REG - AIB Group PLC - Annual Financial Results 2024

AIBAnnouncement

05/03/2025 07:00

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RNS Number : 3638Z  AIB Group PLC  05 March 2025

 EMBARGO 07:00  5 March 2025

 

AIB GROUP PLC 2024 ANNUAL RESULTS

AIB announces profit after tax of €2.35 billion and total distributions of
€2.6 billion

 

"I am pleased to announce that AIB has again delivered a very strong
performance in 2024 with profit after tax of €2.35 billion, a 26.7% return
on tangible equity and total distributions to shareholders of €2.6 billion.
Against a solid economic backdrop, new lending grew by 17% to €14.5 billion
with 6% loan book growth to €71.2 billion. We have continued to expand the
Group's products and services as well as our customer base, which at 3.35
million has never been higher.

 

The Group's share register has continued to normalise and, with the State's
shareholding currently at 12.39%, there is a clear path to a return to full
private ownership this year. To date, the Group has returned €18.5 billion
to the State, with €4.4 billion returned since January 2024. Additionally,
discussions are underway with the Department of Finance for a further €1.2
billion directed share buyback.

Supporting the transition to a greener future, €16.6 billion of our €30
billion Climate Action Fund has been deployed since 2019, with €5.1 billion
new green lending in 2024 representing 35% of our €14.5 billion new lending.
We've also seen a strong performance in new mortgage lending, advancing €2.8
billion to support 10,000 first-time buyers to purchase their first home.

As we progress our strategy and support our growing customer base, we are
mindful of uncertainties in the external environment. However, we remain
confident in the strong fundamentals of our business and our ability to play a
positive role in the Irish economy, helping to build a more sustainable future
for our customers while delivering sustainable returns for our shareholders."

- Colin Hunt, Chief Executive Officer

 

KEY HIGHLIGHTS

 

Financial highlights: (all comparisons versus 2023 unless otherwise stated)

·    Very strong financial performance ahead of expectations

o  Profit after tax €2,351m; EPS 92.5c; RoTE((1)) 26.7%

o  RoTE in 2025 is expected to be meaningfully ahead of 15% medium-term
target

·    Total income up 4% to €4,908m; net interest income (NII) of
€4,129m; other income of €779m

o  NII up 7%; net fee & commission income up 5%

o  2025 income guidance of NII > €3.6bn and other income c. €750m

·    Total distributions of €2.6bn; payout ratio 109%

o  €500m mid-year directed buyback completed in H2 2024

o  €861m proposed cash dividend or 36.984c per share

o  €1.2bn regulatory approved share buyback; directed buyback discussions
underway

·    Strong organic capital generation with December 2024 CET1 of 15.1%
(Dec 23: 15.8%)

o  Inaugural SRT completed in 2024; c. 20bps benefit

o  c. 120bps Basel IV benefit from January 2025, previously estimated c.
50bps

 

·    Costs((2)) of €1,971m as guided; cost income ratio (CIR) of 40%

·    Gross loans increased 6% to €71.2bn (Dec 23: €67.0bn)

o  New lending up 17% to €14.5bn; mortgage market share 36%((3))

·    Strong funding with 5% increase in customer accounts to €109.9bn
(Dec 23: €104.8bn)

 

Strategic highlights: Continued progress on three areas of strategic focus

·    Customer first: developing more enduring relationships with our 3.35
million customers

o  Launched Abi, our new AI digital assistant, in our contact centre
assisting >130,000 customers to self-serve with a rapid response time;
phased roll-out since December 2024

o  AIB measures customer experience performance across 5 core NPS metrics,
all of which outperformed 2024 targets with 4 of the 5 reaching the highest
ever recorded scores

·    Greening our business: mobilising capital to support climate action

o  €16.6bn of our €30bn Climate Action Fund has been deployed since 2019

o  84% of the Group's power is sourced from fully traceable renewable energy
sources

·    Operational efficiency and resilience: investing in capabilities,
capacity & resilient platforms

o  Continuous investment in progressive, modern and resilient technology; c.
€300m on average p.a.

o  Progress made on removing organisational complexity: 17% reduction in
legal entities and 5 legacy applications decommissioned reducing IT storage

 

2025 Guidance:

·    NII is expected to be > €3.6bn

·    Other income is expected to be c. €750m

·    Costs are expected to increase c. 3%

·    Cost of Risk (CoR) expected to be within the range of 20-30bps

·    Bank levies and regulatory fees are expected to be c. €140m

·    Exceptional costs are not expected to be material

·    Customer loans are expected to grow by c. 5%

·    RoTE is expected to be meaningfully ahead of our 15% medium-term
target

 

2026 Medium-term targets:

·    RoTE of 15%

·    CET1 >14% with a buffer over MDA of at least 250bps

·    Absolute cost <€2 billion with a CIR of <50%

 

 

FINANCIAL PERFORMANCE

 

The Group delivered a very strong performance driven by increased income and
loan growth which contributed to profit after tax of €2,351m and a RoTE of
26.7%.

