Morgan Stanley has upgraded AIB Group (AIBRF, Financial) from Underweight to Equal Weight, revising its price target to EUR 7.50 from the previous EUR 7. The firm believes that the decreasing risk to European economic growth will support yield steepening, leading to a resumption of net interest income growth for banks by 2026. Consequently, Morgan Stanley has also improved its overall outlook for the European banking sector, shifting its rating from In-Line to Attractive.
AIBRF Key Business Developments
Release Date: March 05, 2025
- After-Tax Profit: EUR2.4 billion.
- Return on Tangible Equity (ROTE): 26.7%.
- Net Interest Income: Increased by 7% to EUR4.1 billion.
- CET1 Ratio: 15.1%.
- Total Distributions: EUR2.6 billion, representing a payout ratio of 109%.
- New Lending: Increased by 17% to EUR14.5 billion.
- Gross Loans: EUR71.2 billion, a 6% increase.
- Cost of Risk: 8 basis points, with a charge of EUR55 million.
- Total Income: EUR4.9 billion, up 4%.
- Net Fees and Commission: Increased by 5% to EUR666 million.
- Costs: EUR1.9 billion, with an underlying growth of 7%.
- Cost Income Ratio: 40%.
- Customer Accounts: EUR109.9 billion, increased by EUR5 billion.
- Proposed Cash Dividend: EUR861 million or EUR0.36984 per share.
- Share Buyback: Regulatory approved EUR1.2 billion.
- New Mortgage Lending: EUR2.8 billion to first-time buyers.
- Green or Transitional Lending: 35% of new lending.
- Market Share: 40% in personal main current accounts, 49% in business main current accounts, and 36% in mortgage market share.
- Assets Under Management: EUR17 billion.
- Net Interest Margin: 3%.
- Other Income: EUR779 million, down 13%.
- Staff Costs: Increased by 9%.
- Headcount: Reduced by 1%.
- Funding and Liquidity: LDR 64, LCR over 200, and net stable funding ratio of 162%.
- Capital Generation: 400 basis points.
- Deferred Tax Asset Benefit: 50 basis points in 2024.
- Basel IV Positive Effect: 120 basis points.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AIB Group PLC (AIBRF, Financial) reported an after-tax profit of almost EUR2.4 billion, representing a return on tangible equity (ROTE) of 26.7%.
- The company's net interest income grew by 7%, surpassing expectations, with strong performance across both assets and liabilities.
- AIB Group PLC (AIBRF) maintained a robust capital position with a CET1 ratio of 15.1%, allowing for proposed total distributions of EUR2.6 billion.
- Significant progress was made in green finance, with 35% of new lending being green or transitional, and over EUR16.5 billion of the EUR30 billion Climate Action Fund deployed.
- The company achieved a 17% increase in new lending to EUR14.5 billion, with strong growth in corporate and SME lending, particularly in renewable energy and infrastructure.
Negative Points
- The commercial real estate market remained subdued, with new property lending down 21% for the year.
- AIB Group PLC (AIBRF) faces potential challenges from geopolitical uncertainties and trade tensions, which could impact the Irish economy.
- The company anticipates a moderation in the growth rate of modified domestic demand in Ireland from 3% in 2025 to 2.3% by 2027.
- There is a need for significant upgrading of critical economic and social infrastructure in Ireland, which could pose challenges if not addressed.
- The cost of risk was 8 basis points, with a charge of EUR55 million, indicating some level of risk in the asset portfolio despite strong overall asset quality.
