26th Jul 2019 11:32
(Alliance News) - Irish bank AIB Group PLC on Friday said its profit declined in the first half its financial year due to exceptional items as well as impairment writebacks and absence of disposal gains.
Shares in AIB were down 4.4% at EUR3.50 in morning trade.
The company's pretax profit for the six months to June 30 was EUR436 million, including exceptional items. This compares to a EUR762 million pretax profit in the first half of 2018, when the company recorded a EUR142 million net credit writeback and gains on loan portfolio disposals. In the first of 2019, the lender recorded a EUR9 million exceptional charge.
The pre-exceptional pretax profit was EUR567 million, which consists of USD131 million predominantly resulting from "restitution costs and provisions associated with legacy issues". The company said the tracker mortgages examination is concluding and payment have been "issued to the vast majority of customers" with the firm now working with Ireland's central bank "through the enforcement process".
"We know that issues may continue to emerge and we are committed to dealing with them in an expedited, transparent and fair way for our customers," said AIB.
Net income margin was 2.46% for the first half versus 2.50% year-on-year and a second quarter net interest margin of 2.43% due to a widened spread between loans and deposits. AIB is still targeting a medium term net interest margin of more than 2.4%.
Operating expenses rose to EUR744 million from EUR711 million due to wage inflation, higher depreciation, and increased costs from its distressed loan work-out unit and more regulatory oversight.
The cost income ratio was 54% in the first half, compared to 51% year-on-year. AIB said "cost discipline is a key management priority" and committed to working toward a cost income ratio of less than 50%.
The company also incurred a EUR9 million charge after "a small net credit impairment write-back" in the first quarter of 2019.
Chief Executive Colin Hunt said: "Today we announce our half year results, my first as CEO. We continued to deliver on our strategic plan with solid underlying profitability, sustainable new lending growth, an expanding performing loan book and a robust capital base. Our progress towards non-performing exposure (NPE) normalisation continues and with all levers at our disposal, we remain firmly on track to reach the milestone of [circa] 5% by year end. Our primary strategic focus remains NPE reduction facilitating the potential for capital returns. Supported by market-leading technology, we continue to invest in all of our customer channels and AIB is the No 1 Irish Banking App with over one million users reached this year."
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