 

Net interest income of €4,129m (2023: €3,841m) increased by 7% reflecting
higher average interest rates and higher average customer loan volumes partly
offset by an increase in interest expense. Deposit beta was c. 12% in 2024.
Net interest margin (NIM) was 3.16% (2023: 3.11%) and the Q4 2024 exit NIM was
3.00%. The outlook for NII 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. For 2025 we expect NII of >
€3.6bn based on rate assumptions of an ECB deposit rate of 2.00% (from June
2025) and a BOE rate of 4.00% at December 2025.

 

Other income of €779m (2023: €900m) decreased by 13% mainly due to lower
income relating to a forward contract for the acquisition of Ulster Bank loans
(2024: €27m; 2023: €223m). These loans are fully onboarded. Net fee and
commission income increased by 5% to €666m (2023: €633m) primarily
reflecting higher transaction volumes from a larger customer base and higher
wealth income. For 2025 we expect other income of c. €750m.

 

Operating costs were €1,971m (2023: €1,826m), representing underlying cost
growth of 7% or 8% including c. €25m once-off additional spend for customer
and operational efficiency initiatives. Costs reflect increased average staff
numbers to support growth in business volumes, salary and general inflation
and enhanced employee benefits. FTE numbers reduced by 1% to 10,469 (Dec 2023:
10,551). The cost income ratio was 40% (2023: 39%). For 2025 we expect costs
to increase by c. 3% primarily reflecting salary inflation in a tight labour
market.

 

Overall credit quality remains robust. There was a net credit impairment
charge of €55m representing 8bps cost of risk (2023: €172m charge; 27bps
CoR) with the outcome benefitting from writebacks in mortgages and a small
number of exposures in the leisure (Covid impacted) and property sectors,
excluding these the CoR was 25bps. Our approach remains conservative,
comprehensive and forward-looking and is reflected in an ECL coverage rate of
1.9%. For 2025 we expect CoR within the range of 20-30bps.

 

Bank levies and regulatory fees of €138m decreased by €47m (2023: €185m)
primarily due to a reduction in Deposit Guarantee Scheme and Single Resolution
Fund fees which was partly offset by an increase in the Irish bank levy to
€94m from €37m. For 2025 we expect bank levies and regulatory fees to be
c. €140m.

 

Exceptional items in the year were €66m and primarily relate to the cost of
resolving legacy matters((4)) and the final migration of Ulster Bank
mortgages. For 2025 we do not expect exceptional costs to be material.

 

CUSTOMER LOANS

 

Gross loans of €71.2bn increased by €4.2bn or 6% (Dec 2023: €67.0bn)
primarily driven by strong new lending and the completion of the onboarding of
€0.8bn Ulster Bank tracker mortgages. For 2025 we expect customer loans to
grow by c. 5%.

 

Total new lending increased by 17% to €14.5bn (2023: €12.3bn) with
positive trends across mortgages, renewable energy and corporate lending.

The mortgage market in Ireland performed strongly in 2024 with growth driven
by first-time buyer activity. AIB's new mortgage lending in Ireland was up 14%
to €4.5bn and reflected a mortgage market share of 36%. Personal lending was
up 7% to €1.3bn reflecting our enlarged customer base, an increase in
consumer credit demand and our market-leading digital proposition with 87% of
personal loan applications completed online. New lending to SMEs in Ireland
remained relatively stable at €1.6bn with > 60% of small business loans
originated on our new online business loan platform.

In Capital Markets, new lending was up 11% to €4.4bn. The growth in new
lending was driven by corporate lending, reflecting a favourable market
backdrop. Growth was partly offset by lower property lending reflective of
lower activity in the sector.

Climate Capital delivered strong new lending of €1.9bn, up 55%, as we
continue to finance the transition to renewable energy and infrastructure. New
lending includes the financing of onshore and offshore wind developments in
France, solar assets in the UK and utility scale renewable ventures in North
America. In Ireland, Climate Capital funded key renewable transactions in the
onshore wind and solar sectors.

UK new lending increased by 30% to £1.2bn (2023: £0.9bn) driven by strong
corporate lending as we continue to focus on our chosen market sectors such as
leisure and residential investment.

