AIB raises interest guidance and launches share buyback

AIB raised its full-year interest income forecast on Thursday in expectation of central bank rate rises, and the bank pressed the start button on a €91 million share buyback, including a directed repurchase of stock from the State.

Irish taxpayers continue to own almost 70 per cent stake in the lender as a result of the financial crisis.

The bank said it now expects its net interest income to "increase by a high single-digit percentage in 2022", when factoring in expected interest rate increases from the European Central Bank (ECB) and Bank of England this year to combat soaring inflation, as well as the purchase of Ulster Bank corporate and commercial loans. It sees the ECB increasing its deposit rate from minus 0.5 per cent to zero by the end of the year.

Goodbody Stockbrokers analyst John Cronin said that market consensus estimates for AIB’s full-year underlying pretax profit should move up about 10 per cent from €490 million, currently, as a result of the new guidance.

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Shares in AIB rose more than 4 per cent in early trading in Dublin, but subsequently fell into negative territory as European equity markets fell into negative territory as concerns over persistently high inflation and an economic recession resurfaced. AIB shares closed 0.3 per cent lower.

AIB also reported, on the day of its annual general meeting, that its total income rose 4 per cent during the first three months of the year and that it had released a further €50 million of bad loan provisions. Last year it freed up €238 million of the €1.46 billion of loan provisions taken during the worst of the Covid-19 crisis.

"Today I am pleased to announce both a strong first-quarter performance and the commencement of our share buyback programme," said chief executive Colin Hunt. "Notwithstanding heightened geopolitical risk and uncertainty internationally, the Irish economy remains strong."

Last week saw AIB receive competition approval to proceed with its planned acquisition of €3.7 billion of Ulster Bank corporate and commercial loans. The bank also disclosed that it had entered exclusive talks to buy Ulster Bank’s €6 billion of tracker mortgages, as the UK-owned lender continues its retreat from the Irish market.

Green lending

New lending grew by 18 per cent at AIB during the first quarter, to €2.8 billion, with green lending accounting for more than a fifth of the new business. The bank’s overall book of performing loans rose by €400 million to €55.7 billion from the end of December.

“We are conscious that higher prices are affecting our customers and we will continue to support them and the wider economy through the challenges ahead, just as we did during the pandemic,” Mr Hunt said. “We remain confident in our outlook and with each passing quarter, we are delivering on our strategic priorities as we build an ever more resilient and sustainable business in the interests of all our stakeholders.”

The bank’s purchase of Goodbody stockbrokers in late 2021 for €138 million helped to drive a 14 per cent increase in its non-interest income during the reporting quarter, while net interest income remained stable.