AIB Group plc

Good morning and welcome to the presentation of our interim results for 2025, our first set of results as a fully privatised company in over 15 years. As usual, I will spend a few moments reflecting on the highlights of the first half, give some time to the economic performance and outlook, and update you on our progress on the Group's three strategic priorities before I hand over to Donal who will bring us through the financial details and then, as usual, we will open to the floor for questions. We're now halfway through our current strategic cycle. We're very pleased with the performance of the business and are confident in the outlook for this year and beyond. In the first half of this year, we delivered a profit after tax of €927 million, representing a return on tangible equity of 21.4%. We maintained an exceptionally strong capital position with a CET1 ratio of 16.4%, while the Irish state exited our share register at the end of the half with total proceeds of €20.5 billion to date. The state stood behind AIB Group when that support was vital to our continued existence as a key part of the country's economic infrastructure, and we remain extremely grateful to the taxpayers of Ireland. Notwithstanding a significant easing of monetary policy, our net interest income remains resilient and in line with expectations at €1.9 billion and a half, And on foot of the strong performance, we are pleased to be resuming the payment of interim dividends with a cash distribution of €263 million. And this is the first interim dividend that AIB has paid in 17 years, reflecting the full post-crisis normalisation of the group. Sustainability sits at the very heart of our purpose and we remain committed to our leadership standing in this critical area. The first half saw further significant progress with over €19 billion now deployed in supporting the transition to a low carbon future since 2019, including €2.5 billion in new lending to the end of June, representing 36% of the total. We're firmly on track to meet our 2030 target of 70% of all new lending being greener transition in nature. We continue to augment our range of sustainability products and services, but real traction now in our consultancy services to business customers across both the AIB and Goodwillie brands, while we were pleased to launch new low-cost green and transition loans for SMEs. We continue to be a leading issuer of ESG bonds, with €7.2 billion raised in total since 2020. And for our personal customers, we will continue to incentivise the purchase of energy-efficient homes through discounted mortgage rates. Since 2024, we've made a cumulative total of €4 billion available to 14,000 first-time buyers and we pledge to do even more. And finally, we continue to achieve broad gender balance across management levels throughout the organisation. Turning to the economy, the world is grappling with a wide array of uncertainties driven by trade negotiations, tariffs and marked geopolitical tensions. That said, the Irish economy continues to perform well. While we expect growth to be more moderate than in recent years, as measured by modified domestic demand, which is the most relevant metric for our business, a real rate of expansion of at least 2% is forecast over the next three years. And if anything, in the current year, the risk to that forecast is to the upside. Our confidence in the outlook is underpinned by ongoing buoyancy in the labour market, with employment continuing to grow strongly, now standing at an all-time high of 2.8 million people. Private sector balance sheets for both households and businesses are in rude health with real leverage at some 40% of its post-GFC peak, while savings ratios remain very high at 14%, something which is very clearly manifest in the liabilities side of our balance sheet. Ireland's demographic outlook was also very positive with population growth of 33% recorded in the last 20 years and a further increase of 8% expected in the next five which will bring the population in the Republic of Ireland to just shy of six million people. That's a very strong backdrop for the economy and for our customer base given our standing as the number one choice by Country Mile for new account openings. There has been a significant increase in trade tensions and uncertainties since the start of the year and that has the potential to weigh on economic activity. However, the economy, despite its marked trade and investment openness, has proven to be remarkably resilient in 2025. Ireland, a leading destination for inward investment over many decades now, remains a very attractive home for overseas headquartered companies. This is underscored with the news that the flow of IDA-supported foreign direct investments grew by 37% in the first half of this year. Our standing as the only English-speaking common law member of the world's largest single market continues to be an important ballast to the country's economic performance. Matching the good health that we're seeing in household and business balance sheets, the fiscal position is strong. We welcomed the announcement last week that the National Development Plan will see capital expenditure of €100 billion to 2030, with a further €175 billion to 2035, with a focus on housing, energy, water, transport and research and development. The plan lays out a significant increase in capital investment which is designed to enhance our national infrastructure in housing, climate, energy and transport sectors. It will boost current activity and it will enhance the competitiveness and the sustainability of our core market. It also will create new lending opportunities for AIB over the years ahead, with the government targeting a critically needed doubling of housing output to 60,000 units per annum by 2030. and there are few countries that can offer such a promising medium-term economic outlook in an age of increased global uncertainties. Returning to our own performance in the first half of 2025, we recorded new lending growth of 9%, bringing the total to 6.9 billion in the opening six months of this year. Mortgage lending increased by 7%, giving the group a 32% market share. Personal lending was up by 4%, while property lending, growing from a low base, reached €1 billion, which was in line with the performance in the first half of 2023. Corporate lending grew strongly by 13%, though this was offset by softer activity in climate capital, which is lumpy and uneven in nature, as well as flat SME lending. Green and transition lending accounted for 36% of total new lending. Overall, we expect our loan book to grow by some 3% this year, and we continue to expect a CAGR of 5% to the end of 2027. AIB is Ireland's leading financial services group. The strength of our franchise is underpinned by our geographic reach, the array of products and services we present to our 3.35 million customers, and the quality and the resilience of our digital offerings. Over half of those people opening personal current accounts in Ireland choose to bank with AIB while we are also the leading bank for business with a 49% share of main current accounts. We are committed to an omnichannel approach which is predominantly digital for everyday transactions and in person for the moments that matter. And that's a winning formula and underpins the strength of our franchise and our extraordinary success in attracting new customers. Turning to the first of our strategic priorities, customer first. We're now using our rich pools of data to better understand our various customer segments and their