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Irish Banks Smash Expectations with “Exceptionally Strong” Results, Boosted by Competitive Deposit Rates


Irish Banks Report “Exceptionally Strong Results” with Combined Income of Over €1.7bn

Three of Ireland’s major banks, AIB, Bank of Ireland, and Permanent TSB, have reported “exceptionally strong results” for the first half of the year, generating a combined income of over €1.7bn. This success has been attributed, in part, to the deposits they place at the European Central Bank (ECB) and the deposit rates they offer customers, according to ratings firm DBRS Morningstar.

The DBRS report highlights the strong profitability of the Irish banks, driven by deposit margin. However, it also notes “early signs” of deterioration in loan quality, likely due to high levels of price and cost inflation for households and businesses. Despite this, the three banks reported a total net income of €1.73bn, marking one of the strongest performances at the half-year stage since the financial crisis over 14 years ago.

The surge in European Central Bank interest rates since last summer has contributed to the banks’ profits. This allowed them to tap into higher returns from the deposits held at the ECB. Additionally, the continuous repricing of loan rates and the loans acquired when rivals Ulster Bank and KBC Bank exited the market have also played a role in boosting profits.

While interest rates on customer deposits, the largest source of funding for Irish banks, have slightly increased since the end of 2022, most customers prefer to hold deposits in accounts with no or low-yielding rates. As a result, the return on equity, as calculated by DBRS Morningstar, has significantly increased year-on-year.

For AIB, the return on equity climbed to 13.6% at the half-way stage from 7.2% a year earlier. Bank of Ireland saw an increase to 14.4% from only 5%, and Permanent TSB experienced a rise to over 2% from a below-water return of 4% over the same period.

However, the DBRS report also highlights an increase in total loan provisions for the three banks, reaching €258m in the first half. This is attributed to an increase in risk in the residential mortgage and real estate sector portfolios, indicating early signs of asset quality deterioration.

Despite these challenges, the Irish banks have maintained significant capital buffers to protect against potential economic shocks and loan losses. These buffers are well above the minimum requirements set by regulators.

It is worth noting that Irish banks are not the only ones experiencing positive results. Banks in Italy, Portugal, Spain, and Greece have also posted strong results in the first six months of the year. DBRS Morningstar states that these jurisdictions, like Ireland, have low deposit betas, lower than initially expected for 2023, averaging around 10%.

The positive news has been reflected in the stock market, with shares in Irish banks rising. AIB shares gained 2%, Bank of Ireland shares saw a slight increase, and Permanent TSB rose by almost 4.75%.

Overall, the Irish banking sector has shown resilience and profitability in the face of economic challenges. While there are indications of potential asset quality deterioration, the banks’ strong performance and significant capital buffers provide a solid foundation for future growth and stability.

Thomas Lyons
Thomas Lyons
Thomas, the founder and chief editor at Top Rated, harbours a deep-seated passion for business, news, and product reviews. His thirst for knowledge and experience has led him on a journey across the length and breadth of the country, enabling him to garner a wealth of insight. At TopRated.ie, his sole aim is to deliver meticulously researched news and provide impartial reviews of fact checked Irish companies, thus helping readers make well-informed decisions.


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