TIDMAIBG
RNS Number : 1336R
AIB Group PLC
03 November 2021
EMBARGO 07:00 3 November 2021
AIB Group pLC - Nine Months to September 2021 Trading update
(UNAUDITED)
Strong performance in Q3 with positive momentum
"I am pleased to report that the Group had a strong third
quarter and is performing in line with our 2021 full year guidance.
Looking to the fourth quarter and beyond, we expect the steady
economic recovery to continue as our customers return to
pre-pandemic levels of activity.
We are making meaningful progress towards achieving our
medium-term targets as we deliver at pace on our strategy. Our
robust balance sheet, leading digital capability and the strength
and breadth of our franchise enable us to support our 2.8 million
customers and the communities we serve.
The doubling of our Climate Action Fund to EUR10 billion will
play a leading role in Ireland's transition to a low-carbon
economy. The Group is also focused on continuing to fund the
construction of much needed new homes and to provide mortgages to
our customers and their families.
We are increasingly confident about the economic outlook and our
ability to generate sustainable shareholder returns, and in this
regard the Board will consider the resumption of dividends for
2021, subject to regulatory approval."
- Colin Hunt, Chief Executive Officer
Highlights: (all comparisons nine months to Sept 21 versus
equivalent period 2020 unless otherwise stated)
-- Strong profitability in Q3 with current trading in line with expectations
-- Confident in our delivery for 2021; full year guidance reiterated(1)
-- Strong capital position continues; CET1 16.6%; significantly ahead of >13.5% target
-- Total income broadly stable
o Net interest income (NII) decreased 8%; on track for moderate
full year decline
o Other income increased 26%
-- Costs in line with expectations; strategic cost initiatives on track
-- Net credit impairment writeback in Q3; Asset quality remains resilient
-- Performing loans stable at EUR55.1bn; new lending increased 7% to EUR7.2bn
o ROI new mortgage lending increased 17% with green mortgages
representing 18%
o 31% mortgage market share in month of September, 27% YTD
-- September pro-forma NPEs of c.EUR3.1bn (c. 5.3%) following c.
EUR0.4bn agreed NPE portfolio sale
-- Customer deposits of EUR90.7bn; increased 11% from Dec 20 as savings continue to accumulate
-- Ireland's leading digital bank with 1.8m customers digitally active
-- Doubled our Climate Action Fund to EUR10bn; first Irish bank to adopt the Equator Principles
Financial Performance
The Group is trading well and is on track to meet earnings
expectations for the full year.
We reiterate our guidance that we expect a moderate decline in
NII in 2021(1) . In the first nine months NII decreased 8%
reflecting the impact of the lower interest rate environment, lower
loan volumes and excess liquidity partially offset by momentum in
our negative interest rate strategy. As at September 2021 c.
EUR12bn deposits were at negative rates, up from EUR4.7bn at
December 2020. The continued distortionary impact from c. 14bps
excess liquidity grossing up the balance sheet contributed to a
decline in NIM to 1.58% from 1.70% Q4 exit. NII in H1 2021 included
EUR15m of TLTRO (2) III funding benefit as the relevant March 2021
lending benchmark target was achieved. We expect to recognise c.
EUR 5 0m TL TRO funding benefit in Q4 on TLTRO III borrowings of
EUR10bn, subject to the achievement of the relevant December 2021
lending benchmark targets.
Interest rate sensitivity (3)
The structure of our balance sheet is geared towards higher
rates in our core markets of ROI and UK. The table below shows the
sensitivity of the Group's banking book to a 100 basis point
parallel movement in interest rates in terms of the impact on NII
on a forward looking basis over a twelve month period assuming no
change in the balance sheet:
Sensitivity of projected NII to interest 2020
rate movements EURm
+ 100 basis point parallel move in all
interest rates 219
------
- 100 basis point parallel move in all
interest rates (202)
------
Other income increased 26% (+24% excluding Goodbody) and within
this net fee and commission income increased 15%. We expect full
year 2021 other income to be ahead of 2020 due to a better than
expected performance as net fees and commissions return to more
normalised levels and the inclusion of Goodbody.
Costs were stable in the first nine months and on a full year
basis are expected to decline marginally (excluding c. EUR25m for
Goodbody). We remain focused and on track to achieve our
medium-term target of <EUR1.475bn(4) by 2023 which includes a
commitment to generate EUR230m cost-savings.
Regulatory costs and levies for 2021 are expected to be c.
EUR125m for the full year.
A further net credit impairment writeback was recorded in Q3
reflecting continued repayments, recoveries and a stronger macro
environment, we expect this trend to continue in the fourth
quarter. Macroeconomic scenarios will be updated as part of the
full-year credit impairment process reflecting the strengthening
environment.
Exceptional costs are expected to be c. EUR350m in 2021 as
guided.
Balance sheet
Gross loans of EUR58.5bn were broadly stable from EUR58.7bn in
June 21. New lending of EUR7.2bn for the nine months to September
represented 7% growth versus the equivalent prior year period with
a pick-up in momentum in Q3 to EUR2.7bn (Q1: EUR2.3bn, Q2:
EUR2.2bn). We expect this trend to continue in Q4 as H2 new lending
is on track to outperform H1 with a strong performance expected in
mortgages and corporate banking.
