AIB hikes shareholder returns, 'well on track' to hit growth targets

By Padraic Halpin

DUBLIN (Reuters) - AIB on Wednesday followed main rival Bank of Ireland in hiking its returns to shareholders and said a good start to 2023 with positive income momentum left it well on track to deliver its medium-term targets.

The country's largest mortgage lender will return 381 million euros ($401 million) to shareholders this year mostly through share buybacks, up from 213 million euros in 2021 after its profit before tax rose by 40% to 880 million euros.

The majority state-owned bank said in December that it expects to reach a more than 13% return on tangible equity (ROTE) by 2024 versus 9.6% last year, allowing it to supplement increased dividend payments with share buybacks over that time.

That represented an annual ordinary dividend of 50% of statutory profit and Chief Financial Officer Donal Galvin reiterated that AIB will examine on annual basis whether it is appropriate to exceed its current dividend policy of 40 to 60%.

Having upgraded its forecast for net interest income (NII) twice in the second half of 2022 to reflect the faster pace of European Central Bank interest rate hikes, AIB said on Wednesday that it ended up 20% higher year-on-year at 2.2 billion euros.

It forecast a further jump above 3 billion euros this year with customer loans also expected to grow by more than 8%, partly reflecting the completion of large loan book acquisitions from NatWest as it exits the shrinking Irish market.

Analysts at Davy Stockbrokers said the guidance pointed to significant upside to consensus expectations and indicates that AIB should comfortably exceed its 2024 ROTE target a year early in 2023.

Galvin told Reuters that AIB has not seen any slowdown in appetite for credit demand or signs of distress from the rise in interest rates but some slowdown and forms of weakness "have to be viewed as inevitable" as ECB rates continue to rise.

($1 = 0.9489 euros)

(Reporting by Padraic Halpin, Editing by Louise Heavens)