AIB Group Stock

Good morning, and welcome to the presentation of AIB Group's results for the first half of 2026. I'm conscious that the analyst community has a very busy day of announcements. So Donal and I will get through the performance highlights at a decent clip before we open to the floor for your questions.

H1 was another period of progress with purpose for AIB, building on our exceptional customer franchise and the momentum of recent years. We're pleased to be reporting a profit after tax of EUR 939 million, representing a ROTE of 23.2% with strong organic capital generation of circa 170 bps and a closing CET1 of 16.1%.

The strong financial outturns reflect an excellent performance across the business with new lending of EUR 7.5 billion, an increase of 10%, bringing our gross loans to EUR 74.5 billion, representing growth of 3% since the start of the year. With good visibility on the second half pipeline and a strong first half booked, we're well on course to meet our full year guidance for loan growth of circa 5%.

Now in the face of an evolving competitive environment, our NIM remains resilient at 2.68% and our deposit base grew to almost EUR 119 billion. And all of this positions us well to declare an interim dividend of EUR 0.19528 per share, representing an increase of almost 60% on the prior year. Sustainability continues to sit at the very heart of our mission and our purpose.

Green and transition lending accounted for 41% of all new lending in the half with EUR 26 billion of our EUR 30 billion climate action target now successfully deployed, directly and positively supporting Ireland's transition to a low-carbon future. And aligned with our success in green and social lending, we remain a leading issuer of ESG bonds with EUR 8.2 billion issued since 2020, and we've comfortably exceeded our 2026 first-time buyer lending target while supporting some 23,000 customers to buy their first home. Our medium-term sustainability targets are all well in-hand.

Now these results are reflective of the ongoing economic strength and resilience of our core market, Ireland. And growth in modified domestic demand is expected to remain robust over our current forecasting horizon to 2028. The pace and durability of Ireland's post-COVID bounce has been exceptional with real per capita economic growth ranking at the upper end of the world's largest developed economies. The employment market remains strong and while there has been a moderation in the pace of new jobs growth in recent years, we're expecting the unemployment rate to remain no higher than 5% out to the end of 2028.

Balance sheets of households, businesses and government remain in robust health and are very conservatively positioned, and that augurs well for the medium-term outlook for both consumption and investment. And the strength of the fiscal position with a surplus of some 3% of gross national income and a debt to GNI of 54% forecast for 2026, is key to the unlocking of Ireland's true potential over the years ahead. The successful and timely execution of the EUR 275 billion national development plan over the next decade would underpin demand metrics, but more importantly, would transform and modernize the supply side of the economy for the medium term and beyond.

There is real momentum now as Ireland seeks to build the housing, energy, water and transport infrastructure we need to sustain our economic and social progress. You can see it clearly reflected in housing stats with completions expected to reach 39,000 this year and to remain on an upward trajectory over the years ahead. We need to decide faster, build faster and connect faster.

Ireland has the resources, the ambition and the opportunity to pivot critical infrastructure from a constraint to an enduring competitive advantage. And in that vein, last week, we welcomed the Irish government's designation of 9 projects as critical infrastructure under the Critical Infrastructure Act. The potential benefits for AIB, Ireland's leading bank and the impact we can make to both society and the economy are significant.

Turning now to new lending. We are pleased to report a strong performance in the first 6 months of the year. Solid outturns in personal and SME lending while new mortgage lending was EUR 2.1 billion with our mortgage market share standing at 30% for the first half, and we remain the largest direct-to-customer mortgage lender. Property and corporate lending reported strong growth rates, reflecting the strength of our customer base and the quality of our delivery. And I'm particularly pleased with the exceptional performance of our climate infrastructure capital team, which after a sluggish 2025 due largely to geopolitical considerations, had a stellar first half with new lending doubling to EUR 1.2 billion.

As we continue our relentless focus on supporting our customers in the required transition to a low-carbon future, the impact we are making is clear with green and transition lending now representing 61% of EUR 7.5 billion in new lending and 60% of the new lending for mortgages. Looking out to the end of this year, the pipeline across all our lending teams remain strong, and we're confidently reiterating our guidance of loan growth of some 5% for the year as a whole.

Once again, we can state with confidence backed by facts that AIB is Ireland's leading bank. We continue to welcome more new customers to AIB than any other financial institution with the total number of customers we serve reaching 3.5 million for the first time. And while we maintain and are very committed to the largest branch network in Ireland, we're continuing to enhance our digital offering, our key customer interface with 84% of our personal customers now digitally active.