differing needs over the course of their financial life cycles. This is enabling us to build more targeted propositions, tailored communications, and a better customer experience all around. We've segmented the franchise into seven distinct cohorts, and today we're putting a spotlight on the 25 to 34-year-old segment. comprising 18% of the retail banking customer base with diverse nationalities, strong growth momentum and whose needs are, as outlined here, savings, payments, credit flexibility and tailored financial advice. This approach is already reflected in a significant improvement in our net promoter scores, which are hitting all-time highs for customer experience across the branch network, our call centres and our digital channels. And we continue to increase the number of customer journeys handled by Abbey, our AI digital assistant, which now stands at 36, with an expectation that this will exceed 50 by year end. We leave it open to our customers to speak with a person to assist them on these 36 journeys, and 85% of customers are choosing to engage with Abby, who is now handling over 3,000 calls every day. Meanwhile, we are pleased with the reaction of our customers to our AIB Life offering, with the number of policyholders now standing at 50,000, an increase of 15% in the first half. I'm looking forward to further significant progress here as AIB Life becomes an ever more important part of our customer offering and our financial performance. We believe that the transition to a low-carbon future presents AIB with an enormous opportunity and need the capital, the expertise and the appetite to realise it. We have a target to deploy €30 billion in climate action funding by 2030 and we're now 64% of the way there. In the first half of the year, green drawdowns amounted to €2.5 billion, 36% of all new lending, with each of our business segments making a strong contribution, most obviously retail Ireland. We will continue to broaden our product and service range over the course ahead, and I was pleased to see AIB launch green loans for SMEs in the first half of the year. Climate capital had a relatively soft six months in terms of new lending in a quiet market, but we are confident that the strong second half pipeline will see a robust performance for the year as a whole. On the slide we are highlighting two of the transactions we were involved in this year which saw the climate capital team supporting Ireland's green transition as well as the development of critical social infrastructure. Operational efficiency and resilience is our third strategic priority with a key focus on simplification and digitalisation. We've been investing some €300 million on average per year over the past decade in the progressive modernisation of our technology and we'll continue to do so. Highlights for the first half of 2025 include the delivery of a new data centre in the cloud, our third data centre, the introduction of push notifications on our mobile app and DORA readiness delivered. We're also rolling out Copilot to all our colleagues in an investment which as Microsoft has remarked, shows AIB leading innovation in Irish banking. We're very excited about the potential of AI to assist us in delivering better services, better security and greater efficiency over the years ahead. And that's building on the progress driven by our AI Centre of Excellence, which we established in 2024. At the same time, we are continuing to invest in our security and our resilience, which we know are central to customer trust. and I can report that we delivered level one IT service availability of 99.99% in the first half. And our digital offering is delivering better outcomes to our customers with 66% of new business lending now on our Encino platform, putting business customers in a position to draw within days of making a loan application. On the personal side of the house, 84% of our customers are now digitally active with 87% of personal loans applied for via the app. And interestingly, only 26% of mortgages are applied for digitally, highlighting the reality that for the biggest financial decisions, for the moments that matter, the majority of our customers want to engage in person with our colleagues across the group. Now, that's just a taste of what's in the hopper, and I look forward to updating you in future presentations as we relentlessly and resiliently drive efficiency gains through the business. So lots of progress to report on the three strategic priorities with lots more in the pipeline. Now for one last time, we will have a look at our progress in accommodating the state's exit from our share register. Through accommodation of ABBs, DBBs in the state's trading plan, the government reduced its shareholding in AIB from 71% to zero over the past three and a half years. We welcome the return to full private ownership and we are very grateful to the support of Irish taxpayers to sustain this institution when that support was needed. As of today, we have now returned a total of €20.5 billion to the State, taking into account the proceeds of share sales, redeemed capital instruments, fee income, coupons, dividends and levies. We are in ongoing discussions with the Department of Finance regarding the potential purchase of the warrants issued at the time of the IPO in June 2017 And we estimate that a successful conclusion to those discussions would see a further circa 0.3 of a billion being generated for the state. Taking account of the 100 million Euro bank levy to be paid in the second half of the year, total payments to the state are expected to reach 20.9 billion by the end of this year. We've demonstrated clearly and consistently in recent years the ability of AIB to generate strong returns for shareholders. Against a medium-term return and tangible equity target of 15%, we are upgrading our guidance now and expect the 2025 outturn to be above 20%. The first half of the result was 21.4%. We're confident in the ability of our business to deliver strong capital generation over the years ahead. We did 150 bps in the first half, and that will allow us to maintain a strong C2-1 ratio above 14% to invest in our businesses, and to make sustainable distributions to our shareholders. With our share register now normalised and the imperative of directed buybacks eliminated, we are very pleased to be resuming the payment of interim dividends with a 2025 interim cash distribution of €263 million, representing a third of the full-year ordinary cash dividend in 2024. With a CET1 ratio of 16.4% at end June, we're still well above our end 2026 CET1 target. We have no desire to be a hoarder of excess capital over the medium term, and we will be considering further special distributions at board level at year end, of course subject to regulatory approval, with any announcements to be made at the time of the full year results in early March next year. So, AIB is in a position of great strength. We have built an exceptional customer franchise with a heavy exposure to one of Europe's most dynamic economies. We've dealt comprehensively and conclusively with all the post-GFC legacy items. We are focused and delivering day in, day out on our plans and we're creating sustainable real value for our shareholders. I've never been more optimistic about the medium and long-term outlook for AIB. The group's legacy chapter is now firmly closed Colin has entered a new era, focused relentlessly on the future, executing on our three strategic priorities and delivering on our purpose of empowering people to build a sustainable future.

