Buoyant AIB targets higher return on equity, dividends and buybacks

Colin Hunt, CEO AIB Group: 'The Irish economy continues to deliver economic growth and demonstrate resilience.' Picture: Miki Barlok

AIB expects to reach a more than 13% return on tangible equity by 2024, up from the 10% forecast for 2023, and to be able to supplement increased dividend payments with share buybacks over that time, the Irish bank said on Friday.

In an update of its medium-term targets, Ireland's largest mortgage lender said it expects annual costs to rise to €1.75bn in 2024, from the €1.65bn expected this year, with its cost-to-income ratio dropping to about 50% from 60% across that period.

It kept its fully loaded core tier 1 capital ratio target - a key measure of financial strength - at above 13.5%. AIB said it seeks to move towards that target from the 15.4% it stood at the end of September by prudently increasing shareholder returns.

AIB said in October that it expects its net interest income to rise by more than 15% this year, the second time it upgraded the forecast to reflect the faster pace of European Central Bank interest rate hikes that Irish banks are particularly geared towards.

It said on Friday that strong revenue momentum, sustainable loan book growth and a growing customer base supporting fees and commissions would drive the higher returns on equity.

AIB is also benefitting from rivals KBC and NatWest exiting the Irish market, leaving it, Bank of Ireland and Permanent TSB as the only high street banks.

Bank of Ireland said on Friday that it had received final approval to complete its €5bn deal to buy most of KBC's Irish performing assets and expected the transaction to close by end of the first quarter next year.

AIB had opened 350,000 new accounts by the end of September and Chief Executive Colin Hunt said the changing banking landscape had also influenced the revised medium-term targets.

"While global economic headwinds exist, the Irish economy continues to deliver economic growth and demonstrate resilience," Hunt said in a statement.

Reuters