The Irish mortgage market continued to perform strongly in Q3
with nine months drawdowns up 32% on the prior year period. Market
estimates have been revised upwards to >EUR10bn for 2021.
YTD ROI new mortgage lending increased 17% versus the prior year
with 36% increase in Q3 versus Q2. Our mortgage market share of
drawdowns in the month of September was 31% (Sept YTD 27%) as the
strong pipeline of applications and approvals that we have seen
throughout 2021 is converting to drawdowns.
New lending in AIB Capital Markets(5) increased 20% with strong
performances particularly in renewable energy and property. SME new
lending to September was up 3% and the pipeline is robust across a
number of sectors. New consumer lending remains sluggish reflecting
subdued credit demand.
Our commitment to the sustainability agenda and support for
customers transitioning to a lower-carbon economy is reflected in
EUR1.4bn of new green lending recorded in the first nine months of
the year. Within this our green mortgage product represented 18% of
new ROI mortgage lending.
NPEs decreased to EUR3.5bn or 5.9% of gross loans at end
September (Dec 20: EUR4.3bn or 7.3%). Including the recently
announced long-term default c. EUR0.4bn portfolio sale, NPEs are c.
EUR3.1bn or c. 5.3% on a pro-forma basis. Asset quality remains
resilient with minimal net flow to Stage 3. We are well progressed
towards our medium-term target of c.3%.
Funding & Capital
The loan to deposit ratio was 62% at the end of Q3 2021. The
strong trend in customer deposits continued in the third quarter
with EUR90.7bn at the end of September compared to EUR88.3bn in
June (Dec 20: EUR82.0bn). Cash held at the CBI (inclusive of
EUR10bn TLTRO) amounted to EUR33.5bn at the end of Sept (Dec 20:
EUR19.3bn).
The fully loaded CET1 at the end of Q3 was 16.6% (Dec 20: 15.6%)
which is well ahead of our medium-term target of >13.5% and
regulatory requirements. The main movements since June (CET1:
16.4%) are organic capital generation and lower RWAs partially
offset by the impact of Goodbody c. 16bps. Additionally we expect a
further c. 25bps CET1 benefit as a result of the recently announced
NPE portfolio sale.
Following the easing of regulatory guidelines in relation to
capital distributions for European banks, the Board will consider
the resumption of dividends for 2021, subject to regulatory
approval.
Strategic progress & Sustainability
Implementation of our strategic plan continues and we are making
good progress in advancing our digitalisation and ways of working
programmes.
Following receipt of all regulatory approvals, on 1 September we
announced the completion of the acquisition of Goodbody.
Competition and Consumer Protection Commission (CCPC) approval has
been received for our joint venture proposition with Great-West
LifeCo with the regulatory approval process progressing well.
Commercial negotiations with NatWest Holdings Limited, for the
acquisition of a c. EUR4bn performing corporate and commercial loan
portfolio, have completed and the CCPC approval process is now
underway. Our plans to exit the GB SME market are progressing well
with a sales process significantly advanced and we have moved to
preferred bidder stage.
AIB became the first Irish bank to adopt the Equator Principles,
a globally recognised risk management framework used by financial
institutions for determining, assessing and managing environmental
and social risk in projects. Additionally in October we doubled our
Climate Action Fund to EUR10bn due to strong customer demand.
Following a strong performance in Q3 with an economy that has
effectively fully re-opened we are confident for the remainder of
the year and we continue to focus on embedding our strategy and
supporting our customers.
-S-
Analyst conference call
There will be a conference call for analysts at 08:30 GMT today
3 November, hosted by Colin Hunt, CEO, and Donal Galvin, CFO.
Dial in details for this event are as follows:
Ireland: 01 5060650
International: +44 (0) 2071 928338
USA +1 646 741-3167
Conference ID 8089418
(1) Guidance excludes impact of inorganic opportunities
(2) TLTRO: Targeted Longer-Term Refinancing Operations
(3) For further information please see page 159 of Annual Report 2020
(4) Costs before bank levies and regulatory fees and exceptional items
(5) AIB Capital Markets formerly Corporate, Institutional and Business Banking (CIB)
For further information, please contact:
Niamh Hore / Siobhain Walsh Paddy McDonnell / Graham Union
Investor Relations Media Relations
AIB Group AIB Group
Dublin Dublin
Tel: +353-86-3135647 / +353-87-3956864 Tel: +353-87-7390743 / +353-1-6412430
email: niamh.a.hore@aib.ie Email : paddy.x.mcdonnell@aib.ie
siobhain.m.walsh@aib.ie graham.x.union@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 50 to
53 in the Annual Financial Report 2020 and updated on page 36 of
the Half-Yearly Financial Report 2021. In addition to matters
relating to the Group's business, future performance will be
impacted by direct and indirect impacts of the COVID-19 pandemic
and 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 50 to 53 of the Annual Financial Report 2020 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.
Figures presented may be subject to rounding.
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