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EMBARGO 07:00
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02 May
2024
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AIB Group pLC - Q1 2024
Trading update (UNAUDITED)
Very strong Q1 performance
driven by growth in revenue
"I am pleased
to announce that the Group had a very strong first quarter
performance and, with continued momentum across our business and
the embedding of our strategic priorities, we are confident in our
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. We
are well on track to deliver sustainable returns for our
shareholders guided by our medium-term target of a RoTE of
15%."
- Colin Hunt, Chief Executive
Officer
Key
highlights: (all comparisons Q1 2024
versus Q1 2023 unless otherwise stated)
·
Total income increased 18% supported by the higher
interest rate environment
o NII
up 27%; Q1 NIM 3.25%
o Other income down 14% given non-recurrence of forward contract
income; increase of 8% in fee and
commission income
·
Costs(1) up 7% in line with guidance;
Cost income ratio of 38%
·
Small net credit impairment charge in
Q1
·
Gross loans increased to €68.0bn, up €1bn since
Dec 2023; new lending of €2.8bn
o Mortgage market share 35.4% Mar YTD(2)
·
Stable and diversified funding: Customer accounts
of €104.6bn; $1bn MREL bond issued
·
Strong capital with a fully-loaded CET1 ratio of
15.9% (Dec 2023: 15.8%)
·
On track to execute previously announced €1bn
directed buyback in the near term
Financial Performance
The Group recorded a very strong financial
performance in the first quarter of 2024.
Net
interest income was 27% higher in Q1 2024
compared to Q1 2023 primarily as a result of higher interest rates,
an increase in average loan volumes and the slower than anticipated
pace of deposit migration. Our full year 2024 NII guidance of
>€3.65bn assumes an ECB deposit rate of 2.75% at December
2024.
Other income
decreased 14% on Q1 2023 reflecting lower
income from forward contracts as the majority of Ulster Bank loans
have been onboarded. There were strong performances across
fee-based lines. We expect full year 2024 other income to be
>€700m.
Operating costs were
up 7% in Q1 2024, reflecting the impact of wage
and general inflation, the introduction of variable pay and health
insurance and higher staff numbers given the enlarged Group.
FTEs at end Q1 2024 were 10,563, in line
with December 2023. We expect costs for full year 2024 to
increase by 6-7%.
A
small net credit impairment charge was recorded
in Q1 2024. At this point, we maintain our conservative,
forward-looking and comprehensive ECL approach and for full year
2024 we expect a cost of risk (CoR) at the lower end of a 20-30bps
range.
Bank levies and regulatory
fees of c. €100m were accrued in Q1
2024 reflecting early recognition of the revised Irish bank levy.
We expect bank levies and regulatory fees for full year 2024 to be
c. €145m.
Balance sheet
Gross loans of
€68.0bn were up €1bn in the quarter (Dec 2023: €67.0bn) primarily
driven by new lending exceeding redemptions. We expect customer
loans to grow by 2% in 2024.
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. NPEs were €2.1bn or 3% of gross loans (Dec 2023: €2.0bn or
3%).
Total new lending of
€2.8bn in Q1 2024 was broadly in line with Q1 2023.
The Irish mortgage market performed well in Q1
2024. Our new mortgage lending in Ireland was €0.8bn in the quarter
and resulted in market share of 35.4%. Personal lending in Retail
Banking was up 14% reflecting our larger customer base. SME credit
demand in Ireland remains subdued and new lending was broadly in
line with Q1 2023.
New lending in Capital Markets, excluding
property, was in line with Q1 2023 whilst there was a decrease in
the UK.
Climate Capital had a strong performance as we
focus on financing energy transition and ESG
infrastructure.
Green lending
in Q1 2024 accounted for 34% of new lending with
€12.5bn of new green lending since 2019 as we continue to support
our customers with the transition to a lower-carbon
economy.
Funding and
Capital
AIB's balance sheet remains strong
and well-positioned for growth.
Customer
accounts of €104.6bn were in line
with Dec 2023 (€104.8bn). Circa 92% of customer accounts are ROI
balances. The mix between current accounts and deposits remains
broadly unchanged from December 2023 and the flow to term accounts
remains consistent with Q4 2023.
The Group continues to have strong
funding and liquidity ratios with an LDR of 64%, LCR of 204% and
NSFR of 161% (3) at Q1 2024 which compare to 63%, 199%
and 159% respectively at December 2023. In March 2024 the Group
raised $1bn from a senior non-preferred MREL issuance. In April
2024 the Group raised further MREL from a €625m AT1
issuance.
CET1 fully-loaded ratio at the
end of Q1 2024 was 15.9% (Dec 2023: 15.8%), comfortably ahead of
regulatory requirements. CET1 movements in Q1 2024 include organic
capital generation partially offset by a dividend accrual (in line
with CRR guidance) and an increase in RWAs primarily as a result of
balance sheet growth.
Sustainability
Environmental
·
Aligned to our target to green our loan book, green mortgage
fixed rates reduced by 0.2% from April 2024 for all customers whose
homes have an energy rating of B3 or higher
·
Recognising the impact of climate and changing
weather patterns on our customers, AIB has provided a range
of cashflow solutions to support our Agri customers following the
prolonged period of difficult weather conditions in
Ireland
Social
·
AIB launched an approved profit-sharing scheme to
recognise the contribution of our people which is linked to a range of
performance targets across the Group
·
Aligned to our strategic focus on housing, AIB
announced a €500m development fund to support apartment and student
accommodation development, increasing Ireland's housing supply and
supporting customers to buy their first home
·
Commitment to deliver >€6bn new lending by 2026
to support our customers to buy their first home; in Q1 first time
buyers accounted for 60% of ROI new mortgage lending at
€0.5bn
Governance
· The
Irish State's shareholding currently stands at 37.99% and we are on
track to complete the previously announced €1bn directed buyback
post the EGM on 2 May, this should reduce the shareholding to
32.9%
Outlook
We are in the first year of our new
strategic cycle and the Group has had a very strong start to 2024
with both income and asset quality demonstrating resilience. Our
reshaped Group is well-positioned, generating sustainable profits,
supporting our 3.3 million customers and the wider economy and
delivering attractive shareholder returns. Following a very strong
first quarter, we are confident for the remainder of the
year.
Guidance full year 2024
·
NII is expected to be >€3.65bn
·
Other income is expected to be
>€700m
·
Costs are expected to increase by 6-7%
·
We expect a CoR at the lower end of a 20-30bps
range
·
Bank levies and regulatory fees are expected to be
c. €145m
·
Exceptional costs are expected to be c.
€100m
·
Customer loans are expected to grow by
2%
We will announce our half-yearly
financial results on 2 August 2024.
***
Analyst conference call
Colin Hunt, CEO and Donal Galvin,
CFO, will host a conference call today at 08.00 IST for 30
minutes.
Conference call access
Republic of Ireland
+353 (0)1 436
0959
UK /
International
+44 (0) 33 0551 0200
USA Local
+1 786 697
3501
Event
Password:
AIB
Please dial in 5-10 minutes prior to the start time using the
number / event password above
***
Note: Figures presented above may
be subject to rounding
Abbreviations:
RoTE: Return on tangible equity; RoTE = (PAT-AT1) / (CET1 @14%
of RWAs)
(1) Costs before bank levies and
regulatory fees and exceptional items
(2) Source: Mortgage drawdowns
BPFI March 2024
(3) Subject to
finalisation
For further information, please contact:
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Niamh Hore / Siobhain
Walsh
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Paddy McDonnell / Louise
Kelly
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Investor Relations
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Media Relations
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AIB Group
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AIB Group
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Dublin
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Dublin
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Tel: +353-86-3135647 /
+353-87-3956864
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Tel: +353-87-7390743 /
+353-87-216-1545
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email: niamh.a.hore@aib.ie
siobhain.m.walsh@aib.ie
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email: paddy.x.mcdonnell@aib.ie
louise.y.kelly@aib.ie
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Forward Looking Statements
This document contains certain forward looking statements with
respect to the financial condition, results of operations and
business of AIB Group and certain of the plans and objectives of
the Group. These forward looking statements can be identified by
the fact that they do not relate only to historical or current
facts. Forward looking statements sometimes use words such as
'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', 'may', 'could', 'will', 'seek',
'continue', 'should', 'assume', or other words of similar meaning.
Examples of forward looking statements include, among others,
statements regarding the Group's future financial position, capital
structure, Government shareholding in the Group, income
growth, loan losses, business strategy, projected costs, capital
ratios, estimates of capital expenditures, and plans and objectives
for future operations. Because such statements are inherently
subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward looking
information. By their nature, forward looking statements involve
risk and uncertainty because they relate to events and depend
on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these
forward looking statements. These are set out in the Principal
risks on pages 27 to 30 in the 2023 Annual Financial Report. In
addition to matters relating to the Group's business, future
performance will be impacted by the Group's ability along with
governments and other stakeholders to measure, manage and mitigate
the impacts of climate change effectively, the impact of
higher inflation on customer sentiment and by Irish, UK and
wider European and global economic and financial market
considerations. Future performance will further be impacted
by the direct and indirect consequences of the Russia-Ukraine
War on European and global macroeconomic conditions. Any forward
looking statements made by or on behalf of the Group speak
only as of the date they are made. The Group cautions that the list
of important factors on pages 27 to 30 of the 2023 Annual
Financial Report is not exhaustive. Investors and others should
carefully consider the foregoing factors and other uncertainties
and events when making an investment decision based on any forward
looking statement