AIB’s financial performance was better than expected in the first quarter of the year, its chief executive said on Thursday, despite fears that Trump administration policies will hit global trade and economic growth.
The bank also secured backing from 97 per cent of eligible shareholders for a plan to buy back €1.2 billion of stock from the State at its annual general meeting (agm) on Thursday, even though it would see the Government get more for the shares than their current market value.
AIB’s board has a week to decide whether to go ahead with the deal.
“The performance of the business in the first quarter was actually ahead of our expectations,” chief executive Colin Hunt said on a call with analysts after the bank issued a trading update ahead of the agm. “We’re seeing no impact at the moment from those increased trading tensions.”
The bank reiterated all of its financial targets for the full year, including a key measure of profitability known as return on tangible equity (RoTE) which, it said, would be “meaningfully ahead” of its medium-term target of 15 per cent.
Mr Hunt told reporters after the agm he was “comfortable” with the consensus view in the market that RoTE would come in at 19.5 per cent for the full year.
Net interest income fell 8 per cent to €950 million in the first quarter amid falling interest rates, in line with the bank’s expectations, according to the trading statement. AIB said it “remains confident” in its outlook for 2025 after the bank turned in a “strong performance” in the first quarter, even as net interest income fell 8 per cent to €950 million amid falling interest rates.
AIB said that it continues to expect to deliver full-year net interest income of more than €3.6 billion, even as it now sees the European Central Bank (ECB) cutting its main deposit rate to 1.75 per cent by the end of the year, having previously expected it to end up at 2 per cent.
Last year’s result was €4.12 billion. The ECB has cut its main rate from 4 per cent to 2.25 per cent since last June.
AIB said net interest income would be helped by its strong deposits base and financial contracts – known as structural hedges – to ease the impact of falling official and market rates.
AIB shareholders’ decision to back a resolution that would allow the bank to buy back €1.2 billion of the Government’s shares would reduce the holding from just under 12 per cent, currently, to about 3 per cent. The Government was not allowed to vote on the matter.
The minimum price was set in late March at €6.26 – off AIB’s prevailing market price at the time and before the global stock market rout that followed US president Donald Trump’s tariffs announcement on April 2nd.
AIB’s shares have fallen to as low as €5.16 since then, though they have subsequently rallied and closed on Wednesday at €5.92. The Dublin market was closed on Thursday as much of Europe enjoyed a public holiday.
Mr Hunt indicated to reporters that if the deal did not go ahead, his preference would be to bring it back to shareholders at an extraordinary general meeting (egm) at another stage this year. If that were to happen, the terms would likely be tweaked to the prevailing stock price.
AIB’s gross loans rose by 2.8 per cent to €71.4 billion in the first quarter, as €3.2 billion of new lending more than offset the impact of maturing loans. While the growth rate was slower than the 5 per cent expansion AIB is targeting for the full year, Mr Galvin said it was ahead of expectations, when volatile currency movements were taken out, and that he was “very comfortable” with the 2025 goal.
Still, AIB’s market share of new mortgage loans dipped to 34 per cent from the 36 per cent recorded for the whole of 2024.
Executives said the bank did not experience any weakening of customers’ ability to meet loan obligations during the quarter, even as the global outlook deteriorated.
Mr Galvin said the bank will be reviewing various economic scenarios, including the impact of international tariffs, as it assesses its loan-loss provisioning before the release of interim results during the summer.
“This is a challenging exercise, given the range of potential outcomes,” he said. He highlighted that a worst-case scenario of a “credit crunch” assessed as part of its 2024 financial reporting would require about €600 million of provisions.
“I don’t think we’re anywhere near that just yet, but that’s just to give you an idea of the process,” he said.