Donal. Thank you very much Colin and good morning everyone. Thank you very much for joining us for our half one update. I'm going to run you through the financial highlights for AIB. Profit after tax of 927 million euros, which represents a return on tangible equity of 21.4%. The total income of just over 2.2 billion euros, which was down 10%. That's made up of an interest income reduction of around 10%. And then our fees and commissions were up around a percent. The cost of 979 million euros, which is up 3% as guided. That means a cost income ratio of around 44%. a slight reduction in our FTEs. Our gross loans increased by 1% to 71.6 billion euros, and as Colin described, our new lending was very strong at 6.9 billion euros, which was up 9% year-on-year. Asset quality remains very resilient, and our ECL coverage rate remains unchanged at 1.9%. We had an ECL charge for the first half of the year of 85 million euros, which represents a 24 basis points cost of risk Our funding position remains very strong. Our customer accounts of 112.5 billion euros shows an increase of around 2.6 billion euros, which is around 2%, and we have a significant amount of NREL executed in the first half of the year, including AT1 and a number of senior non-preferred transactions. Our CET1 ratio of 16.4% is very strong, comfortably ahead of all of our regulatory requirements. and a large part of that increase is related to a Basel IV impact of around 120 basis points. We had very strong organic capital generation of 150 basis points, which we haven't included in this 16.4 CET1 ratio. As Colin mentioned, we're delighted to be able to announce the resumption of our interim ordinary dividends of 12.328 cents per share, or 263 million euros. On the income statement, I've already touched on some of the key highlights. Really just draw your attention to some of the return metrics. Return on assets, 1.2%, we believe is very strong. Earnings per share, 39 cents, really benefiting from all of the buybacks over the last number of years. And the dividends per share are 12.32 cents, as I just described. A number of items here that I typically don't have an opportunity to touch on later, I'll just run you through. Our bank levies and regulatory fees, we expect to be 140 million euros for 2025. Slightly less, I think, than consensus, but we're very comfortable with that number. And overall, on exceptional items for the first half of the year, we haven't seen any material items, obviously given a large number of the legacy issues have been concluded. But we do foresee a gain in the second half of the year, and this is going to be related to the sale of our 49% shareholding in AIB Merchant Services. So we'll have a P&L gain of over €100 million, and that equates to a CET1 benefit of around 35 basis points, and there's a small RWA impact there as well. Flip side to this, we'll be on a go-forward basis. We'll see less income from this investment, which has historically been around €30 million, and you'd have seen that on the associates line. So for full year 25, €140 million for levies and regulatory fees, and €100 million of an exceptional gain expected. Net interest income, just over €1.8 billion for the first half, which is down 10%. really driven by the change in the reduction in interest rates. Just walking through the main moving parts here. Obviously, as rates go lower, the structural hedge is beginning to kick in and we see a benefit of 283 million euros or 43 basis points. Cash loans to banks, which is really cash balances, excess cash held at the ECB of minus 256 million euros or minus 43 basis points. 109 million euros from investment securities. Obviously these are all asset swaps securities which accrue less in a lower rate environment and that has a 19 basis points effect. And then overall on customer loans, a reduction of around 95 million euros, which is 20 basis points. Again, this is ECB tracker related loans or wholesale loans, which are EURBOR plus denominated. On the liability side, obviously there is an increase in the amount of interest paid on deposits, but against that, given the lower rate environment, we have lower wholesale funding costs. So we have an exit NIM of 2.7%, an overall 2.78% NIM for the first half. With respect to the outlook on net interest income, we believe that our Our interest income profile is now very resilient. We've come through a very volatile interest rate period over the last number of years. I think we're getting a little bit more comfortable with where we see the yield curve. So our guidance of greater than €3.6 billion is imagining a deposit rate of 1.75% by the end of the year and a deposit beta, which at the first half of the year was 19%, but we expect that to be around 20% for the full year. Obviously, resilience has been a main theme over the last number of years. We feel we have a resilient balance sheet, which is growing at 5% per annum. We have a very granular deposit base, which I'll be able to break out in a little bit more detail. And with respect to proactive activity in the first half of the year, we would have increased our structural hedge by around 15 billion euros, and obviously taken advantage of the wider spread environment and steeper curves. by buying an additional 2.2 billion euros of GOVI and SSA securities. Just to run through the structural hedge in a little bit more detail, I would have mentioned at the first quarter results that we executed an additional 10 billion euros of hedge in January. We've also added to that in June by adding an additional 5 billion euros. So total 15 billion euros in the first half of the year. And that's materially reduced our interest rate sensitivity. from 439 million euros down to 306 