AIB has reported a good start to the year and said its remains on track to meet its full year expectations, but warned that it expects to see more tracker mortgage costs. 

In a trading update, AIB said its net interest margin - the difference between the average rate at which it funds itself and lends on to customers - rose to 2.5% in the first quarter from 2.48% in the final quarter of 2018.

The bank said its non-performing loans reduced by 21% to €4.8 billion from €6.1 billion at the end of last year. 

It recently completed a €1 billion non-performing loan sale and its chief executive Colin Hunt told a recent Oireachtas Committee that it may sell further non-performing loans later this year. 

In today's trading update, AIB said said it expects to incur exceptional costs this year, including costs related to the tracker mortgage examination as it reaches its final stages, as well as business restructuring charges.

But it said its costs are in line with expectations and added that cost focus remains a key priority for the group. 

Regulatory costs and levies for the year are expected to reach about €100m, it stated. 

Today's trading update reveals that new lending rose by 11% in the first three months of the year, with new mortgage lending up 9%.

AIB said that corporate and consumer credit remains strong, but SME credit demand is "somewhat subdued" as firms delay making investment decisions due to Brexit related uncertainties.

"In this, my first update on the trading performance of AIB, I'm delighted to confirm that we have had a good start to 2019 with solid profitability, strong new lending and continued performing loan book growth," Colin Hunt said in today's trading update.

Mr Hunt said the bank's asset quality continued to improve with significant reduction in non-performing exposures (NPEs) putting it on track to reach the milestone of about 5% by the end of the year. 

"We remain focused on our 'Customer First' strategy and in April we were pleased to enhance our customer propositions in both our digital agenda, through our joint venture acquisition of Payzone, and market leading mortgage offering," he added.

In today's trading update, AIB also said it has put in place a "comprehensive contingency plan" for various Brexit outcomes. 

"Our 31 Brexit advisors understand the challenges and opportunities presented by Brexit and are focused on supporting customers to manage their business through this period of change," the bank said.