6th Mar 2020 08:47
(Alliance News) - AIB Group PLC on Friday reported a sharp drop in profit in 2019, resulting in a reduced dividend, as the lender battled a "challenging" environment.
The lender also confirmed Chair Richard Pym will be stepping down March 6 and is in the process of identifying his replacement.
In 2019, Allied Irish Bank reported pretax profit of EUR499 million, down sharply from EUR1.25 billion in 2018.
Profit before exceptional items dropped 22% year on year to EUR1.09 billion from EUR1.41 billion.
AIB made a net credit impairment charge of EUR16 million in 2019 following a EUR204 million write-back in 2018. AIB also recorded EUR592 million in exceptional items, EUR300 million of which was related to additional tracker mortgage-related provisions.
Net interest income was down 1.0% year on year to EUR2.08 billion from EUR2.10 billion
Due to the lower profit, AIB has declared a total dividend for 2019 of 8 euro cents, down 34% on the 12.1 cents distributed in 2018.
"The operating environment for European banks continued to be challenging in 2019. Notwithstanding this backdrop, the fundamentals of the group remain strong and in 2019," AIB said.
Chief Executive Colin Hunt, presenting his first annual results as CEO following his hire in March, said the lender was able to make "progress" in 2019.
Total operating expenses rose 4.9% in 2019 to EUR1.50 billion from EUR1.43 billion, but was in line with the bank's guidance.
As a result, AIB's cost-to-income ratio worsened to 56% from 53%.
AIB ended 2019 with a loan book totalling EUR62.1 billion, with EUR58.8 billion in performing loans, up 3.5% year on year, and non-performing loans of EUR3.3 billion, down 45% year on year.
The lender's net interest margin worsened in 2019, however, slipping to 2.37% from 2.47%.
Total new lending was up 2% to EUR12.3 billion, new mortgage lending in Ireland up 8% to EUR3.0 billion. AIB's mortgage market share in Ireland is 31.4%, the largest in the country.
Customer deposits grew by 5.7% over 2019 to EUR38.77 billion from EUR36.67 billion.
The bank's fully loaded CET1 ratio decreased to 17.3% in 2019 from 17.5% at the end of 2018.
Looking ahead, AIB is targetting absolute costs of EUR1.5 billion in 2022. The lender expects to see a "material" reduction in staff costs, as the bank looks to end 2022 with less than 8,000 full-time staff, down 9,520 at the end 2019.
AIB is also targetting a CET1 fully loaded ratio above 14% by 2022 and a return on tangible equity above 8%. For 2019, AIB's RoTE was 3.6%.
Hunt added: "As we announce our new medium-term targets today and embark on our next phase, I am intent on addressing legacy matters of the past so that our future, characterised by a normalised cost base, balance sheet and capital structure, will deliver for our stakeholders and sustainably generate shareholder value."
Shares in AIB Group were down 2.7% in London on Friday morning at EUR1.85.
By Paul McGowan; [email protected]
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