million euros. We expect to replace around 7 billion euros of swaps in 2025 and approximately 6 billion euros in 2026. By executing these transactions, the 15 billion euros, we were looking to obviously reduce sensitivity but add duration. So the average life of a euro hedge is now over 5.1 That's where we expect it to be by the end of 2025. With respect to receive fixed yields, we expect for Euros this to be around 2.3% and for Sterling 2.4%. And then as we look at duration overall on our balance sheet, we normally look at our fixed rate mortgage portfolio as well, which remains unhedged on our balance sheet. So the quantum there remains around €20 billion. And the average life of that is now around two years with a yield of 3%. So we feel that the outlook and the balance sheet position is very resilient and we're very comfortable maintaining guidance of greater than €3.6 billion for 2025. Other income of €358 million, stable and growing net fees and commission income, which is up 1% year on year. Some of the positives of that were on card income, wealth and insurance, and investment banking. And against that, we probably had a weaker first half than some of the other more volatile line items like equity investments. We bought back some debt securities, et cetera. I do think on those other income areas, we'll be able to outperform the second half of the year. And as I look at the fees and comms line, we expect to see a slight outperformance in the second half of the year. Some of the line items, I would say, such as FX, may be impacted a little bit by some of the uncertainty, particularly in the SME segment. But putting all of that together, very comfortable to reiterate our other income guidance of 750 million euros for 2025. I would draw your attention to the fact that we've restated the way we present these numbers. We have a large focus on wealth and insurance area. And we've really tried to break it out to make it really clear. So you'll be able to follow this line item going forward. And also we've disclosed what the AUM volumes are for Good Bodies and AIB Life, which are the main drivers of that line. So we'll be able to talk to that in more detail in future outings. Cost of 979 million euros, which is a 3% increase in line with guidance. Staff costs are flat, really due to lower headcounts. offset by a little bit of inflation. Depreciation is down slightly year on year, and our G&A is up 12%. A little bit of inflation, but also some higher OPEX spend related to operational efficiency initiatives. That gives us a cost income ratio of 44%. And if you see our head count here, slowly reducing, down 2% in the year, which is very much in line with what we would have talked about and we would expect to see that to continue to decrease on an organic basis. So costs for the year expected to be 3%, very much in line with what we talked about. In terms of asset quality in ECLs, we had a charge of 85 million euros, which represents a 24 basis points cost of risk. We've maintained our ECL cover rate of 1.9%. And if I was just to Have a look here at the main three moving parts. We've obviously taken into account the wide range of outcomes in the geopolitical environment. So we've had a charge of around 23 million euros based off a change in macro assumptions. Underlying credit performance was around 103 million euros. And then between PMAs and model changes, we had a small right back of around 41 million euros. Really taking a step back, notwithstanding the fact that the environment is quite uncertain, we haven't seen any asset quality deterioration in any of our main markets, and we do believe that given the certainty in recent agreements between the EU and the US, that this should remain quite stable for the rest of the year. But very happy to reaffirm our cost of risk guidance for the year of between 20 to 30 basis points. Balance sheet wise, nothing really new to talk about here. I would have mentioned earlier that we would have increased the holdings of investment securities, really just to take advantage of widening spreads, particularly in core Europe and in SSAs. Given the fact that we have a significant amount of excess liquidity, that seems to make a lot of sense. And we do think that we'll be able to add to that in the future, particularly in 2026, maybe another €2 or €3 billion to bring the total to around €5 billion between 2025 and 2026. Overall, our equity position of €14.3 billion, reduced by €1.1 billion, and that's obviously due to the buyback and distribution paid in the first half of the year, partially offset by the H1 profit. A loan book increased by 1% to 71.6 billion euros. I'll just try and walk you through some of the main moving parts here. New lending very strong at 6.9 billion euros. Redemptions of 5.5 billion euros. Pretty much in line with our own expectations. Obviously given the volatile external environment, some of our reporting currencies are a little bit weaker. So there's an FX effect of around 700 million euros. and also an inclusion reduction from some MPE reductions. So notwithstanding the fact that we imagined a 5% asset growth for 2025, given the first half of the year, slight amount of uncertainty, we think that that's gonna be more like 3%. But overall, as you look to the second half of the year and beyond, we're very happy and comfortable with our 5% CAGR out to 2027. Conor would have talked about the new lending in all of the main segments, and I'm really just looking at the total balance sheet effect here. Really in the Republic of Ireland mortgage consumer space, strong growth, very comfortable there. Property, we've seen a slight increase there, albeit from a low base. And then when in the wholesale construct, I would say corporate strong, SME a little bit weaker or flat, but overall from a balance sheet perspective, that's flat. So for 2025, on a reported basis, we see growth of 3% in 2025, but growing strongly into 26 and 27. On the liability side, our position remains very strong. 