REG - AIB Group PLC - EBA European-wide stress test 2023

AIBAnnouncement

28/07/2023 18:00

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RNS Number : 6301H  AIB Group PLC  28 July 2023

   28 July 2023

 

AIB Group plc - European Banking Authority (EBA) European-wide stress test
2023

 

AIB notes the announcements made today by the EBA on the EU-wide stress test.

 

CFO comment on EBA EU-wide stress test

 

"Our result of 9.95% fully loaded CET1 in the EBA's hypothetical adverse
scenario demonstrates our high capital base and capital resilience in the face
of one of the most severe EBA adverse scenarios to date. Capital depletion of
6.3% marks an improvement on the 2021 exercise, despite this test being more
severe.  AIB continues to be very well-capitalised with a CET1 ratio of 15.7%
at H1 2023 which remains substantially in excess of regulatory requirements."

-Donal Galvin, CFO

 

Results of EBA EU-wide stress test

 

AIB Group plc ("AIB") was subject to the 2023 EU‐wide stress test conducted
by the European Banking Authority (EBA), in cooperation with the Central Bank
of Ireland (CBI), the European Central Bank (ECB), the European Commission
(EC) and the European Systemic Risk Board (ESRB).

 

AIB's capital ratios and EBA stress test results are outlined below:

 

 AIB CET 1 capital ratios      Dec 2022
 CET 1 - Transitional          17.90%
 CET 1 - Fully loaded          16.27%

 EBA 2023 stress test results  Dec 2025

                               (Adverse scenario)
 CET 1((1))                    9.95%

 

 

The 2023 EU-wide stress test does not contain a pass-fail threshold and
instead is designed to assist competent authorities in assessing AIB's ability
to meet applicable prudential requirements under stressed scenarios.

 

The adverse stress test scenario was set by the ECB/ESRB and covers a
three-year time horizon (2023-2025).

The stress test was carried out applying a static balance sheet assumption as
of December 2022, and therefore does not take into account future business
strategies and management actions. It is not a forecast of AIB's profits.

 

No capital action is envisaged for AIB as a result of the EBA stress test
results.

 

 

The 2023 EBA stress test adverse scenario resulted in capital depletion of
6.3% on a fully loaded basis and is lower than the 2021 EBA stress test
adverse scenario (capital depletion 6.8%), reflecting the improved risk
profile of the Group. CET1 in the adverse scenario of 9.95% is well above the
total SREP capital requirement (TSCR) of 6.05%((2)).

 

AIB Group plc published its half-yearly financial results this morning,
further information is available on our website.

-ENDS-

Further information:

·    The severe nature of the adverse scenario reflects the EBA's
deliberate choice and purpose of the stress test exercise, which is to assess
the resilience of the European banking system to a hypothetical severely
deteriorated macro-environment

·    The EBA's 2023 adverse scenario is the most severe to date in terms
of GDP decline. The scenario also includes a significant shock to Irish
unemployment which is assumed to increase from a low starting position of 4.7%
at Dec 2022 to a peak of 12.4%. For further scenario information, please refer
to the EBA website here
(https://www.eba.europa.eu/eba-launches-2023-eu-wide-stress-test-0)

·    Due to the methodology, net interest income (NII) was capped at 2022
levels such that the increasing interest rate environment was not incorporated
into the assessment.

·    AIB's stress test results are heavily influenced by past experience
and historical credit losses; they do not fully capture the significant
improvements in risk management and credit underwriting since the global
financial crisis (GFC)

 

To view the results including disclosure templates published by EBA for AIB
please http://www.rns-pdf.londonstockexchange.com/rns/6301H_1-2023-7-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6301H_1-2023-7-28.pdf)
(https://aib.ie/content/dam/frontdoor/investorrelations/docs/se-announcements/2021/eba-stress-test-2021.pdf)

 

 

 1   Note that both the transitional and fully loaded CET1 ratios are the
same by the end of the stress test period as all transitional adjustments are
fully phased out.

((2)) TSCR is the sum of Pillar 1 (4.5%) and Pillar 2 requirement (1.55%) and
excludes combined buffer requirements

 

For further information, please contact:

 

 Niamh Hore / Siobhain Walsh                              Kathleen Barrington/Paddy McDonnell
 Investor Relations                                       Media Relations
 AIB Group                                                AIB Group
 Dublin                                                   Dublin
 Tel: +353-86-3135647 / +353-87-3956864                   Tel:  +353-87-408-8323 / +353-87-7390743
 email: niamh.a.hore@aib.ie (mailto:niamh.a.hore@aib.ie)  email:  kathleen.m.barrington@aib.ie (mailto:kathleen.m.barrington@aib.ie)

             siobhain.m.walsh@aib.ie                       ………..paddy.x.mcdonnell@aib.ie
 (mailto:siobhain.m.walsh@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 23 to 25 in the Annual Financial
Report 2022 and updated on page 33 of the Half-Yearly Financial Report 2023.
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, the impact of higher inflation on customer sentiment and by
Irish, UK and wider European and global economic and financial market
considerations. Future performance will further be impacted by the direct and
indirect consequences of the Russia-Ukraine war on European and global
macroeconomic conditions and any enduring effects of the COVID-19 pandemic.
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 23 to 25 of the Annual Financial Report 2022 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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