AIB plans to buy back a further €1.2 billion of shares from the Government, leaving taxpayers on track to sell the remaining crisis-era bailout shares in the bank by the middle of the year.
The buyback sum is well above the €760 million that stock market analysts had expected and is set to reduce the State’s holding in the bank to about 5 per cent.
Net profit at AIB rose 14 per cent last year to €2.35 billion, the bank said on Wednesday, with the figure coming in more 10 per cent above consensus forecasts as net interest income advanced 7 per cent to €4.13 billion, even as official interest rates fell at pace between June and December.
Earnings were underpinned as loan-loss impairments fell by two-thirds on the year to €55 million. Davy analyst Diarmaid Sheridan had expected a €149 million charge.
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AIB shares jumped as much as 8 per cent in early trading in Dublin, to €7, the highest level since the State first sold shares in the bank in an initial public offering (IPO) in mid-2017.
“The group’s share register has continued to normalise and, with the State’s shareholding currently at 12.39 per cent, there is a clear path to a return to full private ownership this year,” chief executive Colin Hunt said.
“To date, the group has returned €18.5 billion to the State. Additionally, discussions are under way with the Department of Finance for a further €1.2 billion directed share buyback.”
The bank, which received a €20.8 billion rescue from the State between 2009 and 2011, also plans to pay an €861 million dividend on last years earnings, it said, of which just over €100 million will go to the State.
AIB executives signalled on Wednesday that they plan to open talks in coming months to repurchase stock warrants that the State continues to hold in the bank.
They signalled this could cost €250 million. Adding this, and the current value of the remaining 5 per cent stake, could see the State recoup the full €20.8 billion granted in bailout investment, based on AIB’s current share price.
AIB’s net interest income figure last year was helped as average customer loans rose to €68.3 billion from €63.4 million and the bank managed to increase its net interest margin – the difference between the average rates at which it funds itself and lends to customers – to 3.16 per cent from 3.11 per cent. But the margin had fallen back to 3 per cent by the fourth quarter.
“The outlook for net interest income remains resilient in a lower rate environment due to growth in our loan book, our stable and granular deposit base and proactive management of our structural hedge programme,” AIB said.
The structural hedge relates to financial contracts the bank has entered into to ease the impact of falling official and market rates.
AIB sees its net interest income topping €3.6 billion this year, based on a forecast that the European Central Bank (ECB) deposit rate will fall to 2 per cent in June. The rate has fallen from 4 per cent to 2.75 per cent over the past nine months as a result of falling inflation.
The bank delivered a return on tangible equity – a key measure of bank profitability relative to shareholders’ equity in the business – – of 26.7 per cent and said that the result for this year will be “meaningfully ahead” of the group’s 15 per cent medium-term target.
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Mr Hunt said that “it is not currently” in AIB’s plans to reduce customer care staff numbers on the back of a new artificial intelligence (AI) digital assistant introduced late last year across its phone and online banking systems.
“She is allowing our people in customer engagement to spend more time dealing with customer issues,” he said.
Aside from 150 job cuts announced last summer, AIB does not envisage further voluntary redundancies over the coming years, he said. However, the CEO said he expects the bank’s headcount to fall over the period from 10,469 as of the end of December as a result of natural attrition and retirements.
Mr Hunt said that he expected the Irish economy to “weather the storm” from likely US tariffs on EU imports.