81% of our funding is coming from deposits. 72% of these are in personal and SME balances less than a million euros. 52% of our deposits are insured, and 92% of our customer accounts are in the Republic of Ireland, really representing our very strong franchise in our main market. Our MREL ratio is 34.9%, well in excess of our 28.9% requirement, and we continue to expect to transact around three MREL-type transactions on an annual basis. LDR remains strong at 62, LCR, very strong at 204%, and our net stable funding ratio is very strong at 165%. Overall, on the liability side, we've seen growth of around 2% in the first half of the year, and that growth is coming, I would say, in personal and business areas. AIB is attracting 53% of new account openings, which is really giving a strong performance on the liability side. So we expect overall liability growth to be at least 3% in 2025. Our capital slide and our capital position of 16.4% is well ahead of regulatory requirements. And I think that this is a particularly strong and insightful slide. So we finished 2024 with a CET1 ratio of 15.1%. In January, we would have had a benefit from Basel IV of 120 basis points. In the first half of the year, we've had a strong performance generating 150 basis points. We've just announced an interim dividend of 12.32 cents, which represents around 40 basis points or 263 million euros. Slight DGA benefit of 20 basis points, adjustment for 81 coupons. That leaves us with a pro forma CET1 of around 17.5%. We then deduct the remaining quantum of our earnings for the year of 1.1% to leave us with a reported CET1 of 16.4%. The exclusion of the remaining half on profits of 110 basis points really is pending a final decision on distributions at the year end. We feel that that provides, gives us maximum flexibility on payouts and is very much in line with regulatory expectations. Just running through the headwinds and tailwinds out to 2026. Obviously our goal is always to maximize our capital generation. Sustainable profits greater than 270 basis points, DTA benefits of 30 basis points. So it looks like we're gonna exceed that certainly for 2025. We're always going to invest in our business. That's a requirement in an ongoing basis. So we'll invest at least 300 million euros on an annual basis. And we'll obviously require capital support, our balance sheet growth objectives of 5% growth per annum. With respect to headwinds and tailwinds, I would have talked previously about the benefit in CE2-1 of 35 basis points. from our sale of AIB merchant services or stake in AIB merchant services. We expect that transaction to close in Q3. We're in discussions with the Department of Finance to retire the IPO warrants with an estimated cost of around 40 basis points. Again, we would hope to be able to conclude that in quarter three. And we look to close the second of our SRTs in Q3 or Q4. I've talked previously about a multi-year, multi-asset program, so we're really targeting AIB mortgages in Q3 or Q4. We're going to look at €2 billion worth of nominal to reduce €1 billion worth of RWA. The CET1 benefit could be 20 or 30 basis points, and the estimated cost of equity of that transaction is around 5%, but I'll be able to update you on that at a later stage. On IRB models, adoptions and developments, I'd say as we stand here in 25, 50% of our risk-weighted assets are on IRB models. We want to move that up to 80 to 90% by 2030. We think that that's going to increase fairly linearly by 10% per annum. There's a number of models which are close to conclusion, such as EBS mortgages and project finance. We don't have any final conclusions on those, but I'm not expecting any negative outcomes. And now with respect to distributions, obviously, as Colin would have mentioned, this is the first time we've presented results when the governments are no longer a shareholder. And in prior years, engaging with the government on a directed basis was a very supportive thing for the government and very advantageous to AIB as well. So really what we wanted to do today is outline a very clear distribution plan for all shareholders to understand. So from an ordinary dividend perspective, we'll look to pay a sustainable dividend within a 40 to 60% payout policy range. The ordinary dividend is gonna be paid in cash. We've obviously announced the resumption of our interim dividends today, and we're gonna set that at one third of the prior year's ordinary dividend per share. Coming towards the end of the year in quarter four, we'll look at the overall performance of the business. We'll look at the outlook and the way that we're going to view additional distributions is that there will be capacity for above policy payouts subject to annual review and necessary approvals. And it will have the optionality to utilize share buybacks or special dividends or a combination of both as we move towards our medium term target of 14%. Okay, so just to wrap all that up with respect to guidance, net interest income greater than 3.6, other income at circa 750 million euros, a cost increase of 3%, cost of risk within 20 to 30 basis points range, levies and reg fees at 140 million euros, an exceptional gain of 100 million euros, and assets and deposits to grow by around 3%. and overall giving us a return on tangible equity of greater than 20% for 2025, moving us towards our 2026 medium term targets. So thank you very much and I look forward to taking your questions.

