AIB has announced a €91m share buyback programme and revised upward its income outlook for the full year after recording a strong performance in the first quarter following a return to profitability in 2021.
The shares will be bought on the open market (€27m) and from the state (€64m), which owns just under 70% of the bank, and the programme will be completed by the end of the year, with Goodbody Stockbrokers acting as an agent for AIB for the open market transactions.
Total income at the bank increased 4% year-on-year in the three months to the end of March, and the lender said in a trading update that it is now on track to achieve €230m in cost reductions, with "broadly flat" operating expenses and "stable" staff numbers since December.
The majority state-owned bank also approved new lending of €2.8bn during the quarter, an annual increase of 18% year-on-year, with green lending accounting for 22% of new lending, and has taken 32.2% of the mortgage market this year to date.
AIB's performing loan book is now valued at €55.7bn, up €400m from December, while non-performing exposures were cut by €100m to €3bn or 5.1% of total loans, and customer deposits also fell by €400m quarter-on-quarter to €91.7bn.
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Net interest income at AIB was "stable" compared to the same period last year despite a smaller total loan book after the bank disposed of €1bn in non-performing loans and its decision to exit the UK small business lending market. AIB also increased personal lending by 24% while new lending to SMEs in Ireland rose 3%
The bank achieved a net credit impairment writeback of €50m related to Covid-19 post-model adjustments, recoveries, repayments and changes to macroeconomic scenario weightings in light of the war in Ukraine, and it has a fully loaded CET1 of 16.6%, ahead of targets for the ratio of capital held to total assets of 13.5%.
Deposits at negative interests rates increased from €12bn to €14bn during the quarter, with a net interest margin of 1.45%, up 4bps from December, and the bank now expects net interest income to increase by "a single-digit percentage this year" on the back of rising interest rates and its Ulster Bank acquisitions.
AIB has entered into exclusive discussions with NatWest to acquire a portfolio of €6bn in performing tracker and linked Ulster Bank mortgages after receiving regulatory approval for its acquisition of €3.7bn commercial loans last month.
Other income not tied to lending increased 14% year-on-year, thanks to increased customer activity following the lifting of Covid-19 restrictions, and its purchase of Goodbody, which saw net fee and commission income rise 33%.
Costs excluding Goodbody were down 2% as AIB continues to seek savings, with employee numbers now standing at 8,916, down 6% from Q1 2021.
The bank will see costs rise when it takes over Ulster Bank's commercial loans and as it takes on new customers from exiting banks, and it has forecast exceptional costs for the full year of €250m.
"Today I am pleased to announce both a strong first quarter performance and the commencement of our share buyback programme," said Colin Hunt, CEO of AIB.
"Notwithstanding heightened geopolitical risk and uncertainty internationally, the Irish economy remains strong. While maintaining a focus on cost discipline, we continue to execute our strategy at pace, delivering both inorganic and organic growth.
"We are conscious that higher prices are affecting our customers and we will continue to support them and the wider economy through the challenges ahead, just as we did during the pandemic," Hunt added.
Of the share buyback programme, Hunt said it was a positive development that would enhance shareholder value for all investors and facilitate repayment of funds to the state for bailing the lender out during the crash.
Photo: A woman wearing a face mask walks by an AIB branch in Dublin city centre during Level 5 Covid-19 lockdown in March 2021. (Pic: Artur Widak/NurPhoto via Getty Images)
