Investors cheer AIB's 1.7 bln euro shareholder returns


By Padraic Halpin

DUBLIN, March 6 (Reuters) - Irish bank AIB Group AIBG.I on Wednesday announced plans to boost shareholder returns more than four-fold after higher interest rates helped it more than double its full-year after-tax profit and lift profitability targets, sending shares up 4%.

Ireland's highly concentrated banking sector makes more of its profit through interest revenue than its European peers. AIB raised its net interest income guidance three times last year, eventually delivering an 83% jump to 3.84 billion euros.

That boosted the bank's profit to 2.1 billion euros ($2.28 billion) from 765 million. It plans to return 1.7 billion euros to shareholders, 696 million of it via dividends and the rest through a directed share buyback with the Irish government that could cut its stake to around 34% from just under 40% currently.

That equated to a payout ratio of 82% of profit after tax, above AIB's target of 40-60%. The bank said that represented the start of a return of excess capital to shareholders promised at its 2017 IPO.

AIB shares rose 4% in early trading as investors gave its plans a better reception than a similar hike in distributions by main rival Bank of Ireland BIRG.I, which was overshadowed by a weaker than expected outlook and increase in its 2023 profits.

Shares in Bank of Ireland, the country's largest lender, fell by as much as 13% last Monday. It has since recovered more than half of that fall.

AIB, one of two dominant lenders in a market that now contains just three high-street operators, almost tripled its return on tangible equity (ROTE) to 25.7% last year, way above its target of boosting returns above 13% by 2024.

It reset its targets to 2026 as a result, seeking a ROTE of 15% that analysts at Davy Stockbrokers said would likely end up being conservative.

Like Bank of Ireland, AIB set aside cash to cover potential commercial real estate losses in 2024. AIB CFO Donal Galvin told Reuters he expected office and retail values to begin to recover in the second half following a 5-10% fall in the first half.

($1 = 0.9210 euros)

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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