AIB Group plc ($A5G)

Good morning, and welcome to AIB Group plc Q1 2026 Trading Update Conference Call. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded. I will now pass you over to our speakers for today's session, Chief Executive Officer, Colin Hunt; and Chief Financial Officer, Donal Galvin. Mr. Hunt, please go ahead.

Thank you, Nadia. Good morning, all, and thank you for joining us on our Q1 call. I have Donal with us, as Nadia said, this morning, and we will both be available to take your questions very shortly. But I'd like to make some brief introductory remarks. We're very pleased with the performance of the business in the first quarter, and the group is performing very much in line with our own expectations. We entered 2026 with great momentum, and that has been maintained in terms of actuals and outlook. And I'm particularly pleased with loan growth of 1.7% in the quarter. And with a strong pipeline now building before us, we're confidently reiterating our guidance for 2026. We're seeing a strong performance right the way across the franchise as the group fires on all cylinders. And the strength of the performance that we're reporting today reflects the ongoing resilience of the Irish economy in the face of marked geopolitical uncertainty. So with almost 1/3 of the year now behind us, we can comfortably assert that we are confident in our ability -- in our outlook for 2026 and beyond as well as in our ability to deliver strong sustainable returns to our shareholders today, tomorrow and over the medium term. I'll stop there, and I'll turn over to you for your questions.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Denis McGoldrick from Goodbody.

Just 2, please, if I may. Firstly, I'm interested if you're seeing any impact yet on the business or on your customers from the higher fuel and energy costs? And then secondly, could you walk us through the NII movements quarter-on-quarter and then the outlook as you see it for the remainder of the year?

Denis, thank you for your questions. I'll take the first one. Look, we're obviously monitoring the situation very, very closely. And -- but certainly, from all engagements that we've had with the network and with colleagues in the various business units, we are not seeing any impact coming through as of yet. Obviously, we are dealing with a very uncertain environment, but it is not having an impact on either the performance of the book in terms of the credit performance or indeed, it's not having an impact on the pipeline. And I have to say, just to reiterate the comments I made earlier, we're looking at a very strong pipeline over the course of the next number of months. The great thing about this business is you can see activity coming at you over the horizon. And certainly, the flow is very, very reassuring at this particular point in time. So short answer to your question, no impact discernible as of yet.

Yes. On the NIM NII question, I think if you're looking at a quarter-on-quarter, there's just 1 or 2 smaller items impacting there. We issued some Tier 2 at the very back end of 2025, a couple of days less in Q1. But overall, I would say that the NII guidance, we're certainly very firm on that. Obviously, we have not amended or adjusted any of our interest rate assumptions and maintained a year-end ECB position of 2%. The market has clearly moved quite a bit away from that. Just given the volatility, we have decided not to change any of those assumptions as of yet. But naturally, there is some upside there.

Now we're going to take our next question, and the question comes from the line of Diarmaid Sheridan from Davy.

Two, if I may, please. Maybe just firstly on NII and the structural hedge. Just the EUR 10 billion that you referred to in today's statement, is that separate to the EUR 10 billion that was referred to in the full year presentation? Or is it the same EUR 10 billion? And just the sensitivity to rates looks like it has fallen further from what you would have flagged at the full year presentation. So just wondering what might be behind that? And then secondly, just on the disposals in the bond portfolio, was that tactical kind of a point in time in the quarter? Or is that an ongoing program? And are they being just put into cash for now? Or are you deploying them back into the bond market?

Thanks very much, Denis. On the structural hedge, it's not a new EUR 10 billion. We referenced that we executed EUR 10 billion early 2026. So none of the metrics that I talked about previously have changed. Overall, the sensitivities have slightly changed. I think the new number that we've provided you with for 100 basis points change is around EUR 256 million, and that's for 100 basis points change. And what I would say on that is that's pretty linear, okay, between 20, 50, 75. So depending on your view on rates, that's the position that you should look at. I mean we obviously recognize that the issues in the Middle East were going to be inflationary, put upward pressure on rates. But really looking into the '27, '28, '29 years, we really felt that we wanted to add some duration, which is why we executed that hedge, and we're very happy that we did. With respect to the fixed income security, look, nothing really to report there. Every year, we will look at different segments where we want to participate, and we would have switched out of some sectors into new sectors, would have benefited from that. And that capital has already been redeployed into euro SSAs and euro sovereigns.

And we're going to take our next question, and the question comes from the line of Jordan Bartlam from Mediobanca.

