AIB must up rate another 1.5% for profitability

Goodbody Stockbrokers analyst Eamon Hughes says AIB will have to hike its interest rate on standard variable rate mortgages by a further 1% to 1.5% to return the bank to profitability and enable it to start lending again.

“The net interest rate margin in Ireland is less than 1%, which is well below the 2.5%-3% interest rate margins in markets similar to Ireland. There is a 2% interest rate margin in the UK,” said Mr Hughes.

AIB announced a 0.5% increase in its standard variable rate for residential mortgages to go from 3% to 3.5%. AIB also announced a 0.5% increase in the standard variable rate for buy-to-let mortgages to increase from 3.95% to 4.45%. There are roughly 70,000 AIB customers on standard variable rate mortgages.