Green and transition lending of €5.1bn accounted for 35% of new lending with
€16.6bn deployed since 2019 as we continue to support our customers
transition to a more sustainable future. Green mortgages represented 52% of
new mortgage lending (2023: 46%).

NPEs were €2.0bn or 2.8% of gross loans (Dec 23: €2.0bn or 3.0% of gross
loans) as net inflows of €0.8bn were offset by €0.8bn of redemptions and
disposals. Asset quality remains resilient and we continue to carefully manage
the loan book.

 

FUNDING & CAPITAL

 

Strong funding and capital ensure AIB is well-positioned for sustainable
growth. Customer accounts increased by €5.1bn to €109.9bn with 92% of
accounts ROI-based (Dec 23: 92%). The mix between current accounts and
deposits remains broadly unchanged from December 2023 and the flow to term
decreased in the second half of 2024. The Group continues to have strong
funding and liquidity ratios with LDR of 64%, LCR of 201% and NSFR of 162% at
December 2024 (Dec 23: LDR 63%, LCR 199% and NSFR 159%).

 

The Group completed three MREL issuances in 2024 consisting of €625m AT1 and
€650m green Tier 2 hybrid capital as well as a $1bn senior non-preferred
bond. Our MREL ratio at December 2024 increased to 31.7% of RWAs, well in
excess of our requirement of 28.9% for 1 January 2025. Total proceeds raised
from ESG bonds to date stand at €6.4bn. On average we expect three debt
issuances per annum across Euro and US dollar.

 

Ratings: The Group is rated at investment grade with Moody's and S&P
Global. In November 2024 S&P Global revised the outlook for AIB Group plc
upwards from Stable to Positive due to solid financial performance, sound risk
management and improved digital capabilities.

 

Capital remains robust and well ahead of minimum regulatory requirements. The
Pillar 2 requirement decreased from 2.60% to 2.40% for 2025. The CET1 ratio at
December 2024 was 15.1% (Dec 23: 15.8%). The main drivers of the CET1 movement
were:

·    Strong organic capital generation (+400bps) supporting distributions

o  The completed €500m mid-year directed buyback (-80bps)

o  Proposed €861m cash dividend (-150bps)

o  Regulatory approved buyback €1.2bn share buyback (-200bps)

·    DTA utilisation (+50bps) partially offset by AT1 coupon and other
items (-20bps)

·    RWA increase (-70bps) impacted by:

o  Balance sheet growth and increased operational risk RWAs offset by

o  The inaugural significant risk transfer (SRT) executed in November 2024
(c. +20bps)

 

The Group expects a positive CET1 impact from Basel IV of c. 120bps, up from
c. 50bps previously estimated.  Over the coming years there are headwinds and
tailwinds impacting capital such as IRB model adoption and development and
expansion of our SRT programme.

 

Shareholder distributions of €2.6bn equate to a total payout ratio of 109%
including the €0.5bn mid-year directed buyback completed in H2 2024. A cash
dividend of 36.984c per share, equating to €861m, has been proposed.
Regulatory approval has been received for a share buyback of €1.2bn,
discussions with the Department of Finance in relation to a potential directed
buyback are currently underway. Shareholder approval will be required for both
and it is our intention to seek approval at our AGM on 1 May 2025.

 

 

SUSTAINABILITY

In AIB we are empowering people to build a sustainable future. Greening our
business is a strategic priority for AIB. The summary below shows some of the
highlights of 2024 across each of the ESG categories:

 

Environmental

•    €16.6bn of green and transition lending since the Climate Action
Fund launched in 2019 including €5.1bn in 2024 (35% of new lending in 2024)

•    We continue to make significant progress on reducing our own carbon
footprint with 84% of our electricity now sourced from certified renewable
sources

•    AIB is the Mandated Sustainability Coordinator with 17 of Ireland's
leading companies

 

Social

•    Supported c. 10,000 customers to buy their first home with €2.8bn
of new lending to first-time buyers in 2024, well-progressed towards >
€6bn target by 2026

•    Announced that we will invest over €20m in sustainability
education and research, with €10m allocated to a new AIB Trinity Climate Hub
in Trinity College Dublin and a €10m commitment as founding partner of
Innovate for Ireland.

•    Developed our 'SME Steps to Sustainability', a go-to resource for
SME businesses designed to guide them to take sustainable action.

 

Governance

•    The Irish State's shareholding currently stands at 12.39% down from
41% at December 2023

•    Gender balance maintained across management levels with 43% of women
in management roles((5))

•    Inclusion in S&P Global Sustainability Yearbook 2025

For more information, please see our Sustainability Statement in the 2024
Annual Report which is in line with the Corporate Sustainability Reporting
Directive (CSRD).

