TIDMAIBG
RNS Number : 6981X
AIB Group PLC
01 May 2019
EMBARGO 07:00 01 May 2019
AIB Group pLC - Q1 2019 Trading update (UNAUDITED)
Good start to 2019 and trading in line with expectations
"In this, my first update on the trading performance of AIB, I'm
delighted to confirm that we have had a good start to 2019 with
solid profitability, strong new lending and continued performing
loan book growth. Asset quality continued to improve with
significant reduction in non-performing exposures (NPEs) putting us
firmly on track to reach the milestone of c. 5% by end 2019. We
remain focused on our Customer First strategy and in April we were
pleased to enhance our customer propositions in both our digital
agenda, through our joint venture (JV) acquisition of Payzone, and
market leading mortgage offering."
- Colin Hunt, CEO
Key Highlights
-- Net interest margin (NIM) of 2.50% for Q1, up from 2.48% exit Q4 2018
-- Performing loans up EUR0.8bn; new lending up 11% on the equivalent prior year period
-- NPEs reduced by 21% to EUR4.8bn from EUR6.1bn at year end;
including EUR1bn non-performing loan sale
-- Fully loaded CET1 17.3% driven by solid profitability offset
primarily by IFRS 16 impact of 17bps
-- Successful MREL transaction of US$1bn; c. 65% of our MREL issuance requirement complete
Economic Environment
The Irish macro indicators published for the opening months of
2019 point to an economy that is continuing to grow at a relatively
strong pace. The general consensus is for growth of c. 4% this
year, which would represent a moderation on the underlying growth
rate of between 4.5-5% evident in the past couple of years.
Activity metrics for the housing market continue to indicate
improving output, with housing commencements up 30% in the first
two months of 2019. Housing completions are forecast at close to
23,000 units this year, still some way below estimated annual
housing demand of 35,000 units. Market commentators estimate a
mortgage market of c. EUR10bn for 2019, which represents an
estimated c. 15% increase year on year. House price inflation is
now trending at more moderated levels, especially in the Dublin
market, which overall we view as a positive from a business
perspective. Factors which continue to constrain the market include
supply shortage, impact of CBI macro-prudential rules and
affordability, more acutely in Dublin. The Irish economy looks set
to continue to grow at a healthy pace not withstanding Brexit
uncertainty.
AIB has put in place a comprehensive contingency plan for
various Brexit outcomes. Our 31 Brexit advisors understand the
challenges and opportunities presented by Brexit and are focused on
supporting customers to manage their business through this period
of change.
Financial Performance
In Q1 2019 solid net interest income was supported by NIM of
2.50% up from 2.48% exit Q4 2018. We remain comfortable with our
2019 guidance of mid-2.40%s and in excess of our medium term target
2.40%+.
Fees and commission income was stable in Q1 versus Q1 2018.
Costs are in line with expectations and cost focus remains a key
priority for the Group. Operating costs in Q1 were marginally up
compared to Q1 2018 due to the previously stated factors of wage
inflation, continued investment in loan restructuring and increased
depreciation. We continue to work towards a sub 50% cost income
ratio and making the bank as efficient as possible.
Regulatory costs and levies for 2019, relating to the Single
Resolution Fund, the Deposit Guarantee Scheme and the Bank Levy,
are expected to be c. EUR100m for full year 2019.
A small net credit provision write-back was recorded in Q1
reflecting the current economic environment.
We expect to incur exceptional costs in 2019 including costs
relating to business restructuring projects and the tracker
mortgage examination programme as it reaches its final stages.
Balance Sheet
The performing loan book increased from EUR56.8bn in December
2018 to EUR57.6bn at end March 2019 as new lending exceeded
redemptions. Gross loans of EUR62.4bn were down EUR0.5bn primarily
driven by the non-performing loan sale.
New lending increased by 11% on the prior year equivalent
period. ROI mortgage new lending increased 9% and our market
share(1) of mortgage drawdowns YTD March was 31.4%. We are
experiencing a positive trend in applications data although the
impact of our enhanced fixed rates offering has yet to be
reflected. In a continuation of credit demand trends witnessed in
2018, corporate and consumer credit remains strong but SME credit
demand remains somewhat subdued as firms have delayed making
investment decisions due to Brexit related uncertainties.
Strong progress continued in Q1 normalising our NPEs with a 21%
reduction of EUR1.3bn to EUR4.8bn (7.6% of gross loans) due to
continued customer engagement and the EUR1bn non-performing loan
sale(2) . The normalisation of NPEs remains a key focus and we are
firmly on track to reach c. 5% of loans by end 2019.
Customer accounts of EUR68.1bn increased from EUR67.7bn at
December 2018. The loan to deposit ratio was 89% at the end of Q1
2019.
Funding & Capital
AIB Group plc is now rated investment grade across all three
rating agencies and this contributed to our successful execution in
April of a US$1bn MREL transaction, priced at T+195bps (yield
4.26%). The quality and breadth of investor interest (2.4x
oversubscribed) was positive and positions us well for further
issuance. We have now completed c. 65% of our estimated c. EUR4bn
MREL issuance requirement.
The fully loaded CET1 at the end of Q1 was 17.3% (Dec 2018:
17.5%) driven by solid profitability in the quarter offset by
IFRS16 impact, dividend accrual and RWA increase from balance sheet
growth. CET1 will be impacted by the RWA reduction from the
non-performing loan sale(2) and the JV acquisition of Payzone(3) in
due course.
Outlook
We have had a good start to the year and remain on track to meet
expectations. The economic backdrop is favourable and our Customer
First strategy is delivering results. We continue to make progress
on our key priorities of delivering for our customers and reducing
NPEs to normalised levels. With strong profitability we are well
positioned to deliver for our customers and shareholders.
(1) Source: Mortgage drawdowns BPFI March 2019.
(2) On 1 April 2019 we announced a non-performing loan sale of
EUR1bn equating to RWAs EUR0.75bn. Agreement was reached on the 31
March and EUR1bn NPEs have been derecognised from customer loans.
We await the RWA reduction until settlement. The buyer Everyday is
a regulated entity and will be responsible for all regulated
activities in relation to the portfolio. Link ASI Limited will
service the portfolio on behalf of Everyday under an outsourcing
arrangement between the two parties. Please click here for
announcement:
https://aib.ie/content/dam/aib/investorrelations/docs/se-announcements/2019/aib-portfolio-sale-01-april-2019.pdf
(3) On 18 April 2019 we announced a joint venture acquisition of
Payzone, a leading Irish fintech payments business, for an
enterprise value of up to EUR100m. Please click here for
announcement:
https://aib.ie/content/dam/aib/investorrelations/docs/se-announcements/2019/aib-forms-joint-venture-to-acquire-payzone-18-apr-2019.pdf
-S-
For further information, please contact:
Niamh Hore / Janet McConkey Stephen O'Shea / Paddy McDonnell
Investor Relations Media Relations
AIB Group AIB Group
Dublin Dublin
Tel: +353-1-6411817 / +353-1-6418974 Tel: +353-1-7720456 / +353-1-6412869
email: niamh.a.hore@aib.ie email: stephen.p.o'shea@aib.ie
janet.e.mcconkey@aib.ie paddy.x.mcdonnell@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 plc ("AIB" or the "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 62 to 68 of the Annual
Financial Report 2018. 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 62 to 68 of
the Annual Financial Report 2018 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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