AIB back in the black after Covid-19 crisis prepares to benefit from exit of rivals

Its pre-tax profit of €291m in the six months to the end of June compared with a loss of €909m a year earlier. File Picture: Mark Stedman/RollingNews.ie

AIB was black in the first half of the year as it became the second of the two big lenders to show the banking industry is returning to some sort of financial health following the huge hit from the Covid-19 economic crisis.

Chief executive Colin Hunt said the bank had made “solid progress” and has revisited its financial targets to reduce costs and boost returns as it prepares to benefit from the consolidation in Irish banking amid the exit of rivals Ulster Bank and KBC.

AIB - which is 70%-owned by the Government - will acquire €4.2bn in performing corporate loans in the carve-up of the NatWest-owned Ulster, and also plans to buy back broker Goodbody.

Its pre-tax profit of €291m in the six months to the end of June compared with a loss of €909m a year earlier. New lending was up 3%.

However, net interest income fell 9% to €881m due to lower loan volumes and low interest rates, and the half-year numbers also included a net credit impairment write-back of €103m, as the worst of the Covid storm lifted.

On mortgages, Mr Hunt said the Irish mortgage “performed strongly” in the latest period.

“A solid rise in mortgage lending is expected with market estimates revised to circa €10bn for 2021. With a strengthened proposition, momentum continues in our applications and approvals data, giving us confidence in our full-year performance,” he said.

Main rival Bank of Ireland showed in financial earnings earlier this week it too was back in the black. It posted an operating profit of €465m in the six months compared with a loss of €669m a year earlier.

Bank of Ireland will also benefit hugely from consolidation: It plans to take €9bn in mortgage loans and €5bn in deposits from KBC, as the Belgian-owned group exits the Republic and is set to buy back broker Davy. 

Bank of Ireland also plans to close a significant part of its branch network by the end of the year.