AIB Group PLC (AIBRF) (H1 2026) Earnings Call Highlights: Record Profit and Strategic Growth

Q & A Highlights

Q: How should we think about AIB's approach to its medium-term targets for the next strategic cycle, given the company is running well ahead on its current three pillars? Will you look to increase them or keep them as a baseline? A: Colin Hunt (CEO): The executive team is giving significant consideration to the strategy for the next four years, extending to 2030. The strategy will continue to focus on the three pillars of customer first, winning our business, and operational efficiency, while factoring in the structural forces of electrification, digitalization, and demographic change. While we won't front-run the outcome, the management team has been consistently ambitious in strategy and conservative in execution, and we will share the refreshed medium-term targets with the full-year results in March 2027.

Q: Given the strong delivery on dividends and buybacks, how should we think about the mix of future distributions, and would you still look at buybacks as being as material as they have been? A: Colin Hunt (CEO): We have a very clear policy on ordinary dividends and will continue to adhere to it, as evidenced by the interim dividend of EUR0.19528 per share, a 60% increase year-on-year. Any distributions outside of that policy are a matter for the annual Board discussion. We have capacity for above-policy payouts, with optionality to utilize share buybacks, special dividends, or a combination of both as we move towards our medium-term CET1 target of 14%.

Q: Can you provide an update on the SRT program, specifically the run-rate cost of protection and the cost for the remaining planned SRTs? A: Donal Galvin (CFO): We have executed two SRTs so far (on the corporate loan book and AIB mortgages), both with less than EUR10 million NII cost and an implied cost of equity of 3% to 4%. For Q4 of this year, we plan to execute an SRT on our project finance portfolio, targeting over EUR1 billion of RWAs and a CET1 benefit of 25 to 30 basis points. We expect this to have an implied cost of equity of under 5% and an NII cost of around EUR10 million.

Q: Your deposit costs trended down in the first half. Is this supporting NIM expansion, and can we expect more repricing tailwinds? Also, are you seeing any impact from competition on deposit margins? A: Donal Galvin (CFO): The Q2 exit NIM was 2.71%. We expect continued liability growth in H2 with a similar mix to H1, with a deposit beta of 20% for year-end. We have around EUR5 billion of fixed-rate mortgages repricing in 2026 and EUR7 billion in 2027, with structural hedge swaps maturing in similar amounts. As the rate environment changes, we expect NIM to increase from here. Colin Hunt (CEO) added that while the competitive environment is evolving, the key test is that deposits continue to rise, up 1.3% since December.

Q: Your mortgage market share remains strong at circa 30%. Could you talk us through what you've seen in that market in H1 and your strategy from here? A: Colin Hunt (CEO): We don't target mortgage market share per se, but we are very happy with the 30% share, with our direct-to-consumer share at about 46%. We focus on the direct-to-customer market to maintain a direct relationship, which allows us to cross-sell other products like home and mortgage protection insurance to about 60% of those customers. We are seeing a drift towards digital delivery, with 90% of personal loans and 29% of mortgages now delivered digitally, and we remain focused on writing the right business with the right customers at the right price.

Q: You've updated your assumption for an ECB rate of 2.5% from the end of this year. How do you view consensus NII for '27 and '28 based on that rate assumption? A: Donal Galvin (CFO): We initially expected a year-end rate of 2%, but it now looks like there will be another hike in September, ending the year at 2.5%. For 2027 and 2028, we are comfortable with consensus, as we believe it has incorporated the updated yield curves.

Q: Can you give an update on the evolution of your cost base into 2027? Staff numbers are coming down, but the average payment per staff member seems to be up significantly. Is there something to read into that, especially regarding AI optimization? A: Colin Hunt (CEO): We have seen an ongoing reduction in headcount driven by natural attrition and retirements, a trend we expect to continue. However, we have introduced an approved profit share scheme and a savings scheme for colleagues, enhancing the employee value proposition. On AI, we are well beyond experimentation and in the implementation phase, using it in cyber defense, financial crime prevention, software engineering, and our customer engagement center, where Abi triages about 70% of calls. We remain very focused on efficient cost management, supported by our EUR400 million annual capital investment.

Q: Your mortgage share has dropped slightly. Have you adjusted your proposition to capture a greater share of future flow, given customers may increasingly prefer an intermediated offering? A: Colin Hunt (CEO): The market is roughly a 50-50 split between direct and broker channels. We made some rate adjustments in the closing quarter of last year and are watching the market closely, with applications trending well. While there is a shift towards digital engagement, for the biggest financial engagements, customers still want to talk to us directly, either in our 170 branches or through our customer engagement centers. Our focus is on having a product that appeals to all parts of the market while maintaining a strong direct relationship, which is why our direct-to-consumer share is running at 46%.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .