AIB upgrades guidance after 70% jump in first quarter income

AIB revised its full year guidance upwards across the board on Thursday after its total income jumped 70 per cent year-on-year in the first quarter due to record increases in official interest rates.

The bank said it expects net interest income of €3.3 billion this year versus the €3 billion guided in March, increased its net interest margin forecast to above 2.7 per cent from 2.4 per cent and forecast 2023 return on tangible equity (ROTE) to be a high-teens percentage.

The bank said in December that it expected to reach a more than 13 per cent ROTE by 2024 and that this would allow it to supplement increased dividend payments with share buybacks over that time.

A €215 million direct share buyback last week cut the Government's stake in the bank to 53 per cent.

The bank's net interest margin (NIM), a key metric showing the profitability of its lending, rose to 2.78 per cent in the first quarter versus 1.45 per cent a year ago when it was still operating in a negative interest rate environment.

The European Central Bank is expected to raise its deposit rate for the seventh meeting in a row to at least 3.2 per cent later on Thursday.

AIB chief financial officer Donal Galvin said the market consensus for NIMs of 2.4 per cent and 2.5 per cent in 2024 and 2025 seemed reasonable.

He added that the momentum in recent quarters would slow as official interest rate hikes taper and the main unknown for the bank will be how customers respond to new products it plans to bring online in the second half.

Deposit rates in the State's highly concentrated banking sector have risen little so far in response to ECB hikes.

"We've had such a benign rate environment for such a long period of time, it's hard for us to predict what their behaviour is going to be in the different liability cohorts," Mr Galvin said. -Reuters