We've delivered a complete rebuild of our mobile offering, which we launched in the first half of the year to a very positive reception. Built in the cloud, the new app will allow us to add new functionality with ease over the months and quarters ahead, further underpinning the quality and the reliability of our products. I also want to draw attention on this slide to the success we have enjoyed in growing our savings and investment management businesses at both Goodbody and AIB Life with total group AUM now standing at over EUR 20 billion, including our recently agreed Legacy Wealth Management acquisition, which is subject to regulatory approval.

And now turning to the first of our strategic priorities, Customer First, with further progress to report. I'm delighted to see that the efforts of my colleagues in supporting our customers across the group are being recognized by those customers in Net Promoter Scores at all-time highs across multiple customer journeys. We're also making real progress on improving our understanding of our customers' needs through their life stages, which will help us to deliver more tailored personalized propositions.

I'm also pleased that together with the other retail banks, we successfully launched Zippay, enabling our customers to send requests and split money instantly using their mobile phones. We're encouraged by early adoption and usage levels. And meanwhile, Abi, our digital assistant is continuing to triage and handle an increasing number of customer journeys in our customer engagement centers, and she is now fully embedded in our new app.

Abi is delivering a very high quality of service to those of our customers who are happy to engage with her, supporting some 6,500 calls per day, which is up about 25% since the end of last year. And she's now supporting 90 customer journeys in our customer engagement center, up 60% over the same period. And we look forward to further service enhancements on the app at the website and indeed in our customer engagement centers in the second half of this year.

We maintain our commitment to greening our business, and I'm delighted that the performance in green and transition lending in the first half was a standout with 87% of our EUR 30 billion climate action target now deployed. 41% of all new lending in the first half was green with solid contributions being made across each of our operating divisions.

And as I mentioned earlier, Climate & Infrastructure Capital had an exceptional first half with 13% growth in gross loans. We've built the expertise. We have the skills and the reputation, and we're building a really strong franchise in an area of great opportunity as the world continues to electrify. Now, the scale of that opportunity is immense, and it allows us to be highly selective about the projects that we choose to finance, some of which are spotlighted on the slide here, representing some of the transactions that we've been involved with here in Ireland, in Europe and indeed in the United States.

Operational efficiency and resilience is the third of our strategic priorities, and we're continuing to make real tangible progress. I'm encouraged that in an ever more challenging and dynamic cyber environment, we maintained more than 99.99% IT service availability across our critical customer service areas, while at the same time, we continue to digitalize at pace with 2.4 million digitally active customers. Meanwhile, we are continuing to enhance our internal efficiency through relentless simplification, digitalization and product rationalization. Now this is a multiyear process, but I'm very pleased with the real results that we're now generating, and I expect far more to be delivered.

In terms of scaling AI adoption, we are well beyond experimentation and firmly focused on operationalization with AI now embedded across hundreds of workflows. Having built the foundations and demonstrated value through use cases such as Abi, we're now scaling adoption across core business processes with new agentic capabilities live and expanding to improve our productivity, to strengthen our resilience, to enhance our risk management and to deliver better customer outcomes.

In June, we successfully launched our new mobile app, which was designed in collaboration with our customers and which will be fully rolled out by the end of October. Now I'm really pleased with the enhanced functionality, the look and the feel of the app, which is the #1 channel for customer engagement on a day-to-day basis. This investment was not just about our customer interface, but it represents a transformation of our digital engagement platform. And we're going to continue to invest around EUR 400 million per annum, increasing our resilience, leveraging scale and accelerating innovation for future growth.

As we embark on the final 6 months of our current strategic planning cycle, I'm really pleased with how the group is performing. We're very clear on our strategic priorities, and we're focused and relentless in our execution. Our franchise is strong and growing, while our multi-year investment in technology is bearing fruit in the form of our new key customer interface, enhanced efficiency and robust system reliance resilience and security. We are very well placed to reach the end of this strategic cycle in good health, delivering on our targets and on our commitments to all our key stakeholders.

Now we are looking beyond the end of 2026 and towards our new planning horizon. With great momentum in our business and a strategy framed in the context of the structural forces of electrification, digitalization and demographic change, I'm very excited about the prospects for AIB today, tomorrow and in the years ahead. Clear focused delivery built upon the pillars of a remarkable franchise and capital strength will position AIB strongly to deliver sustainable long-term value for our shareholders for many years to come. We are very well advanced now on planning for our next strategic cycle, and we look forward to sharing our 2030 targets with you all in March. Donal?