Thanks very much, Donald. We'll now turn to the phone lines. I understand the first question we have this morning is coming from Dennis McGoldrick in Goodbody. Good morning, Dennis.

Hi. Good morning, Colin and Donal, and thank you for taking my questions. Two, please, if I may. One is just around your expectations on loan growth, and I guess maybe if you could give some additional color on what areas were slower than expected in H1, and more importantly, what gives you the confidence to retain the 5% tiger for 25 to 27? And then just secondly, on bond activity, so I know the 12% increase in the first half of the year, Could you give some additional colour as well then on what level of activity we can expect in H2 of this year? Thank you. Thanks for that.

I'll deal with the loan growth volume question and I'll hand over to Donald for the second question. The business performed largely in line with our expectations in terms of volume growth. The exception was climate capital. The market was quieter than we've seen for some time. It's a business by definition where the lending is lumpy, it's uneven, and our confidence in the outlook is driven by the pipeline that we see before us. It's a very, very strong pipeline and it gives us confidence in our expectation that we'll hit 3% loan growth, sort of 3% loan growth for the year as a whole, and indeed in the outlook over the medium term. These are typically projects with a long lead time, extended delivery times, but you can see them coming. And the pipeline, as I said, is very, very strong for the second half of the year after a first half which was quieter than would have been expected, perhaps driven by some of the noise that we've had out there about renewable energy in the first six months of the year. But looking out to the second six months and indeed beyond, we're very comfortable with the guidance given this morning.

Hi Dennis, so with respect to bond activity, you know, we obviously recognised, you know, post-liberation day that, you know, curves are going to be a little bit steeper and spreads were a little bit wider. We don't think that that's like for a moment in time. Most of the large Eurozone super-nationalist governments are going to be issuing more of that going forward to finance infrastructure and events type of activities. So we don't think that there's any particular rush to take advantage of these wider spreads. But specifically to the question, we would have bought around €2 billion in the first half of the year. And for the second half of the year, we're just going to take a little bit of a break, look at the whole portfolio, make some adjustments if and where we see fit, And then looking at 2026, maybe look to add another 3 billion euros. Like I said, I don't think these wider spreads are going to be going away anytime soon. And if anything could go a little bit wider.

Okay, thank you. We're turning now to Dermot Sheridan and Davey. Good morning, Dermot.

Good morning, Colin. Good morning, Donald. Thank you for taking my questions. A couple of them I made. First of all, just on net interest income. So your guide of greater than 3.6 billion, I guess consensus is maybe about 2% or so above that. Are you comfortable with that or do you think the greater than could be a little bit more than 2%? Secondly, just on distributions and Maybe I guess if we read between the lines of what you're saying to us is you're going to look to try and return kind of substantially all of the profit that you generate this year. Is that the correct way to think about this? And over what kind of time frame do you think you can get to that greater than 14% target? Because obviously, you know, when you incorporate profitability, you're at significantly higher levels than that at the moment. Thank you.

Yeah, I think on the NII, it's certainly very comfortable at greater than 3.6. I mean, we had set that guidance imagining ECB rates were going to be 2%. They're now a bit lower at 175. I think the main area that gives us the comfort to reiterate that is the growth on the liability side. We thought it might be 2%. It's already 2% of the half-year. And in some respects, I think the performance or outperformance will depend on where that's going to land. We've guided for 3%, but we'll see how that one goes. I think on the distribution and the profits. We're in a new world now, okay? The government isn't on the share register. Directed buybacks are no longer going to be a feature. So what we really wanted to do today was set a really clear policy that was very easy to understand and effectively make AIB look like every other bank around the world, certainly in Europe. So we think it's appropriate to be very clear on what our interim dividend policy is going to be. And then we're just being, I think, conservative by holding back on the interim profits or reporting of the interim profits. We feel that that gives us maximum flexibility around payouts towards the end of the year. And then I think with respect to the 14% payout ratio, I mean, this is obviously an evergreen item. You know, if we look at our CET1 ratio of 16.4%, we've got a medium-term target of 14%. I don't think that outperformance is relating to any form of trapped surplus capital that we're unable to access. Particularly this year and slightly last year as well through RWA efficiencies, we probably have generated around 200 basis points. And obviously we're looking to move towards our medium term target of 14%. But if we continue to be very successful on RWA initiatives, it might take us a little bit longer to reach that 14% CET1 ratio, but I don't think that that's necessarily a bad thing.

Okay, thanks for that. Very clear. The next question is from Chris Cantus, Autonomous. Good morning, Chris.

Good morning. Thanks for taking my questions. I just wanted to follow up on... Oh, I've got an echo. We don't.

Proceed if you can.

Okay. I think I managed to fix. I'm not sure what I did. So, following up on capital distributions, I guess the question is why no interim buyback? Why no interim special dividend? I mean, you had a sort of an exceptional capital benefit in the first half with Basel IV. that to me is the kind of thing that could definitely warrant a special dividend. It's a one-off item. It's not going to repeat. It's not part of your yearly profit. It shouldn't really form part of the payout ratio debate. So with the government off the shelf to register, I appreciate you've moved to an interim dividend policy, but you were able to do an interim buyback last year, directed buyback. Why no interim buyback this year? Why no interim buyback? and is that what we should expect going forward? So is the cadence of capital return a sort of mechanical interim dividend and then surplus capital return just on an annual basis? And in terms of your comment on the last question, coming down to 14% potentially more slowly, if your RWA actions are more successful than you think, Again, if special dividends are part of the equation here, why is it the case that you can't come down to target at the same speed? I understand there may be a sort of a liquidity limitation on the ability to deploy capital through open market buybacks, but if specials are gonna be part of the equation, why is it that you would need to come down to target more slowly? Thank you.

