REG - AIB Group PLC - Q1 2024 Trading Statement

AIBAnnouncement

02/05/2024 07:00

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RNS Number : 9063M  AIB Group PLC  02 May 2024

 

 

 EMBARGO 07:00  02 May 2024

 

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  (https://edge.media-server.com/mmc/p/h4n8igoc)

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:

 Niamh Hore / Siobhain Walsh                              Paddy McDonnell / Louise Kelly
 Investor Relations                                       Media Relations
 AIB Group                                                AIB Group
 Dublin                                                   Dublin
 Tel: +353-86-3135647 / +353-87-3956864                   Tel: +353-87-7390743 / +353-87-216-1545
 email: niamh.a.hore@aib.ie (mailto:niamh.a.hore@aib.ie)  email: paddy.x.mcdonnell@aib.ie

             siobhain.m.walsh@aib.ie                                  louise.y.kelly@aib.ie
 (mailto:siobhain.m.walsh@aib.ie)

 

 

 

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

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