TIDMAIBG
RNS Number : 9487V
AIB Group PLC
27 July 2018
EMBARGO 07:00 27 July 2018
AIB Group plc ("AIB") announces half year pre-tax profits of
EUR762m
"We have had a positive six months with solid underlying
profitability, significant progress towards NPE normalisation,
stable NIM and increases in the performing loan portfolio. The
fundamentals of the business are sound and sustainable. The strong
Irish economy continues to provide good growth opportunities for
our customers and our business."
- Bernard Byrne, CEO
Highlights
-- Sustainable profitability underpinned by stable net interest income and margin
PBT EUR762m; NIM 2.53% with underlying NIM(1) of 2.50%
-- Strong capital generation supporting growth and capital returns
CET1 (FL) 17.6%
-- Continued focus on cost control, H1 2018 in line with expectations
Stable costs and income, CIR 51%; excluding enhanced income
effects CIR 53%
-- Growing performing loan book and increased new lending
New term lending +15% to EUR5bn; new transactional lending
EUR0.5bn(2)
-- Ongoing progress in NPE normalisation
Reduced by EUR2.7bn (-27%) to EUR7.5bn from EUR10.2bn at
December 2017
-- Investment grade status achieved; MREL programme commenced
EUR1bn issued in H1 via two transactions
AIB continues to perform well and we remain on track to achieve
all of our medium term targets. In the first half of 2018 AIB
continued to make progress on strategic priorities, resulting in
robust financial numbers and strong positions in key segments. Our
focus on improving the customer experience, value management and
efficiency is driving commercial success.
FINANCIAL PERFORMANCE
Profit before tax of EUR762m is consistent with H1 2017.
Continued momentum in business performance is in line with market
expectations.
Sustainable profitability is underpinned by stable net interest
income and margin. NIM for H1 2018 was 2.53% as the underlying
spread between loans and deposits widened. Mortgage pricing changes
and the cost of excess liquidity were absorbed by a favourable mix
and lower funding costs on customer accounts. NIM underlying was
2.50%, unchanged from FY 2017 and well ahead of our medium term
target of 2.40%+.
Stable fees and commissions of EUR217m are the primary component
of Other Income, which at EUR322m included EUR40m from previously
restructured loans compared to EUR146m in H1 2017.
Operating expenses of EUR711m were marginally higher than the
prior year and in line with expectations. Staff costs were flat
while absorbing wage inflation. Other factors that continue to
impact expenses are investment in loan restructuring operations and
increased depreciation.
We continue to focus on cost management, simplifying our
operating model while delivering the many requirements needed to
meet heightened regulatory oversight. Our cost income ratio (CIR)
was 51%. We are on track to achieve our cost income ratio target of
less than 50% by the end of 2019.
A net credit impairment write back of EUR130m was recorded in H1
2018 reflecting increased security values and a strong economic
environment.
We are entering the final stages of the tracker mortgage
examination with payments issued to the vast majority of customers,
with the remainder being completed by the end of September. We know
that issues may continue to emerge and we are committed to dealing
with them in a transparent and fair way for our customers.
BALANCE SHEET
AIB's balance sheet is growing, facilitated by stable
customer-based funding and strong capital ratios. The loan to
deposit ratio at the end of June 2018 was 89%.
Total new lending in the half was EUR5.5bn. New term lending
increased by 15% to EUR5.0bn with a very strong performance in
Wholesale, Institutional and Corporate banking of EUR1.9bn and 11%
growth in mortgages. Our market share of mortgage drawdowns in the
first half was 32% and our strong trend in applications and
sanctions continues. Based on market leading shares in key
segments, we are well positioned for further growth.
Having passed the inflection point, since December 2017 the net
loan book grew by EUR0.5bn excluding disposals of loan portfolios.
In the same period, the performing loan book (gross) increased by
EUR2.2bn.
The momentum in reducing non-performing exposures (NPEs)
continues, with a 27% reduction in NPEs from EUR10.2bn (16% gross
loans) to EUR7.5bn (12% gross loans) as a result of ongoing
restructuring activity and the sale of non-performing portfolios.
In H1 2018, non-performing loans with gross value of EUR1.1bn and
characterised by deep arrears were sold, resulting in a gain on
disposal of EUR140m. We remain on track to achieve normalised NPE
levels by 2019.
FUNDING & CAPITAL
Strong funding and capital ensures AIB is well positioned for
growth. We maintain a robust capital position with a fully loaded
CET1 of 17.6% well in excess of minimum requirements. Capital
generation of 130bps in the first half was offset by impact of
accrued dividend, IFRS 9 initial impact and movement in investment
securities reserves, which under IFRS 9 are now marked to
market.
Following recent rating agency actions, including upgrade from
Moody's, AIB Group plc (HoldCo) is now considered investment grade
status. This is a positive development and recognises the ongoing
significant progress in NPE reduction and augers well for MREL
issuance.
Based on our MREL target of 28.04%, our issuance requirement is
c. EUR4bn (the mid-point of our guided range EUR3bn-EUR5bn). In H1
2018 we successfully executed our first two AIB Group plc senior
issuances for MREL purposes, totalling EUR1bn.
A SUSTAINABLE, INNOVATIVE BUSINESS
We remain focused on reaching our medium term targets and
delivering sustainable performance. With ongoing investment in
technology and innovation, we are at the forefront of digitally
enabled banking, which is a key enabler for customers and a
competitive advantage for AIB. The bank remains number one for
digital distribution in Ireland, with 1.3m online users.
-- 96% of customer transactions are now automated
-- 67% of transactional customers active on digital channels(3)
-- 78% of personal loan applications made online or via mobile
We will continue our focus on improving customer experience
through greater efficiency, product offering and delivery.
OUTLOOK
We have had a solid first half of 2018 and remain on track to
meet our stated medium term targets. We are committed to
implementing a proven strategy, with a relentless focus on Customer
First, by delivering a simple and efficient business model and
growing the balance sheet with enhanced quality new lending while
normalising NPEs.
The overall economic backdrop continues to be favourable and our
Customer First strategy is delivering results.
Further detail, including all relevant disclosures and notes to
financial statements can be found on
https://aib.ie/investorrelations or click on the following link
http://www.rns-pdf.londonstockexchange.com/rns/9487V_1-2018-7-27.pdf
(1) NIM underlying 2.50% in half year to June 18 excludes
interest on loans upgraded from Stage 3 without incurring financial
loss
(2) New transactional lending are balances drawn down for the
first time on transactional based products
(3) Based on personal current account customers
-S -
For further information, please contact:
Mark Bourke Niamh Hore Stephen O'Shea
Chief Financial Officer Head of Investor Relations Head of Media Relations
Tel: +353-1-6412195 Tel: +353-1-6411817 Tel: +353-1-772 0456
email: mark.g.bourke@aib.ie email: niamh.a.hore@aib.ie email: stephen.p.o'shea@aib.ie
Forward Looking Statements
This announcement 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 and
uncertainties' on pages 58 to 68 of the Annual Financial Report
2017. In addition to matters relating to the Group's business,
future performance will be impacted by Irish, UK and wider European
and global economic and financial market considerations. 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 58 to 68 of the Annual Financial
Report 2017 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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END
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