Thank you very much, Colin, and good morning, everyone. I'm going to run you through the financial highlights for the first half of 2026. We had a profit after tax of EUR 939 million, and that equated to a return on tangible equity of 23.2% and an earnings per share of EUR 0.422. Our total income was EUR 2.282 billion, which was up 2%. Our costs were just over EUR 1 billion, which are up 2% as guided, leaving us with a cost-to-income ratio of 44%.

Our gross loans increased by 3% to EUR 74.5 billion, and we had EUR 7.5 billion of new lending, which was up 10% year-on-year. Our asset quality remains resilient, and our ECL cover is unchanged at 1.6% and we had a charge in the first half of the year of EUR 91 million, which is a 25 basis points cost of risk. Our customer deposits were EUR 118.8 billion, which increased EUR 1.6 billion, which were up 1.3%.

Our CET1 ratio is 16.1%, which is well ahead of regulatory requirements, and with strong organic capital generation in that of about 170 basis points, an interim ordinary dividend of EUR 0.1952 and our EUR 1 billion share buyback announced in March continues with EUR 410 million completed at June.

I'm just going to run through some of the key highlights here on the income statement. Return on tangible equity strong 23%; EPS, 42.2%; return on assets, 1.2%. Our levies and reg fees were EUR 109 million, which includes a levy of EUR 94 million. I think for our full year 2026, reg fees and levies of EUR 140 million are expected and no material exceptional items. NIM of EUR 1.8 billion is stable at 2.68% and exit NIM of 2.71%.

Moving parts here are really SHP, offset by lower returns from cash at banks and cost of liabilities offset by customer loans. NII has been resilient through the interest rate cycle, and we expect our NII to be greater than EUR 3.8 billion in 2026. Other income is EUR 411 million, which is up 15%, and we expect other income to be around EUR 800 million for the full year. Very strong performance in wealth and insurance.

Costs are EUR 1 billion, which are up 2%, which is very much in line with guidance. And like I mentioned, we have an ECL charge of EUR 91 million, which is a 1.6% ECL cover rate. Cost of risk for the year is expected to be 20 basis points to 30 basis points. Overall, on balance sheet, as Colin would have mentioned, we've had growth of 3% in the first half of the year. We expect that to be around 5% for the full year and deposits were up 1.3%, and we expect them to be greater than 3%. The moving parts on balance sheet growth really in our consumer areas, mortgages and personal are up low-single digits. And in the wholesale areas, we saw significant growth, as Colin would have mentioned.

Funding and capital remain very strong, all of our key ratios above key metrics. CET1 ratio, 16.1%, very strong, comfortably ahead of all targets. Pathway to CET1 target, we will continue to invest in our business and drive sustainable profits greater than 320 basis points of underlying business, a DTA benefit of 35 basis points, investing EUR 400 million per annum and supporting balance sheet growth of 5%.

With respect to IRB and capital, we'll continue our multi-asset SRT program. We implemented the slotting model for our project finance business that had a benefit of EUR 900 million. And there are other factors impacting RWAs. We look to execute an SRT in quarter 4 of this year on our project finance book that will have a benefit of 25 basis points to 30 basis points. And we'll also have a rollout or continued rollout of our IRB program.

Our EBS mortgage model is expected to be broadly neutral. And post implementation of our commercial real estate model, we do expect there to be an increase in RWAs of up to 50 basis points. We will continue to deliver market-leading distributions. We delivered over 100% in 2024 and '25, and EUR 6.9 billion in total distributions since 2023. We'll pay a sustainable dividend with a 40% to 60% payout policy and an interim dividend set at 1/3 of the prior year's ordinary dividend.

With respect to additional distributions, we have capacity for above policy payouts subject to annual review and necessary approvals. And we have optionality to utilize share buybacks and special dividends or a combination of both as we move towards our medium-term target of 14%.

So to wrap all that up, our net interest income will be greater than EUR 3.8 billion. Other income will be circa EUR 800 million. We expect costs to increase by 2% but a cost of risk of between 20 basis points. and 30 basis points. Growth in customer loans of 5% and deposits of 3%, giving us a ROTE of greater than 20%.