I was interested on the deposit line. So we saw a small Q-on-Q decline there. I know there's a bit of negative seasonality typically. I just wonder, was that a little bit more adverse than you expect? And what was driving that decline? Are you perhaps seeing a little bit more competition from the new entrants in the market at this stage? And then maybe just a very brief one on fees as well. So that was down 5% year-on-year. You flagged some positive one-offs last year. I just wonder if you could remind us what those were? And maybe a bit more color on just how you're seeing the fee-generating businesses performance right now. Is that aligned to your expectations? Is it outperforming or is it underperforming? So those would be my 2 questions.

Very good. Yes. On the deposit side, I would say very much in line with our expectations. If you can remember, Q1 2025, we also saw, let's say, a flat quarter with respect to growth. So it's somewhat of a seasonal effect. We still maintain our overall guidance for the year of 2%, 3% growth on the liability line. As you mentioned, the competition seems to be coming a little bit more prevalent. But certainly, as of yet, we're not seeing any significant outflows. So no change to our estimations on that one. On fees, it was more related -- it was a Visa rebate that we would have received in quarter 1 of 2025 that wasn't repeated. So just that year-on-year analysis looks a little bit lower. Overall, on the fees and comms line, I think we're very comfortable to maintain our overall guidance. Obviously, one of the main areas of growth for us is going to be in the wealth and insurance space. Certainly for the first quarter of the year, we're very happy with the growth trajectory there. And otherwise, everything else is very much in line with our guidance.

Now we're going to take our next question, and the question comes from the line of Sheel Shah from JPMorgan.

Great. I've got 2, please. Firstly, you've mentioned the pipeline a few times on this call. Could you explain what you're seeing in the pipeline? Is it broad-based? Are you seeing any of the fiscal infrastructure plan feeding into the economy yet? So I'd be interested to get some color on that. And then secondly, maybe just a follow-on on the last question. I'd like to get your thoughts on the competitive environment. We've had a few more neobanks enter the segment. We've had BAWAG's recent offer for PTSB. So more of a longer-term question, but your thoughts around lending and deposit margins considering the pickup in competition.

Okay. Thanks so very much indeed, Sheel, for the questions. We do believe that the national development plan is going to have a material impact on activity in our business. But we're really not going to see that in a material way until '27, '28. Very, very pleased with the progress that has been made in terms of -- or that is currently being made in terms of the reduction of barriers to the swift implementation of the government's ambitious NDP. The pipeline that we're referring to this morning is the pipeline that we see across our various operating divisions. So it's the pipeline in mortgages, it's the pipeline in corporate, good strong performance in business banking. And of course, Climate & Infrastructure Capital having a very, very strong start of the year and with a very strong pipeline ahead of us. So we're not yet seeing the impact of that NDP, but that will be a positive carrying us into '27 and '28, we believe. In relation to the competitive environment, obviously, it is evolving in front of our eyes. We continue to see very, very strong flow in terms of new account openings. You have heard me talk in the past about us having a share of new account openings in Ireland of 49% to 50%. That is -- we believe that, that remains very stable in terms of our share. That said, it is an evolving competitive environment. We're going to continue to monitor it very, very closely. But we have the strongest franchise in the country, and we know what we need to do. What we need to do is to ensure that we have an attractive range of products and services that are appropriately priced and presented to our customers in the way that they want. And we do that every single day through our digital channels, through our customer engagement centers and through 170 branches.

Now we're going to take our next question, and the question comes from the line of Mike Evison from Autonomous.

Yes. I mean I'll just pick up on 2 things. On the loan growth point, obviously, it looks like the loan growth didn't come through new mortgage growth, which is broadly sort of flat year-on-year despite probably stronger system level trends. So I wondered if you could say anything to what you're seeing in housing completions or the housing market and the possible for mortgage growth there or whether you see growth coming from other lines, so that's of green lending and corporate lending. And then just if you have any thoughts on the sort of ever-changing topic of investment accounts and SIU in Ireland. So it seems like the government might be moving away from the [ ISK ] style accounts. I wondered if you had any comments on what you saw as the potential impact there, please?

