Ireland's AIB ramps up shareholder returns after profits jump

By Padraic Halpin

DUBLIN (Reuters) -AIB boosted its returns to shareholders following an unexpectedly strong jump in full-year profit, including through a buyback of government-owned shares that the lender expects will cut the state's stake to around 5%.

The bank's full-year after-tax profit rose 14% to 2.35 billion euros, and it will return a total of 2.6 billion euros to shareholders through a mix of dividends and share buybacks compared to 1.7 billion euros in 2023, a payout ratio of 109%.

The increase in after-tax profit to record levels was 11% ahead of company-compiled consensus. Shares in the bank rose 6.7% in early trading.

Ireland's finance minister has said the state may this year exit the bank it effectively nationalised in 2010. AIB finance chief Donal Galvin told Reuters the fresh 1.2 billion euro share buyback should more than halve the state's stake from 12.4%.

The bank's strong profit growth was driven by a 7% increase in net interest income (NII) to 4.1 billion euros, ahead of the 4 billion it had guided for. Total new lending rose 17% thanks to positive mortgage, renewable energy and corporate activity.

AIB's return on tangible equity (ROTE) increased to 26.7% from 25.7% in 2023.

The bank, one of Ireland's two dominant lenders alongside Bank of Ireland, said it had made a good start to 2025 and expects loan growth of around 5% with NII of more than 3.6 billion euros, down due to an expected drop in interest rates.

Analysts at Davy Stockbrokers said that implies a 2% beat to analysts' 2025 consensus forecasts for underlying profit before tax.

AIB's Galvin said while Ireland's strongly growing economy would eventually be affected if growing external risks lead to a slowdown in Europe, he did not expect that to hamper momentum in the Irish mortgage market.

He said AIB's exposures to foreign direct investment-type companies is not large.

"Our starting point is still in a much better place than most of the other European countries, not just with respect to growth but also the government's fiscal position," he said.

(Reporting by Padraic Halpin, Editing by Louise Heavens and Jan Harvey)