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The quarter continued to enjoy stronger-than-expected revenue momentum driven by interest and, to a lesser extent, non-interest income while the asset quality trends remained benign.
Companies: AIB Group plc
AlphaValue
The first-half’s profitability skyrocketed to excessive levels driven by a stronger-than-expected net interest margin widening. This performance should be repeated in the second half. It remains to be seen where the management will place the new sustainable profitability, but it is likely to be at least in the mid-teens.
The first quarter enjoyed stronger-than-expected interest rate tailwinds thus enabling the management to upgrade its full-year guidance. Asset quality trends proved also more resilient, paving the way for further upgrades.
Like BOI yesterday, the net interest margin skyrocketed to unprecedented and hard-to-justify levels. Management now expects to meet its +13% 2024 financial objective as soon as this year. However, it is worth remembering that, contrary to BOI, it is set on CET1 (@13.5%) and corresponds in reality to a relatively unambitious +10-11% RoTE.
Management slightly upgraded its top-line guidance for 2022 driven by both interest and non-interest income, while the acquisition of Ulster Bank will distort the second half materially.
The first-quarter results were largely in line with the group’s expectations thus enabling it to qualify them as strong. The full-year guidance was upgraded on stronger net interest income largely driven by scope changes but also by the progressive support from interest rate increases.
The third quarter enjoyed further net provision recoveries and confirmed fee income recovery. The net interest margin remained under strong pressure but will benefit from a stronger TLTRO relief in Q4. The balance sheet has been positioned to benefit from interest hikes, if any.
The first half of the year was impacted by heavy charges, fortunately mitigated by strong loan provision releases. Management increased its 2023 RoTE objective by 1ppt to above 9%, a demanding target that still has to be reflected in consensus or AV projections.
The quarter was in line with management’s full-year guidance, showing the first signs of a net interest margin recovery and normalisation of fee income generation and cost of risk.
The group managed to post almost breakeven second-half profits thanks to cost control and a sharp reduction in the cost of risk. The return to decent profitability levels remains a distant objective despite the strong planned cost reduction and the expected fast cost of risk normalisation thus evidencing structural troubles.
Management did not hesitate to frontload the bulk of the expected annual COVID-19 impact, although the first-half pre-provision performance was affected by depressed revenue generation and a rigid cost base. The group’s recovery potential remains the big unknown.
The limited first quarter loss only partially captures the pending impact of the COVID-19-induced recession as, contrary to BOI yesterday, the group made it clear that the retained macro-economic scenario is now too optimistic.
The second-half showed a sharp net interest margin squeeze and a deteriorating efficiency. Management’s guidance for this year points to a confirmation of these trends. Although it is committed to offsetting accelerated investments with strong staff cuts by 2022, the viability of its above 8% mid-term RoTE objective will rely on its ability to expand the business in CIB and the UK.
The third-quarter results showed ongoing net interest margin pressure and operating expenses inflation in a context of cost of risk normalisation. Unfortunately, one will have to wait until the release of the group’s full-year results due on 6 March 2020 to know management’s action plan.
The half-year results showed a net interest margin squeeze, efficiency deterioration and increased capital consumption, notwithstanding the strong pending impact of the review of the mortgage model.
Research Tree provides access to ongoing research coverage, media content and regulatory news on AIB Group plc. We currently have 0 research reports from 2 professional analysts.
In the most difficult market conditions in more than a decade, Foxtons after adopting new strategic priorities, delivered an impressive turnaround in performance, and regained its position as London’s leading Estate Agent. Our analysis recognises the logic which underlies current consensus, see scope for upgrades and justifies valuations materially above current values.
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Zeus Capital
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Hardman & Co
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Cavendish
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WHIreland
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Edison
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Liberum
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Auctus Advisors
ATT offers significantly discounted exposure to the technology sector…
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Kepler | Trust Intelligence
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