Okay. On the mortgage market, I can tell you that the -- obviously, we made some rate adjustments at the back end of last year. And the first impact you're going to see that is in terms of application activity and then that flows through to approvals. And we've seen some drawdown impacts in the month of March. And in fact, our market share in the month of March was the strongest that we've seen for about 13 months. So we're building a nice head of steam there in the mortgage market. On the completion side, we have about 36,000 units last year, that was just a bit ahead of expectations. As a house, we expect completions this year to be about 39,000. We would have financed just shy of 1/3 of the new build last year in terms of output of homes, and we'd expect something similar on the development side. And in fact, our development pipeline is the strongest that it's been in many, many -- our development lending pipeline is the strongest it's been in many, many years. And we -- that augurs very positively for activity on the building side and indeed on the mortgage side going into '27 and indeed beyond. On the SIUs, we've been -- we believe we have a responsibility to support the medium- to long-term financial well-being of all our customers. We strongly welcome the initiative in terms of SIAs. There seems to be now more of a preference on the part of government for an ISA style model. And -- but whatever shape that model takes, whatever is the final proposal brought or the final product shape proposed by the government, we'll be ready to go with it. We have a team. We have working groups established already within the organization to ensure that when that product is launched, and we expect to be launched later on this year, that we'll be ready to put it on the shelves of all our stores and have it in the hands of our customers.

Now we're going to take our next question, and the question comes from the line of Fatima Ghaznavi from KBW.

Just a couple from me. So on the share of new lending, you mentioned this is flat versus the end of 2025. Is this sort of a normalized level? Can we expect a 30% share of new lending going forward? Because sort of in 2025, we were seeing more of a decrease in the market share. And so would you say that's flattened out now? And then also, when I look at the quarterly NII, it leaves a bit of work to do in the second quarter to meet consensus for the second half. Can you talk a bit more about the moving parts on the margin and whether you're sort of expecting that to pick up in the second quarter and whether these new hedge volumes will help that?

Yes, I'll take the second one. Yes, on NII, you're absolutely right, we do expect to see a pickup in the second quarter. A little bit of that is going to be driven by the cumulative effect of the higher asset growth. But obviously, we do expect to see some liability growth as well. So those 2 factors alone will lead to some improvement. And then obviously, in the second half of the year, we are expecting to see some rate effects. On the mortgage market share, we don't specifically target market share. For all of our products, we're very disciplined in our pricing approach. Our market share is, in some respects, an outcome for us, but we remain very focused on the direct-to-consumer market for our main brands, where we're able to capture more financial activity with our customers. But we do expect the mortgage market to increase year-on-year, driven by those increased housing completions that Colin referenced. And obviously, AIB will have a very large role to play in that market.

And certainly, Fatima, the trend that we're seeing coming through in terms of applications and approvals is very comforting at this point.

Now we're going to take our next question, and the question comes from the line of Seamus Murphy from Carraighill.

Just one relatively straightforward question. Just in terms of the FTE evolution in the quarter, I'm just wondering, I think I have -- I think you previously guided we have FTEs down 3% in the year, and they just a small amount in Q1. Can we still think in that context for '26 and '27, please?

Yes, we would expect our headcount to come down, Seamus. We would expect our headcount to come down by something in the order of 3% this year and the same number in next year, and that's very much in line with our experience in 2025 and the business plans for the year are fully in line with that reduction in total headcount of about 3%, and we expect that to continue into '27 as well and potentially beyond.

Now we're going to take our next question, and the question comes from the line of Borja Ramirez, Citi.

I have 2 questions, please. Firstly is on the capital, it's quite strong. I would like to ask if it's ahead of your prior expectations. And then my second question would be on deposit growth going forward. According to the Central Bank of Ireland, given the uncertainty, there could be an increase in -- potentially in individual savings because of precautionary savings. So I would like to ask what are your views on this point?

Borja, yes, look, obviously, financial performance for quarter 1 was very strong as it was throughout [ 2026 ]. So we remain very capital generative. I would say the capital number ended up being exactly where we expected it to be. Maybe asset growth was slightly ahead of where we had imagined. But overall, no surprises for us on that one. On the deposit growth side, what I would say to date is that we have not seen any cautionary activity, whether that be on the asset side for new lending, for new projects or similarly any unusual increases on the liability side that could be driven by the same factors. So as of now for Q1 and even towards the end of April, I would say very little impact to date from the volatility that has been created from the Middle East conflict. But obviously, things can change on a week-to-week basis, and we remain very vigilant.

Yes. And what I would just add in relation to that, Borja, is that we're starting with a very high savings ratio. The savings ratio in this country is at the upper end of the range for Europe. And secondly, what I would say is that was the most immediate impact of what's happening in the Middle East is its impact on the amount of income available for saving because it's having a dampening impact on disposable income net of fuel and energy costs. So we wouldn't expect there to be a significant bump in deposit flow as a consequence of the conflict in the Gulf. I believe that's our last question this morning. So I thank you all for your questions, and thank you all for joining us this morning. We obviously have our AGM later on this morning, and we're very much looking forward to presenting a good set of results for the first half on this day, 3 months' time, 30th of July. At that point, I'd say good morning to you all, and have a good day.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.