So for 2026 and beyond, we're moving into the next strategic cycle with positive momentum in our business. We have sustainable business growth and returns, strong organic and capital generation, increased investment in our business and market-leading shareholder distributions. So our medium-term targets continue to guide the business and will be refreshed for Strategy 2030 with full year 2026 results in March 2027. Thank you.

Thank you so much indeed, Donal.

And now we're going to turn to the floor for questions. And I think the first up is Denis McGoldrick from Goodbody.

Just 2, please, if I may. Firstly, on the mortgage market, obviously, your share remains very strong at circa 30%. Could you talk us through anything you've seen in that market in the first half of the year and your strategy in that market from here? And then secondly, just on NII. You've updated your assumption for an ECB rate of 2.5% from the end of this year. I guess, any color you could give us in terms of how you view consensus NII for '27 and '28 based on that rate assumption would be great.

Thanks for both questions, Denis. I'll leave Donal handle question 2. On the mortgage markets, we've consistently said that we don't target mortgage market share per se, but I'm very, very happy with how we are performing, 30% share of the overall market. Our direct consumer share is about 46% in fact, a little bit higher than that in the month of June. And one of the reasons we target the direct-to-consumer market, in particular, is because we want to have that direct relationship with our customers. We think that's in the best interest of the customers, ultimately in the best interest of the group.

And it also, of course, allows us to sell other products to our customers. And of those customers with whom we have a direct relationship, we sell home insurance and mortgage protection insurance to about 60% of them. So happy with the performance of the business. One of the interesting things is, we're now seeing a drift higher in terms of the customers who choose to deal with us digitally. Now we've seen an ongoing climb in terms of usage on the personal front, that's been high for quite some time. But now in the first half of this year, 90% of our personal loans were delivered digitally.

Probably last year, we're looking at about 25% of mortgages being delivered digitally, big step up relatively in the first half of this year, that number is now running at 29%. But overall, very happy with how we are performing in the mortgage market business. Our focus consistently has been on writing the right business with the right customers at the right price. Donal, do you want to cover NII?

Yes. Look, on ECB rates, we had initially expected a year-end 2%. It looks like there's going to be another hike in September '25, ending the year at 2.5%. I think for '27, '28, what we'd say is, we're happy with consensus, and we think that, that's incorporated updated yield curves. But overall, '27, '28, comfortable with consensus.

Now we're going to down the street to Diarmaid Sheridan from Davy.

Maybe just 2 questions, please, if I can. Just on the medium-term targets, I appreciate you're going to come back to us in March next year. But I guess the observation is you're running well ahead on [ month 3 ] on the 3 pillars that you set out. I guess how should we think about you approaching those as you look to the next cycle? Are you going to look to increase those? Or are you comfortable keeping them at a baseline and then looking to exceed them going forward?

And then secondly, maybe somewhat interrelated, just in terms of dividends and distributions, just in terms of going forwards, the mix of those. Obviously, been quite a strong delivery on both the dividend and the buyback side. Given where valuation is now, would you still look at the buyback as being kind of as material as it has been over the last couple of years?

Okay. Well, on the medium-term targets, the executive team here have been given a lot of consideration to the shape of the strategy for the next 4 years. We're going a little bit longer than normal. Normal is a 3-year cycle. We're going to do 4 years this year because 2030 is just too attractive an endpoint to miss. Our strategy is going to, in my view, continue to be focused on those 3 strategic pillars that I speak about, customer first, winning our business and driving ever greater operational efficiency and resilience through the business. We're going to obviously be taking into account what we've identified as 3 major structural forces out there.

You will have heard me referring to them in my earlier remarks, and that's going to shape the discussions that we have with Board later on this year. I'm not going to front run where we're going to end in terms of medium-term targets. We will go through the appropriate governance internally here. And I think that the best juncture thereafter is to share those medium-term targets with you when we present our full year results for this year. But rest assured, this is a management team that has been consistently ambitious in our strategy and conservative in our execution. It's worked really well in terms of delivery for all our stakeholders in the past number of years, and that will be the overriding principles that guide how we approach the strategy out to 2030.

On dividends and distributions, we have a very clear policy in relation to ordinary dividends. We will continue to adhere to that policy. Delighted today to be announcing a EUR 0.19528 interim dividend, which is our second cash dividend -- sorry, second cash interim dividend and a 60% increase in the prior year outcome. Anything about that -- anything outside of policy in relation to ordinary dividends is a matter for annual Board discussion, and we'll be having those discussions with the Board as we near the end of this year.

