AIB has today raised its full-year guidance for the second time in three months after almost doubling its first-half profits thanks to higher interest rates and an influx of new customers.
The bank said it expects net interest income of more than €3.6 billion, increasing a May forecast of €3.3 billion and one of €3 billion it gave in March.
It increased its net interest margin forecast to above 2.90% from 2.70% and expects return on tangible equity (ROTE) of around 20% this year, well above its medium-term target of above 13%.
The bank's net interest income rose by 98% year on year in the first six months of 2023.
This helped its half-year profit after tax jump to €854m from €477m a year earlier, which was higher than the full-year profit the bank recorded in 2022
AIB, the country's largest mortgage lender, said its profit before tax for the six months to the end of June soared by 84% to €987m from €537m the same time last year.
Its income for the six months rose by 73% to €2.2 billion.
The bank said its net income interest jumped by 98% to €1.772 billion from €895m on the back of a higher interest rate environment and higher average customer loan volumes.
It said its net interest margin (NIM) - a key metric showing the profitability of its lending - rose by 146 basis points to 2.94%.
New lending for the first half of the year rose by 2% to €5.6 billion, with the bank noting that growth in personal and corporate lending was partially offset by lower property lending.
The lender noted that it had a mortgage market share of 30.7% in the first half of the year.
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AIB said that another 185,000 new accounts were opened in the first half of 2023 as it welcomed new customers from Ulster Bank and KBC Bank Ireland, which have both left the Irish market.
It also said it has completed the acquisition of Ulster Bank's corporate and commercial loans.
It got CCPC approval in January for the acquisition of Ulster Bank's tracker mortgage portfolio, which includes about 42,000 customers and about €5 billion of mortgages.
About 80% of these customers moved to the bank in July and AIB expects the migration of the others to complete in the second half of 2023.
"The bank is in a very strong position," said AIB CEO Colin Hunt on RTÉ's Morning Ireland. "The results we're announcing today are a reflection of the the implementation of our strategy to strengthen, streamline and simplify AIB, to broaden our range of products and services and to grow the loan book."
Part of its improved performance was due to the expansion of the bank's customer base and loan book in the past year.
Mr Hunt said AIB had been very successful in attracting both customers and assets from the departing Ulster Bank RoI and KBC Bank Ireland.
So far this year it has opened 185,000 new customer accounts. Mr Hunt said around 635,000 new accounts have been opened since the start of last year.
€7 billion in loans have been migrated from Ulster Bank as of last weekend, and the half year results only contain the effects of €2.8 billion of that, with a further €4.2 billion transferred in July and another €1 billion to come towards the end of the year, he said.
"The economy remains resilient, and of course we are also benefitting from a more normalised monetary policy environment," he said, referring to the European Central Bank's interest rate increases.
However Mr Hunt would not be drawn on what the bank planned to do in light of the ECB's latest rate increase.
"What we've done to date is to take a very considered approach to how we've responded to the change in official interest rates," Mr Hunt said. "We've seen an increase of 4.25% over the course of the past 12 months - we've responded in a very measured way".
"I'm not going to provide any future guidance as to what might happen in the future, but we are conscious of the fact that we need to be cognisant of cost of living challenges out there," he stated.
He said the bank had already done that by passing through "less than 50%" of the ECB rate rises to variable and fixed customers.
AIB - along with the country's other lenders - has also been criticised for being slower to raise deposit rates in light of the ECB's moves.
However Mr Hunt said the bank had "led the way" on the rates offered to savers.
"We started increasing our deposit rates in November of last year," he said. "We have rates now out there of up to 2% for fixed rate products.
"We manage two sides of the balance sheet - we manage pricing for mortgage products, we manage pricing on the deposit side. We have been very restrained in how we've responded in our mortgage pricing - and we haven't increased personal loan rates at all."
AIB took a net credit impairment charge of €91m in the first half of the year driven by a charge in relation to commercial property.
Mr Hunt said there had definitely been a slow down in office activity and the banks is quite deliberately taking a cautious approach in the sector.
"There's a fairly direct but inverse relationship between interest rates and the value of commercial real estate," he said.
"Am I worried? I'm not worried because we have been very conservative in terms of how we want written in that space," he added.
Mr Hunt also noted that the State had recouped almost €1.2 billion in the first half of the year, as it reduced its shareholding in the bank to 46.9%.
That marked a significant milestone as the lender returned to majority private ownership - however he said AIB would continue to adhere to the Government's pay cap on bankers, despite expectations it may be relaxed further given the bank is no longer majority state owned.
However, Mr Hunt added that the landscape for attracting and retaining bank staff is now lopsided, in an apparent reference to the fact that Bank of Ireland no longer has a €500,000 cap on executive pay.
"Other institutions don't have the restrictions that we have and...it is a factor in people choosing to either stay with AIB or to move here from other organisations," he said.
Mr Hunt said there is no active plan to do anything to reduce the staff headcount in the bank, which has grown by 12% in the last year as it took in new customers.
Reacting to a call from the Financial Services Union for AIB to make another cost of living top up payment to staff in light of its profits, Mr Hunt said," I think we are delivering on our commitments to our staff."
Shares in the bank rose 3.7% in Dublin trade today.
