AIB Group (LON:AIBG) outlined what it called a “landmark year” in 2025, highlighting a return to full private ownership, strong profitability, resilient net interest income (NII), and a shareholder distribution plan that management said was supported by “exceptionally strong” organic capital generation.
In prepared remarks, CEO Colin described 2025 as a year of “progress and closure,” noting the bank has returned a cumulative “circa EUR 21 billion” to the Irish state. He said the group is entering the final year of its 2023–2026 strategy with positive momentum and is beginning work on the next strategic cycle to 2030, which is expected to be brought to the board for approval in December before being shared with investors.
2025 financial performance and shareholder distributions
Costs were EUR 1.99 billion, up 1% year-on-year, resulting in a 44% cost-income ratio. Full-time equivalent headcount ended the year at 10,207, down 3%.
Management proposed total distributions of EUR 2.25 billion, described as a 105% payout ratio. This included an interim dividend already paid in November, a proposed final ordinary cash dividend of EUR 988 million, and a EUR 1 billion on-market buyback that has begun execution. Total cash dividend per share was EUR 0.5858, up 58%.
The CFO reiterated a dividend policy targeting a sustainable 40%–60% ordinary dividend payout range paid in cash, with scope for additional distributions “subject to annual review and necessary approvals,” including buybacks and/or special dividends. In Q&A, he said the mix of dividends and buybacks is assessed with reference to investor engagement, regulatory considerations, and practical factors such as market liquidity.
Balance sheet growth, funding strength, and asset quality
AIB reported gross loans of EUR 72.3 billion, up 2% (or 3% on an underlying basis), including EUR 14.7 billion of new lending, up 2% year-on-year. Customer deposits increased 7% to EUR 117.2 billion, which the CFO said was “well ahead” of expectations, although the bank expects deposit growth to normalize in 2026 to 2%–3%.
Asset quality metrics were described as resilient. The group recorded an expected credit loss (ECL) charge of EUR 172 million, representing a 24 basis points cost of risk. Non-performing exposures ended the year at 2.2% of gross loans, which management said was the lowest for a number of years at AIB. ECL coverage was 1.6%, with an ECL stock of EUR 1.1 billion and post-model adjustments (PMA) of EUR 254 million.
Funding and liquidity ratios were also highlighted, including a loan-to-deposit ratio of 61%, liquidity coverage ratio of 204%, and net stable funding ratio of 163%. AIB also cited wholesale issuance across AT1, Tier 2, euro senior, and dollar senior markets.
Net interest income resilience and 2026 guidance
Despite a looser monetary policy environment, management emphasized what it called resilient NII, with 2025 NII at EUR 3.748 billion and a 2025 year-end net interest margin of 2.73% (Q4 exit NIM of 2.69%). The CFO attributed NII dynamics to factors including benefits from the structural hedge program, margin pressure from lower rates on cash held with central banks, loan and securities repricing, wholesale funding costs, and customer terming of deposits.
For 2026, the bank guided to NII of circa EUR 3.8 billion, based on an assumed ECB deposit rate of 2% and a deposit beta of 20% (consistent with 2025). The CFO said AIB had executed an additional EUR 10 billion of structural hedge early in 2026, with an average yield of 2.3% and average life of five years, reducing sensitivity to a 100 basis points rate shock from EUR 378 million to EUR 286 million.
Other 2026 guidance items included:
- Other income greater than EUR 750 million
- Costs expected to increase by 2%
- Cost of risk expected in the 20–30 bps range
- Loans expected to grow by 5%
- Deposits expected to grow by 2%–3%
- Return on tangible equity expected to be greater than 20%
In Q&A, the CFO added that he expected return on tangible equity to remain above 20% in 2027 and 2028 as well.
Strategic updates: digital investment, lending mix, and sustainability
On business activity, management said new lending in 2025 was 2% higher than 2024. The CEO noted a 4% decline in new mortgage lending and said mortgage market share fell to 30%, while AIB remained the leading player in direct-to-consumer mortgages with a 46% share. Personal lending was up 4%, and the bank said 88% of personal loans are applied for digitally. Total property lending rose 25% off a subdued base, and corporate lending increased 8%, with management citing some climate and infrastructure capital deals slipping from December into January.
Management reiterated an ambition to deliver medium-term lending growth, with the CEO citing a targeted lending growth CAGR of 5% to the end of 2027. The CFO said the bank was “more confident now than ever” in achieving its 5% asset growth targets for 2026 and 2027.
On sustainability, the CEO said AIB had deployed almost EUR 23 billion of green and transition lending since 2019 and that new green lending in 2025 reached an all-time high of 43% of all new lending. He said the group remains on track for a 70% target. The CEO also said 92% of AIB’s electricity needs were sourced from a virtual power purchase agreement tied to two solar farms.
In the climate and infrastructure capital division, the CFO discussed elevated 2025 cost of risk of around 110 bps, attributing the issue largely to a fiber-related portfolio originated around 2019–2020, with performance varying by geography. He said that excluding the fiber portfolio, cost of risk would have been “probably 5 or 6 basis points,” and that planning assumptions use a cost of risk of less than 20 basis points. He described the business as “accretive” and strategically important, and referenced a newly approved slotting model that reduced risk-weighting density from around 90% to around 75%.
On technology and customer experience, management said annual investment increased to EUR 350 million in 2025 and is expected to rise to EUR 400 million in 2026 and beyond. The CEO cited progress including AI deployment, improved credit decisioning (with nCino handling two-thirds of new SME lending), and “zero critical cyber incidents” in 2025. He also said a next-generation app is slated to launch in summer, and pointed to “Abby,” an AI digital assistant launched in December 2024, which has assisted over 1.3 million customers across 66 customer journeys.
Looking ahead, the CEO said it would be premature to provide detailed metrics for the next strategic cycle, but reiterated an ambition for AIB to be “the best bank in Europe” and “the most trusted brand in Ireland,” with more detail expected in 12 months.
About AIB Group (LON:AIBG)
AIB Group plc operates predominantly in Ireland and the United Kingdom. Our shares are quoted on the Euronext Dublin and the London stock exchange and we are a member of the FTSE4Good index. Our three core segments are: Retail Banking, Capital Markets and AIB UK. We also operate wholesale treasury activities along with control and support functions.