Our next question is coming from Fatima, in KBW.

So just 2 from me. It looks like your deposit costs trended down in the first half. So is this supporting your NIM expansion? And can you expect any more repricing tailwinds to come on the fixed book of your deposits? And then following on from that, is there any impact that you're seeing from competition in the deposit market on deposit margins? Are you sort of expecting any pricing pressure there?

So I'll let Donal cover the cost and the deposit cost and the NIM aspect to your question. But we are conscious we are in an evolving competitive environment. And this is a competitive environment that has been evolving for many, many years. We've had a number of overseas entities opening operations here in Ireland a number of overseas entities indeed leaving the market. We are obviously conscious of what's happening out there.

Our job, as a management team, is to ensure that we deliver decent policy -- decent products and services to our customers every day of the week. We have an unrivaled customer base here in the Republic. We give them a choice in relation to how they deposit their funds with us. But I suppose the key test in terms of how we're performing is that our deposits continue to rise and we're 1.3% higher at the end of June compared to where they were at the end of December last year.

Yes. Fatima, I think with respect to the NIM, the quarter 2 exit was 2.71. We expect to see continued liability growth in the second half of the year with a mix broadly similar to what we've seen in H1 with a deposit beta for the end of the year at 20%. With respect to items that are repricing, we have around EUR 5 billion of fixed rate mortgages repricing in 2026, EUR 7 billion repricing in 2027 on the fixed rate side. And in addition, we also obviously have a structural hedge swaps, which are maturing in a broadly similar amount, EUR 6 billion in '27, EUR 6 billion in 2026.

So obviously, as the rate environment changes as it is, you will see changes in deposit mortgage pricing, et cetera, but we don't talk about those in advance. But I would just take those main drivers, the asset growth, the liability growth, what the existing mix is and indeed, the fact that year-end ECB rates are expected to be 2.5% from September. So we do think that NIM is obviously going to increase from here.

I think our next question is coming from Jordan at Mediobanca. No, it's not.

SRT first? Can you hear me okay?

Yes, we can.

Yes, one on SRTs. A number have already been conducted and several more are planned. I just wonder if you could give a quick update on what the run rate costs of that protection is and how much it's likely to cost for the remaining planned SRTs?

And then secondly, on the mortgage market. So you already had a question there in terms of the 30% mortgage share, that's dropped down a little bit further. Have you adjusted the proposition at all since last year to try and capture a greater share of future flow? I know you said that you'll have to continue to target the direct-to-customer segment. It's just whether the landscape has changed now given AI and the technology we have, whether customers are just increasingly preferring to go via an intermediated offering. So those would be my 2 questions, please.

Okay. I'll cover mortgages. Donal will do SRT. On the mortgage market, it's roughly 50-50 split out there between the direct channel and the broker channel in terms of the market, as a whole. We did make some rate adjustments in the closing quarter of last year. And just looking across the business now, like, we were 30% for the year as a whole last year, 30% in the first 6 months of this year. We're obviously watching the market closely. Our applications are trending well.

And interesting, that customer behavior shift increasingly towards directing -- engaging with us using technology, but for the vast majority of our customers. This is an important competitive advantage that we have. For the vast majority of our customers, for the biggest engagements in their life, the biggest financial engagements in their life, they want to talk to us directly. And they do that either in our 170 branches, embedded in communities right the way across the country or indeed using our customer engagement centers.

But our focus is ensuring that we have a product that appeals to all parts of the market while being conscious that we want to maintain as a relationship bank that we want to be a preference for maintaining a strong direct relationship with our customers. And we do that, our share of the direct-to-consumer market running at 46%, as I said, in the first half on average and a little bit above that in the month of June.

On the SRTs, as you know, we've executed 2 already. The first one we did was on our corporate loan book, then the second was on our AIB mortgages. Both of those transactions were done with less than EUR 10 million NII cost and both done with cost of --like, implied cost of equities of 3% or 4%. So for quarter 4 of this year, the next transaction we're looking to execute will be on our project finance portfolio. We look to target over EUR 1 billion of RWAs, and we'll look to generate a CET1 benefit of 25 basis points to 30 basis points. And again, we expect that to have an implied cost of equity of under 5% and probably an NII cost of around EUR 10 million.

