AIB Group (LON:AIBG) raised its full-year 2026 guidance following what Chief Executive Officer Colin Hunt described as another strong quarterly performance, supported by lending growth across its retail, corporate, real estate and climate-focused businesses.
The bank now expects net interest income, or NII, of more than €3.85 billion for 2026, customer loan growth of 5% to 6%, and customer deposit growth of 3% to 4%. Hunt said the business was positioned for “a strong finish” to the year and to its current strategic cycle, with a strategy update through 2030 planned alongside full-year results in March 2027.
Lending momentum supports upgraded outlook
AIB reported 5.6% year-to-date growth in its customer loan book to €76.3 billion, underpinned by €12.3 billion of new lending, up 17% from a year earlier.
Group Financial Controller Kevin Gahan said Climate & Infrastructure Capital produced €2 billion in new lending, up €0.9 billion year over year after lower activity in the previous year. Capital Markets lending increased 16%, with growth spanning several sectors, he said.
Hunt said the bank’s lending outlook was supported by the Irish domestic economy. AIB has raised its forecast for modified domestic demand growth to 3.8%, from an earlier estimate of about 2.7%. He said the bank expects continued solid retail lending and strong activity in corporate, real estate finance, and Climate & Infrastructure Capital, citing the visibility provided by their pipelines.
Gahan cautioned that underlying loan momentum in the fourth quarter could be partly offset by typically uneven seasonal redemptions and a possible reversal of foreign-exchange benefits.
Net interest margin remains resilient
AIB’s year-to-date net interest margin was 2.72%, while its third-quarter margin reached 2.79%, compared with a 2.71% exit margin in the second quarter. Gahan said the quarterly improvement was driven predominantly by higher average lending volumes, alongside support from the structural hedge program and active balance-sheet management.
The bank generated €2.87 billion in NII through the first nine months, including €1 billion in the third quarter. Gahan said third-quarter NII was broadly representative of the expected fourth-quarter run rate, while acknowledging normal variability in lending, redemptions and balance-sheet dynamics.
Management characterized its guidance of more than €3.85 billion as a floor rather than a target ceiling. Hunt said, “You should read greater than as giving us a floor.”
For 2027, AIB said its internal planning assumes the European Central Bank deposit rate will stand at 2.5% at year-end, although market pricing currently implies a higher rate. Gahan said AIB remains positively geared to higher interest rates, with its previously disclosed sensitivity indicating that a 100-basis-point rise in rates would add about €260 million to NII. He said the bank was broadly comfortable with consensus estimates for NII in 2027 and 2028 but would provide more detailed outlook guidance in March.
Deposits, fees and costs
Management said it had not seen a material change in deposit customer behavior or significant pressure from deposit competition. Hunt attributed deposit momentum partly to a higher Irish household savings ratio, which he said had been estimated at roughly 18%, compared with approximately 14% at the time of AIB’s July update.
Hunt also said fiscal measures announced in Ireland’s October budget were expected to support household income in 2027, with gains of up to €1,600 per household across the income distribution. He said this should underpin the deposit trajectory next year.
AIB’s structural hedge remained unchanged from June at €65 billion, comprising €59.4 billion in euro-denominated positions and €4.6 billion in sterling. The bank expects an exit fixed yield of 2.3% for 2026 and a weighted average life of five years. About €5.6 billion of the hedge is set to mature in 2027, and management said it expects to roll or replace those positions while continuing to review the hedge size in light of deposit growth.
Total fees rose 7% year over year. However, net fee and commission income declined 5%, reflecting a prior-year Visa rebate and the transition in July to a simplified flat-fee structure. AIB provided customers with one month of free banking during that transition. Hunt said the bank had no plans for further material changes to the subscription model.
Costs rose 3% year over year through the third quarter, while the cost-income ratio stood at 44%. Staff costs increased 4%, primarily due to salary inflation and employee benefits, partly offset by a 3% decline in full-time-equivalent headcount. General and administrative expenses rose 1%, while depreciation increased 4%, with each category affected by certain one-off items.
Management maintained its guidance for approximately 2% cost growth in 2026. Looking beyond the year, Gahan said simplification, automation and artificial intelligence would be important tools for creating capacity, improving productivity and moderating underlying cost growth. Hunt reiterated the bank’s ambition to reduce headcount by roughly 3% annually through natural attrition and retirements.
Capital generation and strategy discussions
AIB reported a CET1 ratio of 15.7%, excluding 260 basis points of organic capital generated during the first nine months. The bank also completed a third significant risk transfer transaction in October involving a €2.5 billion project-finance portfolio. The transaction reduced risk-weighted assets by €1.2 billion and is expected to add 30 basis points to the full-year CET1 ratio.
The European Central Bank reduced AIB’s Pillar 2 requirement by a further 20 basis points to 220 basis points. Hunt said the reduction reflected the quality of the group’s risk management, but declined to comment on future capital targets or distribution plans ahead of board and regulatory discussions.
Management said decisions on capital distributions, strategy targets and the company’s outlook through 2030 would be disclosed with full-year results in March 2027.
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.
