AIB said it is in talks to buy back a further €500 million of shares from the State after it posted a 30 per cent increase in its net profit to €1.11 billion.
This would reduce taxpayers’ holding to about 22.5 per cent from 25.5 per cent, currently, when a cancellation of shares being bought back is factored in. The Government has reduced its holding from 71 per cent at the start of 2022 through stock placings and selling shares back to AIB.
AIB has also followed rival Bank of Ireland in raising its full-year net interest income forecast as European Central Bank (ECB) interest rates are now expected to be higher at the end of the year than previously thought. Bank of Ireland reported interim results on Wednesday.
AIB sees its net interest income amounting to about €4 billion for the full year, up from a projection for a figure in excess of €3.65 billion. It estimates the ECB’s deposit rate will fall to 3.25 per cent by the end of 2024 from 3.75 per cent currently. It had previously factored in a decline in the official rate to 2.75 per cent.
AIB, which is awash with surplus cash, had almost €36 billion on deposit with central banks at the end of June, mainly with the Central Bank, where it is earning the ECB 3.75 per cent deposit rate.
“Given our strong capital position, we are pleased to announce our first post-GFC midyear distribution, with discussions underway with the Department of Finance for a €500 million directed share buyback,” said AIB chief executive Colling Hunt. GFC refers to the 2008 great financial crisis.
“Following a very strong first half and with momentum in our business we are well on track to support our 3.3 million customers, our communities and the wider economy while delivering attractive, sustainable returns for our shareholders.”
Net interest income for the first half of the year rose by 18 per cent to €2.08 billion, it said, also helped by higher average customer loan volumes. Gross loans increased by 1.9 per cent over the course of the six months to €68.9 billion as new lending surged 13 per cent to €6.3 billion to outpace the rate at which borrowers repaid debt.
New mortgage lending in Ireland rose 10 per cent to €1.9 billion and reflected a mortgage market share of 36.4 per cent. Personal lending was up 10 per cent at €700 million.
The group’s non-performing loans ratio rose to 3.2 per cent from 3 per cent in December. Still, it said that loan quality “remains resilient and we continue to carefully manage the loan book, particularly in those sectors impacted by inflationary pressures and higher interest rates”.
The bank booked €61 million of loan loss charges during the period, albeit down from a €91 million provision taken in the first half of 2023.
AIB also said it plans to launch an offer to buy out thousands of legacy shareholders with small holdings whose stakes were catastrophically diluted by the bank’s crisis-era bailout – but who still account for almost 90 per cent of registered shareholders.
The bank secured approval at its annual general meeting in May for it to carry out so-called odd-lot offer to acquire as many as 20 shares from individual investors. Sellers would be offered 5 per cent more than the prevailing share price as an incentive.
An offer for 20 shares would equate to a cheque of a little over €100, based on AIB’s current stock price. However, if such investors were to sell their shares through a stockbroker the proceeds would almost entirely be absorbed by related fees, the bank previously said.
Twenty AIB shares – the equivalent of 5,000 shares back in the day, before the bank carried out a large share consolidation in 2015 – would have been worth almost €120,000 in 2007 when AIB’s share price peaked.
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