AIB has revised its full-year income guidance upward following a strong first half of the year and announced a €505 million share buyback that will further reduce the Government’s stake in the bank. The bank reported an after-tax profit of €1.108 billion for the first half of 2024, a significant increase from €854 million during the same period last year.
The growth in profit was driven by an 18% year-on-year rise in net interest income (NII), which reached €2.1 billion. AIB has now updated its NII forecast to approximately €4 billion for the year, up from the previous estimate of over €3.65 billion. This revision reflects expectations that the European Central Bank’s interest rates will be 3.25% by year-end, higher than the earlier projection of 2.75%, combined with improved asset growth and slower shifts by savers to long-term products.
For the six-month period, AIB’s total income increased by 12% to €2.47 billion. Gross loans grew by 3% to €68.9 billion, driven by strong new lending that outpaced redemptions. The bank now anticipates a 4% growth in customer loans for the year, an increase from the prior forecast of 2%.
New lending saw notable increases: personal lending rose 10% to €0.7 billion, new mortgage lending in Ireland was up 10% to €1.9 billion, and SME lending increased by 8% to €0.8 billion. In the Capital Markets unit, new lending grew by 5% to €1.9 billion.
AIB’s asset quality remains resilient, with non-performing loans at €2.2 billion or 3.2% of gross loans, up from €2 billion or 3% at the end of 2023. Operating costs rose by 6% to €947 million due to increased staffing, inflation, and enhanced employee benefits. The bank expects costs to increase by 6-7% in 2024, along with a €25 million one-off expenditure for efficiency initiatives and branch network investments.
Chief Executive Colin Hunt highlighted the bank’s strong performance and strategic focus, announcing a €500 million share buyback, which will reduce the Government’s stake from 25.5% to between 22% and 23%. He described the share buyback as a sign of AIB’s solid capital position and commitment to delivering sustainable returns.
Hunt noted that AIB’s profits were bolstered by the strong Irish economy and a more normalized interest rate environment. He acknowledged the potential impact of future ECB rate reductions on overall returns and emphasized ongoing reviews of market pricing.
Finance Chief Donal Galvin noted that the bank’s customer base has grown to over 3.3 million from 2.7 million in 2020, but volumes are expected to grow at a normalized rate. He also highlighted the bank’s use of Artificial Intelligence to enhance operations and customer experience.
Despite ongoing pay caps for senior executives, AIB remains focused on creating a strong investment proposition as it continues to manage its capital and operational efficiency