Ireland's AIB sees slower loan growth on subdued SMEs, US renewable woes

DUBLIN (Reuters) -AIB Group expects slower loan growth this year due to subdued lending to Irish small businesses and a paring back of financing U.S. renewable energy projects, but repeated its forecast on Friday for growth to pick back up in 2026 and 2027.

AIB, one of Ireland's two dominant lenders, also kept its full-year net interest income guidance and said it expected a return on tangible equity (ROTE) above 20% compared to a prior forecast of being meaningfully ahead of a 15% target.

First half after-tax profits fell 16% to 927 million euros ($1.1 billion) from 1.1 billion euros in 2024 following a run of European Central Bank rate cuts.

AIB shares were 2.6% lower in early trading.

The bank had expected a 5% increase in customer loans this year, but cut that to 3% after growth moderated in the first half. It still expects compound annual growth of 5% over the next two years.

AIB has positioned lending to large-scale renewable energy and infrastructure projects as a strategic growth area and targeted the U.S. as a major growth area.

However, U.S. President Donald Trump's sweeping tax and spending law, passed last month, accelerates by several years the phase-out of tax credits for wind and solar projects.

AIB finance chief Donal Galvin said the bank "read the mood music" and had already pared back its expectations for activity in the U.S. in the first half. It will look to invest in solar, but wind projects no longer look feasible, he said.

Instead, the bank will look to pivot to projects in mainland Europe, Ireland and Britain, a market Galvin said was really active but very competitive.

He added that he expects to see a pick up in small and medium-sized business lending in Ireland following Sunday's U.S.-European Union deal on tariffs.

"The worst-case scenario has been avoided so at least now they have a reasonable amount of certainty to push ahead with their business plans," Galvin told Reuters.

($1 = 0.8751 euros)

(Reporting by Padraic HalpinEditing by Mark Potter)