Hi, Chris. Yeah, thanks for that. 2024, I would say the conversations we had amongst ourselves was resume interim dividend or focus on direct buyback with the government. That was the most advantageous thing for us and for shareholders at the time. So this year we were really focused on trying to normalize our distribution policy and how we set ourselves out. So I think going forward, We do want to normalise the way in which we return to shareholders with an interim and then move the special or the additional conversations towards the end of the year, just gives everyone a little bit more time to understand the environment and ensure that we get the best outcome for all of our stakeholders. So I would say yes, you should expect to see that kind of cadence going forward. And then with respect to items like Basel IV impacts and stuff like that, I mean, there's always things coming in and things coming out. I mean, one wants to have things settle and you want to have comfort that you're not going to have any negative surprises. And that's not me saying that there is one on the horizon, because there certainly isn't. But even with the existing environment at the moment and the geopolitical tensions, it really doesn't seem like the appropriate time to be overly aggressive with respect to distributions. And notwithstanding the fact that we will continue to work hard on RWA efficiencies and generating more capital.

So that end 26 target of the CET1 ratio above 14% is real. and we will use all the tools at our disposal to get close to that by the end of 2026 and we look forward to having an informed debate at board in the fourth quarter of this year and also to engaging with our regulators on what shape and size and form distributions will take for the full year and look forward to making those announcements when we are standing up here at the start of March delivering the full year results. Now we're going to turn to Grace Dargan at Barclays. Good morning, Grace.

Thank you very much for taking my questions. I'm just going to ask you a couple of apologies. I'm going to follow up again on the distributions and maybe just phrase it slightly differently. Given what you're saying and given the payout today, is there any reason we shouldn't think about 100% payout going forward? I presume from your comments, no, that we should still be thinking about that, but any color around that would be helpful. Then secondly, just around the loan growth, just coming back on that, I guess the CAGR does imply quite a significant step up in loan growth. Cognizant of your comments around climate capital, but you do also have increasing competition in your domestic markets. So isn't your growth potentially more challenging in 26 and 27 when you're pointing to a bigger step up? And I guess in that context, maybe could you just give a little bit of colour about what you think of as the long-term mix of that loan book, kind of non-domestic versus domestic as well? Thank you.

Yeah, I think we certainly agree for 2025 that we have created maximum potential. for payouts that looked like last year. But again, it's an additional distribution if it's above 60% and that's going to be subject to board and regulatory approval. With respect to loan growth, couple of things. Our loan lending growth activity is pretty seasonal in nature in any case. Second half of the year is normally stronger than the first half of the year. So that's another reason that gives us a bit of comfort. We've obviously got the benefit of looking at and seeing our own pipeline. which gives us a little bit more confidence. Things were muddied a little bit this year with geopolitics. A slight amount of uncertainty may be impacting SME, certainly impacting foreign exchange. And we just, overall, I think with, you know, your calm, the calm is a selling competition. I don't think in any of our main markets that that is going to have any material impact in the coming years. So we're pretty confident with our 5% CAGR out to 2017.

Yeah and one of the features I think which is probably underexplored in relation to the Irish banking market outlook is that we have a big constraint out there in terms of output at the moment in the housing market. We have seen a very significant increase in the volume of houses being built but that's well shy of where it needs to be and we've seen housing output recover from about 2,000 units in the immediate aftermath of the GFC to where it stands today, just above 30,000 units. It needs to get to 60,000 units. We finance at the moment about a third of the residential development in Ireland. That's a market share that I'm pretty happy with. We don't necessarily target market share, but that gives you a sort of an impression of our appetite. And if we see a doubling coming through an output which is very much centre stage from a policy perspective in Ireland, Well, that's obviously going to have an impact in terms of residential development finance and, of course, on the mortgage market, where we have a very strong position with a market share of 32% in the first half of the year. Now turning to Sheil Shah at J.P. Morgan.

Thanks. Just a follow-up on the distribution policy, please. Can I ask about the discussions that went into setting this policy with regard to the board and the regulator. Were there any pushbacks to this policy and maybe thinking about, you know, it looks like it's a relatively cautious policy where if this policy was maybe set last year with the economic climate in a different outlook. And obviously, if we assume that the government's sake had gone for the purposes of this scenario, then maybe this policy would have been a bit more less conservative, especially with regards to the interim. So I'd like to get your thoughts on that, please.

We are, as I always say about AIB, we're ambitious in our strategy and conservative in our executions. There was no pushback in relation to this particular policy that we put in place. I think it's very clear. And as I said in my opening comments, we have no desire to be an excess hoarder of capital. Our focus this year, well at this point, was in kicking off an interim dividend in cash, a cash interim dividend for the first time in 17 years. A sort of a niche bookend to AIB's journey over the past 17 years since we last paid an interim dividend. But there was absolutely no pushback. And as I said earlier, we were very much looking forward to engaging with our colleagues on the board and indeed with our regulator as we move towards the year end. Because that target out there, that 14% target is a real target. And we're going to have to make progress towards that. Now we are going to Borja at Citi. Good morning.

Hello. Good morning. Thank you very much for taking my questions. I have two. Firstly is on the NII. So you increased the structural hedge by $5 billion. I guess that adds a bit of upside to your NII, especially into 2026 and 2027. So maybe there's even more upside to compare to consensus expectations in the NII. So if you could kindly comment on that, because I'm not sure that the market is fully aware of this, of the benefits of this. And secondly, I understand that from a The process point of view, if you were to decide for a payout of over 100%, I understand if you have excess capital and macro is stable, then I understand there's no issue at all. So you would be able to pay out about 100% if it's from a process point of view.

