TIDMAIBG
RNS Number : 0041M
AIB Group PLC
25 April 2018
EMBARGO 07:00 25 April 2018
AIB Group pLC - Q1 2018 Trading update (UNAUDITED)
AIB releases the following update in advance of its AGM which
takes place today at 11:00 (BST).
A good start to 2018 and performing to expectations
"Q1 delivered a good start to the year with strong
profitability, capital generation and continued loan book growth.
The quality of the loan book also improved with increased new
lending and further NPE reductions. In the quarter, we commenced
our MREL issuance programme, executing a successful HoldCo
transaction. We continue to focus on meeting our customers' needs,
simplifying our operating model and increasing efficiency which
positions us well for the remainder of the year."
- Bernard Byrne, CEO
Key Highlights
-- Fully loaded CET1 17.1% driven by strong profitability offset
by IFRS 9 impact and dividend accrual
-- Holding normalised Net Interest Margin (NIM) of 2.50% for Q1, excluding cured loan interest
-- Gross loans increased by EUR0.3bn to EUR63.6bn in the quarter; new lending up 18% in Ireland
-- Disciplined cost management with stable costs year on year
-- NPEs reduced by 10% to EUR9.2bn from EUR10.2bn in December 2017
Economic Environment
The positive momentum continues in the Irish economy. In 2017,
economic growth as measured by Modified Final Domestic Demand
(which excludes some multi-national activity) grew by 4%. The
number in employment continues to rise by c. 3% per annum while the
unemployment rate declined for a sixth consecutive month in
February 2018, falling to a near 10-year low of 6.1%. Activity
metrics in the housing market are positive although the pace of
housing supply is still some way short of estimated demand.
As global macro-economic and geo-political risks rise,
notwithstanding a continued buoyant economic backdrop, we are
cognisant of uncertainties and potential challenges in the medium
term. We continue to support our Irish and UK-based customers,
working closely with them to better understand any potential
implications, with particular reference to Brexit.
Financial Performance
The Group is performing well and remains on track to meet its
medium term targets.
In Q1 2018 NIM was 2.53% and in line with the prior year
equivalent period (Q1 2017: 2.53% incl ELG). Excluding income from
cured loans, normalised NIM was 2.50%, consistent with FY 2017 NIM.
This reflects lower funding costs offset by the disposal of high
yielding government bonds and the absorption of Q4 mortgage pricing
changes.
Fees and commission income remained stable in the quarter.
Group operating costs to 31 March 2018 were as anticipated and
in line with Q1 last year. As previously stated, the factors
expected to impact costs in 2018 include wage inflation, continued
investment in loan restructuring and increased depreciation. We
continue to invest to generate efficiencies and harvest benefits
from the ongoing simplification of our operating model. We continue
to focus on cost management and are confident of achieving our
sustainable cost income ratio target of less than 50% by end
2019.
Regulatory costs and levies for 2018, relating to the Single
Resolution Fund (SRF), the Deposit Guarantee Scheme (DGS) and the
Bank Levy, are expected to be in line with full year 2017
(EUR105m).
A net credit provision write-back was recorded in Q1, however,
we recognise the scope for some volatility in provisioning in the
short term due to the introduction of IFRS 9 and the move to
lifetime expected loss calculation.
We continue to make progress on the Tracker Mortgage Review. 96%
of identified impacted customers have received payment and the
remaining identified customers will be paid in Q2. The related
provisions are unchanged.
Balance Sheet
The performing loan book increased from December 2017 to March
2018 as new lending exceeded redemptions. Gross loans of EUR63.6bn
were up EUR0.3bn, however an equal increase in provisions due to
IFRS 9 implementation resulted in a flat net loan book of
EUR60.0bn.
New lending drawdowns in the quarter were strong. Lending in
Ireland increased by 18% on the prior year period. Our market
share(1) of mortgage drawdowns in the month of February was 33%, up
on month December 2017, and a positive trend in applications
continues. In the UK, new lending was lower in Q1 2018 compared to
the prior year period, overall however, the UK loan book has
remained stable since December.
Non-performing exposures (NPEs)(2) reduced by EUR1.0bn to
EUR9.2bn driven by continued case by case resolution (c. EUR400m)
and the impact of harmonisation of definitions of defaulted loans
under IFRS 9(3) .The normalisation of NPEs remains a key focus and
a strategic priority for the Bank.
Customer accounts of EUR64.8bn increased from EUR64.6bn at
December 2017 primarily as current accounts continue to grow.
During Q1 2018, we sold a EUR0.5bn high yielding government bond
within our AFS portfolio to lower this balance to EUR15.7bn at
March 2018. The loan to deposit ratio was 93% at the end of Q1
2018.
Funding & Capital
In Q1 2018 we delivered a successful EUR500m 5 year HoldCo
Senior transaction priced at mid-swaps +115bps. The quality and
breadth of investor interest (4.2x oversubscribed) for our
inaugural HoldCo transaction is a positive result as we commence
our MREL issuance programme.
The fully loaded CET1 at the end of Q1 was 17.1% (Dec 2017:
17.5%) driven by strong profitability offset predominantly by IFRS
9 impact(3) , a marginal increase in RWA and dividend accrual.
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, driving
efficiencies through the evolution of our operating model and
reducing NPEs to normalised levels. With strong profitability and
capital generation, we are well positioned to deliver for our
customers and shareholders.
(1) Source: BPFI February 2018
(2) NPEs can broadly be split into two categories: customers
that we have resolved subject to a probationary period or
completion of property sales before the loans exit from NPE;
customers yet to be resolved (previously defined as impaired and 90
days past due)
(3) Subject to finalisation
-ENDS-
For further information, please contact:
Mark Bourke Niamh Hore Orla Bird
Chief Financial Officer Head of Equity Investor Relations Head of Communications
AIB Bankcentre AIB Bankcentre AIB Bankcentre
Dublin Dublin Dublin
Tel: +353-1-6412195 Tel: +353-1-6411817 Tel: +353-1-6415375
email: email: email:
mark.g.bourke@aib.ie niamh.a.hore@aib.ie orla.c.bird@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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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