AIB said on Thursday that it is in talks to buy back some of the State’s shares as part of a plan to hand over €213 million to shareholders through dividends and stock repurchases, after it returned to profit last year.
The bank posted a net profit of €645 million for 2021 as lending grew and its level of performing loans increased.
While the company also freed up €238 million of bad loan provisions, having taken a €1.46 billion loans charge in 2020 at the height of the Covid-19 pandemic, the benefit of this release was more than offset by €318 million of exceptional costs.
AIB, led by chief executive Colin Hunt, is now planning to return to paying dividends after a two-year hiatus during the pandemic, with €122 million set to go to shareholders by way of ordinary dividends. The Irish Government currently owns almost 71 per cent of the bank.
The bank said that it has also ring-fenced €91 million for a share buyback programme – adding that it is in talks regarding a repurchase of some of the State’s share as part of this move.
“Today I am pleased to announce that AIB Group delivered a strong performance in 2021 with a return to profitability and €213m of proposed distributions for our shareholders,” said Mr Hunt. “It was a year of very significant progress across the group despite uncertainties related to the Covid-19 pandemic.”
AIB executives had previously signalled to analysts in November that it was unlikely to start handing back excess capital to shareholders in 2023, beyond returning to regular dividends.
That’s because the group would be concentrating on bedding in its recent acquisition of Goodbody Stockbrokers, investing in a life and pensions joint venture with Canada Life, and completing its planned purchase of €4.2 billion of corporate and commercial loans from Ulster Bank, as the latter exits the market.
Net interest income at AIB dipped by 4 per cent to €1.79 billion last year, reflecting the impact of the negative interest rate environment across the euro zone, lower average loan volumes and the bank’s excess liquidity. During 2021 it expanded its strategy of passing on the European Central Bank’s (ECB) negative rate on deposits to some €12 billion of AIB accounts, up from €4.7 billion a year earlier.
The bank also got some relief in the negative-rate environment by tapping an ECB lending facility – known as TLTRO III – for €10 billion. This allows banks to borrow at rates of as low as minus 1 per cent.
New lending at AIB increased by 13 per cent to €10.4 billion last year. With the overall Irish mortgage market seeing a 25 per cent increase in drawdowns to €10.5 billion, AIB managed to take a 28.3 per cent share of activity.