Thank you. Hi, Borka. I think you're probably looking at the NII correctly there. The additional 5 billion euros duration over five years, you know, received fixed in around over above 2.30. So that position is already in the money, should we say. I think if I look at consensus for 26, pretty much bang in line. If I look at consensus for 27, maybe slightly lower than where we see it, predominantly due to... rate expectation and increases, and also, obviously, the increase in SHP. But certainly, 25 guidance consensus, you know, pretty strong, and 26 is banging like. With respect to the payout expectations, obviously, we have report about CET1 without actually incorporating any of our in-year profits and that indeed is to give us maximum optionality and flexibility when we talk to the board and the regulator at the end of the year for total payout discussions.

So no change in impulsions at all. We're now going to Ben at RBC.

Thanks for taking my question. The first is on cost. where there was a beat and a half. The census currently doesn't have you hitting your less than 2 billion cost target for next year. I'm just wondering whether you advise with your current confidence level for hitting the 26 target. Any moving parts that are worth calling out? It doesn't sound like there's any significant restructuring to come based on your organic FTE reduction comments. And then secondly, on Irish wealth, which is frequently cited as an area of significant opportunity. If you look at good body wealth balances, they're up only modestly really in the half one range. I think growth will clearly be a multi-year journey here, but how should we think about the pace of growth? When should we think about the pace of growth picking up? And if it doesn't come through, can you just give us your thoughts about whether you might take any inorganic opportunities?

Thank you. I deal with wealth. Dawn will deal with costs. We didn't have products and services and wealth up until very recently. And we filled that product gap through the acquisition of GoodBuddy, which we're really pleased with the performance there, and also through our joint venture with Gravelous Life, AIB Life. AIB Life is doing very well. It is, I think, one of the first startups we've had in Ireland and the life space in many, many years. But it is a startup, and we're really pleased with how it's performing. We've got about 50,000 policies, 50,000 customers now, and that number is growing at pace. This is a medium-term startup. organic growth story. But that said, I've remarked on a number of occasions that we remain very open to exploring potential corporate activity in this space in the event that a very attractive asset was to come loose. So we're not ruling out doing something inorganically, we remain very alive to potential opportunity and we would give a very, very strong consideration to making an acquisition of the space if an asset was to become available.

Overall on the cost, very much in line with guidance, our staff cost numbers are probably slightly better, obviously due to the lower number. We are continually investing in operational efficiency areas. which is looking to reduce our costs on an ongoing basis. And we're very, very focused on reaching our medium-term target of less than €2 billion in 2026. Thanks a lot.

We're now turning to Sanjana at UBS. Okay. Clearly, we're not going to get questions there. The last question is going to come from Guy Stebbings at BNP Paribas. Good morning.

Morning. Thanks for taking the questions. I was hoping to come back on distributions again one last time, if you don't mind, and then I had one on NI. I think like a lot of investors, I'm struggling a little bit with the policy. You talked about having a more normal distribution policy and no desire to hoard capital. But I guess there are a lot of banks that do do buybacks, et cetera, the half year, have less capital, generate less capital. So it does make you look very conservative versus pretty much every bank in Europe. So I'm just trying to get to the bottom of why that is. Is that you as a management team coming to that judgment? Or is the bar just quite a bit higher from the regulator if it's not a directed buyback? I know you said there's no pushback to this policy, as in what you proposed today, there was no pushback. But to be clear, do you consider at all an interim excess payment? The regulator said no, so it's just never a consideration. And then on net interest income, clearly you've been very active on the hedging. Sensitivity's come down very nicely. We're getting towards the end of the rate-cutting cycle and good deposit volume. So I'm sure you're thinking about very close to the sort of low point for run rate and high from here and start to pick up as sort of soon as H126 perhaps.

Thank you. Well, the policy is the management team's policy. We brought the proposal to the board and we got the support of the board. Our priority in this period, in the first six months of the year, was putting ourselves in a position where we could return to making interim distributions on a cash basis. We have now done that. And what we're making clear is that we will have a discussion towards the back end of the year in relation to special distributions. We didn't have that discussion in the first half of the year. We were very much focused on the cash distribution. I'm very pleased that we got board support for our policy, which I think is sensible and clear. And as I said already, we're very much looking forward to having those discussions in relation to how we get towards our 14% CET1 target for 2026 when we are reaching the end of this financial year.

Yeah, I mean, I would just add to that in the last two years, we've returned €4.3 billion to investors, which is 30% of our market cap. So I think that compares very favourably vis-à-vis the other banks that you mentioned there. And obviously 2025, we feel that we're going to have a very strong performance as well. So I think you can just look at the track record over the last number of years and that should give you an indication of management's intent. I think with respect to the question on NII, look, I think we've reasonable visibility on the ECB rate curve. Deposits continue to grow. A structural hedge, which is already in the money and performing, and loan growth that we do expect to ramp up and reach 5% velocity and growth. So indeed, yeah, I think you should expect to see NII performing from here.

Thanks for listening to you, Donald. We're just up at the top of the hour now. There you have it. The IR team are, of course, available as ever to discuss the results and the outlook with you over the coming hours and indeed days. But I want to thank you for attending our presentation this morning. We look forward to engaging with you over the days, weeks and months ahead. Thank you.