AIB, Bank of Ireland and Permanent TSB look to bank their huge share price gains

AIB on Thursday was the last of the remaining three Irish banks to take stock in trading updates of the huge benefits flowing their way from the exits of formidable rivals Ulster Bank and KBC Bank from banking in the Republic. The banking trio is benefiting hugely from much-reduced competition and higher interest rates, but they may nonetheless face tougher going to sustain an extraordinary surge in their share prices of the past year.            

Citing higher interest rates and loans growth, AIB chief executive Colin Hunt in his bank’s update hailed “a very strong performance” for the first three months of the year. Net interest margin — a key measurement of banking profitability — had risen, “primarily driven” by rate hikes from the European Central Bank and by the increase in its loan book following the transaction it struck with Ulster Bank, the bank said. The lender also projected that net interest income would rise to €3.3bn, up from an earlier target of €3bn. 

Pointedly, AIB highlighted the strength of the Irish economy, an “ample and diversified funding” and deposit base, “notwithstanding the overseas financial market volatility” of recent times. That is a reference to the global banking turmoil that has led to the collapse in quick succession of Silvergate Capital, Signature Bank, Silicon Valley Bank, and by last weekend, the forced sale of First Republic, all in the US. In Europe, following a huge bank deposit run, Swiss regulators in March forced the sale of troubled Credit Suisse onto national rival UBS. 

Earlier in the week, Bank of Ireland’s new chief executive Myles O’Grady said in its update that the lender was “alert” to recent banking sector volatility. Having completed the acquisition of KBC mortgage loan books, Bank of Ireland said it had added 150,000 customers, €8bn in loans, and had tapped an increase in deposits of €1.8bn, with its share of the mortgage lending also increasing sharply thanks to the KBC deal. 

And at the start of the week, Permanent TSB predicted in its update it would boost total income this year by 60%, as the smaller of the three remaining general Irish lenders also reaps the rewards from the closures of Ulster Bank and KBC. 

Permanent TSB said operating income surged 77% from a year earlier, that net interest income climbed by 86%, and that it now commands a market share of 25% for new mortgage business in the Republic, up from a share of 15% a year earlier, before the full departure of the two rivals. 

The exits of Ulster and KBC have transformed the landscape of Irish banking, making the market here among the most concentrated in the eurozone. The shares of the Irish trio have surged. AIB shares have fallen 4% in the past week but have nonetheless climbed  85% from a year ago; Bank of Ireland’s shares, down 11% in the week, are still up by 51% in the year; and Permanent TSB shares, down slightly in recent days, have climbed 53% from this time last year. The Irish banking chiefs are looking out should renewed global market turmoil spoil the party.

https://www.irishexaminer.com/business/companies/arid-41131492.html