, he said.
“We see that continuing [through 2026],” he said, adding that the bank is not planning any special redundancy programmes. AIB’s last reported staff count was 10,375 at the end of June.
Running costs are forecast to rise 3 per cent this year to €2.03 billion.
AIB expects to post €150 million of once-off gains this year, up €50 million from its previous forecast, driven by the sale of its 49.9 per cent stake in AIB Merchant Services, which helps businesses accept card payments, to its joint venture partner, the US financial technology group Fiserv.
The bank also now sees net loan loss provisions coming in at the lower end of its previous forecast of a charge of 0.2-0.3 percentage points of total loans.
AIB highlighted that it has capacity for further distributions above its ordinary dividend policy of paying out 40-60 per cent of net profits.
It is currently on track to have a common equity Tier 1 capital ratio – a measure of a bank’s ability to withstand shock losses – of 18.7 per cent at the end of the year, chief financial officer Donal Galvin indicated on the call. That’s well above its target of maintaining a ratio of above 14 per cent.
Some 0.2 of a point of the total is expected to come from a planned deal in early December to essentially shift bad-loan risks relating to about €2 billion of mortgages off its balance sheet. This will be done through a so-called significant risk transfer agreement (SRT) with a group of international institutional investors. AIB carried out its first such deal a year ago on first such deal a year ago on €1 billion of corporate loans.
