AIB raises interest forecast and launches share buyback

AIB raised its full-year interest income forecast on Thursday in expectation of central bank rate increases, 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 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 expects the ECB to increase its deposit rate from minus-0.5 per cent to zero by the end of the year. The Bank of England’s base rate, the subject of a 0.25 percentage point increase on Thursday to 1 per cent, is expected to be at 2 per cent by close of 2022.

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Goodbody Stockbrokers analyst John Cronin said 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.

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."

Temporary staff

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.

Mr Hunt told reporters after the agm that AIB was planning to hire as many as 700 temporary staff to help manage an expected surge in Ulster Bank and KBC Bank Ireland customers seeking to open current and deposit accounts elsewhere in the coming months as the foreign-owned lenders retreat from the Republic.

The bank estimates it will have to deploy 500-1,000 staff to help with the transition, according to Mr Hunt. About 300 of these will be from existing staff, with the remainder to be hired on a temporary basis.

It is understood that as many of 100 temporary workers have already been engaged.

The remaining banks in the market say the vast majority of new customers who are signing on are doing so directly, using digital apps. However, some banks – such as AIB and PTSB – require people setting up joint accounts do so in person in physical branches.

Central Bank officials warned last month that exiting and remaining banks were not up to speed with managing the process as more than one million Ulster Bank and KBC Ireland current and deposit accounts are forced to find new homes for their money over the next year or so.