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AIB posts record profits of €765m, boosted by ECB rate hikes

Allied Irish Banks (AIB) has posted impressive profits for 2022, with after-tax earnings of €765m, boosted by European Central Bank (ECB) interest rate hikes and the acquisition of loans from Ulster Bank.

AIB’s operating profits for the year hit almost €1.1bn, as net interest income soared by 20% to nearly €2.16bn. The acquisition of Ulster Bank’s commercial and mortgage loans helped to boost the lender’s market share in the Irish mortgage market to over 32%.

In its earnings statement, AIB chief executive Colin Hunt hailed the bank’s performance despite the challenges posed by the cost-of-living crisis, stating that it had “a strong start to 2023”.

“Despite high levels of volatility in the global environment, the Irish economy performed well and remains on track to record further growth in 2023,” Hunt said.

The bank’s share of the Irish mortgage market has been increasing, thanks in part to the withdrawal of competitors such as Ulster Bank and KBC Bank. Bank of Ireland posted profits of €1.2bn and Permanent TSB had earnings of €267m, thanks in part to the exits of these rivals.

The bank’s shares, along with those of Bank of Ireland and Permanent TSB, have been on the rise following the decisions of Ulster Bank and KBC Bank to leave the market, and since the ECB started hiking interest rates last summer.

AIB has also made plans to pay €381m to shareholders in dividends and share buybacks based on the 2022 results, with the government still holding a substantial stake in the lender.

In separate remarks, Hunt assured the public that the bank deals with all customers on a fair and consistent basis, stating that “there are no special rules, there are no special treatments, there are no special cases.”

This assurance comes after AIB wrote down a large portion of the €9.5m owed by former Kilkenny hurler DJ Carey, which caused public and political outcry.

AIB’s forecast for net interest income this year is based on the ECB deposit rate reaching 3.5% and a Bank of England rate of 4% by the end of December.

The structure of AIB’s balance sheet is geared towards higher interest rates, the bank said in its statement, noting that “the impact of a rising interest rate environment and higher average loan volumes were the main drivers.”

The lender has also been approved to acquire mortgage loans from Ulster Bank, further boosting its position in the Irish mortgage market.

As the last of the three major banks to reveal its profits for the year, AIB has demonstrated its strength and resilience, despite the challenges presented by the global economic environment. With a focus on continued growth and serving its customers fairly and consistently, AIB is poised to continue its success in the years ahead.

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