OUTLOOK

 

Following a very strong financial performance in 2024, we enter the second
year of our strategy in a position of strength. Our purpose is empowering
people to build a sustainable future and we are progressing our three
strategic priorities at pace; Customer first, Greening our business and
Operational efficiency and resilience.

The process of repaying Irish taxpayers for their support, enhancing liquidity
in AIB shares and normalising the share register has been and remains a key
goal for the Group. With momentum in the reduction in the State's shareholding
(currently 12.39%) coupled with a potential €1.2bn directed buyback, there
is now a clear path to return to full private ownership this year.

As we progress our strategy and support our growing customer base, we are
mindful of evolving challenges in the external environment. However, the
outlook for the domestic economy remains supportive and AIB is well-positioned
for the future with a resilient and growing balance sheet, diversifying income
and an exceptional customer franchise.

The Group has had a good start to 2025 and remains focused on our three
medium-term targets. We remain confident in the strong fundamentals of our
business and our ability to play a positive role in the Irish economy, helping
to build a more sustainable future for our customers while delivering
sustainable returns for our shareholders.

Further detail is provided in the 2024 Annual Financial Report which can be
found at 2024 Financial Results (aib.ie)
(https://aib.ie/investorrelations/financial-information/results-centre/2024-financial-results)
or click here to view:
http://www.rns-pdf.londonstockexchange.com/rns/3638Z_1-2025-3-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3638Z_1-2025-3-4.pdf)

 

Analyst presentation

Colin Hunt, CEO and Donal Galvin, CFO will host a presentation via webcast and
conference today at 09.00 GMT, details available at AIB Group plc Full-Year
Financial Results 2024 (royalcast.com)
(https://channel.royalcast.com/aib/#!/aib/20240802_1)

Glossary

EPS: Earnings per share; RoTE: Return on tangible equity; FTE: Full-time
equivalent

SRT: Significant risk transfer; MDA: Maximum distributable amount

LDR: Loan to deposit ratio; LCR: Liquidity coverage ratio; NSFR: Net stable
funding ratio

Notes:

1)        RoTE= (PAT-AT1)/(CET1 @ 14% of RWAs)

2)        Costs before bank levies and regulatory fees and exceptional
items

3)        Source: Mortgage drawdowns BPFI for Dec YTD 2024

4)        Relates to customer redress and associated costs for certain
legacy matters such as investment property funds. Further information is
available on page 319 of the 2024 Annual Financial Report

5)        The Equileap annual Gender Equality Global Report &
Ranking equates 'gender balanced' with between 40% and 60% women

Figures presented above may be subject to rounding and thereby may differ to
the 2024 Annual Financial Report

 

- ENDS -

 

 

For further information, please contact:

 

 Donal Galvin                  Niamh Hore                                                      Paddy McDonnell
 Chief Financial Officer       Head of Group Investor Relations & External Communications      Head of Media Relations
 Tel: +353-1-6418300           Tel: +353-86-3135647                                            Tel: +353-87-7390743
 email: donal.j.galvin@aib.ie  email: niamh.a.hore@aib.ie                                      email: paddy.x.mcdonnell@aib.ie

 

 

Forward Looking Statements

This document contains certain forward looking statements with respect to the
financial condition, results of operations and business of AIB Group and
certain of the plans and objectives of the Group. These forward looking
statements can be identified by the fact that they do not relate only
to historical or current facts. Forward looking statements sometimes use
words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', 'may', 'could', 'will', 'seek', 'continue',
'should', 'assume', or other words of similar meaning. Examples of forward
looking statements include, among others, statements regarding the Group's
future financial position, capital structure, Government shareholding in the
Group, income growth, loan losses, business strategy, projected costs, capital
ratios, estimates of capital expenditures, and plans and objectives for future
operations. Because such statements are inherently subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking information. By their nature, forward looking
statements involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ materially
from those expressed or implied by these forward looking statements. These are
set out in the Principal risks on pages 17 to 20 in the 2024 Annual Financial
Report. In addition to matters relating to the Group's business, future
performance will be impacted by the Group's ability along with governments and
other stakeholders to measure, manage and mitigate the impacts of climate
change effectively. Future performance could also be impacted by geopolitical
tensions and global conflict. Any forward looking statements made by or on
behalf of the Group speak only as of the date they are made. The Group
cautions that the list of important factors on pages 17 to 20 of the 2024
Annual Financial Report is not exhaustive. Investors and others should
carefully consider the foregoing factors and other uncertainties and events
when making an investment decision based on any forward looking statement.

 

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