Okay. We're going to Seamus Murphy now from Carraighill.

Just a quick one. I just want to go through your costs. I'm just wondering about the evolution of your cost base as we look forward into '27. I suppose I'm just worried the fact that it's kind of -- we continue to see a consistent increase. And I suppose part of that, I know the salary -- sorry, the staff numbers are coming down. I think they're down kind of like progressively year-on-year and half-on-half.

But I was just worried about also the -- our thinking about the average payment per staff number in terms of it seems to be up quite significantly in the first half of the year. And I'm just wondering, my perception was that it was the older people were retiring and they were being replaced by younger staff. And I'm just wondering, is there something I should read into that? And then that obviously aligns with your use of AI, the potential for AI optimization as we look forward.

Thank you, Seamus. We have 10,000 colleagues. They do an amazing job for our customers every day of the week. We have seen an ongoing reduction in terms of total headcount, that's been driven by natural attrition as people choose to build their careers in other institutions or in other industries and of course, by retirements in the normal course, that's a trend we expect to see continuing.

That said, obviously, we have had a relaxation of some of the remuneration restrictions. We were delighted to introduce an approved profit share scheme for our colleagues, which we did last year. We were delighted to introduce savings -- you earn as well. And we'll continue to enhance the employee value proposition. But overall, we -- I think we've delivered pretty strong cost management in this organization and it remains an unrelenting priority for us.

It will be a key focus as we roll our operational efficiency and resilience priority forward into the next 4 years. And a point that I think it's pretty important to make and just to reiterate some of the remarks I made earlier, we're not in the experimentation phase on AI. We've put in place the foundations in terms of governance, in terms of building the skills. We then moved into a phase of testing use cases. And we're now very much in implementation phase and we're using AI.

We're using it exceptionally well, supported by our EUR 400 million capital investment. We're using it in our cyber defense. We're using it in financial crime prevention and monitoring and monitoring. We're using it for software engineering. We're using it in our customer engagement center with Abi, who's now triaging about 70% of the calls coming into the customer engagement centers and handling about 16% in total with very, very high customer satisfaction rates.

And finally, we're also using it internally in a number of parts of the bank, including our legal departments and our HR departments. We remain very focused on making sure this organization can be a very, very -- or it continues to be a very efficiently run organization, and it will be a major priority as we move into the next strategic cycle.

That brings matters almost to a halt. That is the last question we have from the floor this morning. But I am very conscious of the fact that Donal and I have presented these results now together 15 times in this room and he's been a great colleague. He has been a huge positive force in the transformation of our institution over the course, past number of years. And I want to take this opportunity to wish him every happiness and success in future years. Thank you.

Good morning, and welcome to AIB Group plc Q1 2026 Trading Update Conference Call. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded.

I will now pass you over to our speakers for today's session, Chief Executive Officer, Colin Hunt; and Chief Financial Officer, Donal Galvin. Mr. Hunt, please go ahead.

Thank you, Nadia. Good morning, all, and thank you for joining us on our Q1 call. I have Donal with us, as Nadia said, this morning, and we will both be available to take your questions very shortly. But I'd like to make some brief introductory remarks.

We're very pleased with the performance of the business in the first quarter, and the group is performing very much in line with our own expectations. We entered 2026 with great momentum, and that has been maintained in terms of actuals and outlook. And I'm particularly pleased with loan growth of 1.7% in the quarter. And with a strong pipeline now building before us, we're confidently reiterating our guidance for 2026.

We're seeing a strong performance right the way across the franchise as the group fires on all cylinders. And the strength of the performance that we're reporting today reflects the ongoing resilience of the Irish economy in the face of marked geopolitical uncertainty. So with almost 1/3 of the year now behind us, we can comfortably assert that we are confident in our ability -- in our outlook for 2026 and beyond as well as in our ability to deliver strong sustainable returns to our shareholders today, tomorrow and over the medium term.

I'll stop there, and I'll turn over to you for your questions.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Denis McGoldrick from Goodbody.

Just 2, please, if I may. Firstly, I'm interested if you're seeing any impact yet on the business or on your customers from the higher fuel and energy costs?

And then secondly, could you walk us through the NII movements quarter-on-quarter and then the outlook as you see it for the remainder of the year?

