The chief executive of AIB has defended the bank's decision to only partially pass on ECB interest rate increases to deposit holders, amid shareholder accusations at its AGM that the bank is "short-changing" savers.
Colin Hunt pointed out that the lender also hasn’t passed on the full interest rate rises to borrowers either and keeps products and pricing under constant review.
"It is an area of active consideration at the moment," he told journalists after the AGM.
"We are alert to the pricing right the way across the product range and in the event that we believe it necessary to move up pricing again we will do so."
"But it is an area we are keeping under constant review and monitoring very very closely."
Most banks here have been slow to pass on the interest rate increases that have taken place since July to their deposit customers.
Addressing the AGM, shareholder Sean Quinn said Irish savers were facing a crazy situation with the rates on offer from banks.
While another shareholder, Hugh Maguire, said those with cash on deposit at AIB at the moment are losing money, despite the shift in rates.
He said AIB customers in Northern Ireland could get deposit rates that were significantly higher.
Mr Hunt said that was because Northern Ireland’s interest rates are set by the Bank of England, which has raised rates more than the ECB has.
He said AIB had moved quickly to end negative rates for large corporate and personal depositors and has since acted to increase deposit rates on some products to as much as 1%.
Regarding the prospect of future rate increases from the ECB, Mr Hunt told reporters that he thinks the bulk of the rate adjustments are behind us.
However, he said he suspects that we will see a number of further rate increases between now and the end of year.
"I suspect we will be dealing with rates at or above these levels for some time," he said.
Mr Hunt said the bank had put in place a comprehensive suite of early warning indicators ahead of Brexit to warn about emerging signs of stress across its loan books.
Right now, he said the lender is not seeing any signs of such stress caused by rising rates, but is monitoring the situation very closely.
He there has been a very significant deleveraging in the Irish economy and this coupled with the high savings rate is why we are not seeing distress in the loan book now.
Speaking in Dublin, Taoiseach Leo Varadkar said he does not think any of the banks should be making increased profits because interest rates have gone up.
"They have options. One is to pass some of it on to savers in the form of higher interest rates or not to pass on all of the increase to mortgage holders," Mr Varadkar said.
"I have had some engagement with the banks and in fairness to the major banks they haven't at least yet passed on most of the ECB increases to their variable customers and that is probably a good thing," he said.
He made his comments at the opening of US technology company Salesforce's new Dublin offices today.
"I think mortgage holders are probably a little bit more pressed for cash at the moment than savers and I think the fact that banks haven't been fully passing on interest rate increases, with the exception of tracker holders is a positive thing but I don't think there is any reason for banks to be using this as an opportunity to massively increase their profits."
Earlier AIB said it had seen a very strong first quarter performance, adding that it was confident in its outlook for 2023.
In a trading update it said that total income in the first three months of the year increased 70% supported by the higher interest rate environment.
The bank noted that it had operated in a negative interest rate environment in the first quarter of 2022 compared to an ECB deposit rate at 2% at the start of 2023.
The country's biggest mortgage lender said it expects net interest income of €3.3 billion this year compared to an earlier estimate of €3 billion.
It also increased its net interest margin forecast to above 2.7% from 2.4% and forecast 2023 return on tangible equity (ROTE) to be in the high-teens.
The majority state-owned bank said in December that it expected to reach a more than 13% ROTE by 2024, allowing it to supplement increased dividend payments with share buybacks over that time.
The bank's net interest margin, a key metric showing the profitability of its lending, rose to 2.78% in the first quarter compared to 1.45% a year ago when the bank was still operating in a negative interest rate environment.
The European Central Bank is expected to raise interest rates for the seventh meeting in a row later today, with only the size of the move still open to debate.
AIB said today that its gross loans in the three months from January to March increased to €61.8 billion, up €0.6 billion since December 2022, while new lending was up 5% to €2.9 billion.
The lender said its mortgage market share stood at 31% in March.
AIB said that a further 100,000 new accounts were opened in the first quarter as the bank saw customers from the departing Ulster Bank and KBC Bank Ireland join it.
The bank said its other income increased by 15% compared to the same time last year with strong performances across fee based lines.
It noted that other income also included a forward contract for the acquisition of Ulster Bank's tracker mortgages and AIB said it now expects full year 2023 other income of about €750m.
But operating costs were up 14% in the first quarter of the year due to the impact of wage and general inflation, customer onboarding costs and increased customer servicing as a result of a larger customer base and higher staff numbers given the enlarged group.
"Notwithstanding the overseas financial market volatility, AIB remains in a position of strength with a robust balance sheet, stable deposit base and growing loan book enabling us to support our customers and the wider economy," Colin Hunt said.
"We remain on track to deliver sustainable returns for our shareholders," he added.
Shares in the bank moved higher in Dublin trade today.
