Declining interest rates caused first quarter income at AIB to drop 9% compared with the same period in 2025.

In a trading update, the bank reiterated its guidance for the financial year, but the group now expects return on tangible equity to be "meaningfully ahead" of its 15% medium-term target.

€950m in net interest income was 8% lower year-on-year but in line with expectations as lower interest rates were partially offset by higher average loan volumes.

For the full year, AIB has projected net interest income of more than €3.6bn, assuming an ECB deposit rate of 2% from June and a deposit beta of c. 20%. The bank's Q1 net interest margin was 2.86%.

Other income dropped 10% from Q1 2024 due to lower gains in equity investments, but net fees and commissions increased 7% with enhancements to the bank's wealth management proposition. For the full year, the bank expects other income of c. €750m.

Costs also increased 3% in line with guidance, and the bank's cost-income ratio was 43%. Employee numbers dipped slightly from 10,469 to 10,423 during the quarter

AIB also recorded a small net credit impairment charge in Q1. Bank levies and regulatory fees are expected to be c. €140m for the full year

Gross loans have increased by €200m since December to €71.4bn as new lending rose 14% to €3.2bn, of which 38% was green lending. The bank expects customer loans to increase 5% this year.

This year to date, AIB's mortgage market share is 34%, and for the quarter, new mortgage lending rose 14% to €900m. Personal lending also rose 7%, and lending to SMEs was stable year-on-year.

Non-performing exposures of €2bn represent €2.8bn of AIB's gross loans, and the bank said its asset quality "remains resilient".

Customer deposits of €109.9bn were in line with the end of 2024, and the bank issued a €700m Additional Tier 1 bond and a €800m green bond during the quarter.

“I am pleased to announce the Group had a strong performance in the first quarter, having entered 2025 in a position of strength and with great momentum in our business," said Colin Hunt, CEO of AIB.

"Notwithstanding the uncertainty in the international external environment, we remain confident in our outlook for 2025 and beyond, given our market-leading customer franchise, resilient revenues and strong funding and capital.

"The Irish economy continues to perform well and AIB plays a key role by supporting our customers and communities. We are implementing our proven strategy at pace and remain on course to deliver strong, sustainable returns to our shareholders, both this year and over the medium term.”

At today's AGM, AIB will seek shareholder approval to buy back €1.2bn in its own shares from the State. On Wednesday, the bank announced cuts to interest rates for non-green fixed-rate mortgages and deposit accounts.

Photo: Colin Hunt (left). (Pic: Shane O'Neill, Coalesce)