Denis, thank you for your questions. I'll take the first one. Look, we're obviously monitoring the situation very, very closely. And -- but certainly, from all engagements that we've had with the network and with colleagues in the various business units, we are not seeing any impact coming through as of yet. Obviously, we are dealing with a very uncertain environment, but it is not having an impact on either the performance of the book in terms of the credit performance or indeed, it's not having an impact on the pipeline. And I have to say, just to reiterate the comments I made earlier, we're looking at a very strong pipeline over the course of the next number of months. The great thing about this business is you can see activity coming at you over the horizon. And certainly, the flow is very, very reassuring at this particular point in time. So short answer to your question, no impact discernible as of yet.

Yes. On the NIM NII question, I think if you're looking at a quarter-on-quarter, there's just 1 or 2 smaller items impacting there. We issued some Tier 2 at the very back end of 2025, a couple of days less in Q1. But overall, I would say that the NII guidance, we're certainly very firm on that. Obviously, we have not amended or adjusted any of our interest rate assumptions and maintained a year-end ECB position of 2%. The market has clearly moved quite a bit away from that. Just given the volatility, we have decided not to change any of those assumptions as of yet. But naturally, there is some upside there.

Now we're going to take our next question, and the question comes from the line of Diarmaid Sheridan from Davy.

Two, if I may, please. Maybe just firstly on NII and the structural hedge. Just the EUR 10 billion that you referred to in today's statement, is that separate to the EUR 10 billion that was referred to in the full year presentation? Or is it the same EUR 10 billion? And just the sensitivity to rates looks like it has fallen further from what you would have flagged at the full year presentation. So just wondering what might be behind that?

And then secondly, just on the disposals in the bond portfolio, was that tactical kind of a point in time in the quarter? Or is that an ongoing program? And are they being just put into cash for now? Or are you deploying them back into the bond market?

Thanks very much, Denis. On the structural hedge, it's not a new EUR 10 billion. We referenced that we executed EUR 10 billion early 2026. So none of the metrics that I talked about previously have changed. Overall, the sensitivities have slightly changed. I think the new number that we've provided you with for 100 basis points change is around EUR 256 million, and that's for 100 basis points change. And what I would say on that is that's pretty linear, okay, between 20, 50, 75. So depending on your view on rates, that's the position that you should look at. I mean we obviously recognize that the issues in the Middle East were going to be inflationary, put upward pressure on rates. But really looking into the '27, '28, '29 years, we really felt that we wanted to add some duration, which is why we executed that hedge, and we're very happy that we did.

With respect to the fixed income security, look, nothing really to report there. Every year, we will look at different segments where we want to participate, and we would have switched out of some sectors into new sectors, would have benefited from that. And that capital has already been redeployed into euro SSAs and euro sovereigns.

And we're going to take our next question, and the question comes from the line of Jordan Bartlam from Mediobanca.

I was interested on the deposit line. So we saw a small Q-on-Q decline there. I know there's a bit of negative seasonality typically. I just wonder, was that a little bit more adverse than you expect? And what was driving that decline? Are you perhaps seeing a little bit more competition from the new entrants in the market at this stage?

And then maybe just a very brief one on fees as well. So that was down 5% year-on-year. You flagged some positive one-offs last year. I just wonder if you could remind us what those were? And maybe a bit more color on just how you're seeing the fee-generating businesses performance right now. Is that aligned to your expectations? Is it outperforming or is it underperforming? So those would be my 2 questions.

Very good. Yes. On the deposit side, I would say very much in line with our expectations. If you can remember, Q1 2025, we also saw, let's say, a flat quarter with respect to growth. So it's somewhat of a seasonal effect. We still maintain our overall guidance for the year of 2%, 3% growth on the liability line. As you mentioned, the competition seems to be coming a little bit more prevalent. But certainly, as of yet, we're not seeing any significant outflows. So no change to our estimations on that one.

On fees, it was more related -- it was a Visa rebate that we would have received in quarter 1 of 2025 that wasn't repeated. So just that year-on-year analysis looks a little bit lower. Overall, on the fees and comms line, I think we're very comfortable to maintain our overall guidance. Obviously, one of the main areas of growth for us is going to be in the wealth and insurance space. Certainly for the first quarter of the year, we're very happy with the growth trajectory there. And otherwise, everything else is very much in line with our guidance.

Now we're going to take our next question, and the question comes from the line of Sheel Shah from JPMorgan.

Great. I've got 2, please. Firstly, you've mentioned the pipeline a few times on this call. Could you explain what you're seeing in the pipeline? