AIB has announced its intention to repurchase another €1 billion of its shares from the State, following a substantial increase in profits last year, stimulated by escalating interest rates. Currently valued at 8.8% of the bank, this directed buyback of Government shares will decrease the State’s stake to around 31.2%. Including the State’s share of a projected €700 million cash dividend for shareholders, the total money returned to the State would be approximately €1.28 billion in the near future.
So far, AIB has reimbursed €13.7 billion of its €20.8 billion financial crisis recovery debt. The bank is currently in discussions with the Department of Finance, with regards to the proposed share buyback, which is also subject to approval at the annual general meeting of the bank in May.
AIB’s net profit skyrocketed by 170% to €2.058 billion, surpassing anticipated results of €2.006 billion. Net interest income reached €3.84 billion, a YoY increase of 83% and exceeding the most recent prediction of over €3.75 billion from AIB.
Throughout last year, based on the rate increase of the European Central Bank (ECB) and the slow migration of savers from low-rate accounts to its more lucrative saving products, AIB has tripled its forecast of net interest income for 2023. Earnings from excess customer deposits worth €33.3 billion placed by AIB with the Central Bank has risen to a rate of 4%, up from -0.5% in July 2022, when the ECB first started raising its rates to combat soaring inflation.
Colin Hunt, the CEO, has reshaped the bank’s medium-term profitability objective or RoTE to 15% from the prior target of over 13%, driven by an extraordinary surge in last year’s profits which led to a RoTE of 25.7%.
With a 10% increase to €1.83 billion, AIB’s operating expenses resulted in a cost-income ratio of 39%, staying under its target of 50%.
“Commencing our next triennial strategic phase, our organisation stands reformed, restructured and rejuvenated,” Mr. Hunt declared. “In our agenda for 2024 and the future, we aim for amplification of our customer-centric approach, further environmentally friendly adaptations of our loan portfolio and an increase in our operational productivity.”
AIB has acquired in excess of €2.8 billion in commercial and corporate loans from Ulster Bank, as a consequence of the UK-based bank’s choice to withdraw from the market. The final sum is less than the preliminary estimate of roughly €4 billion. Furthermore, to date, about €4 billion of the €5 billion in Ulster Bank’s tracker loans that AIB is procuring, have transferred.
Loan issuance amounted to €12.3 billion last year, of which €3.7 billion stemmed from eco-friendly lending. AIB’s mortgage lending’s market share last year was at a third. AIB’s gross loans saw a increment of 9 per cent, bringing the total to €67 billion.
The percentage of the bank’s non-performing loans decreased to 2.96 per cent, which aligns with the goal, down from 3.5 per cent from the previous year. This was facilitated as the majority of its leftover problem loans from the crisis-era were offloaded, selling a portfolio circa €100 million to American distressed-debt titan Cerberus and loan service corporation Everyday Finance.
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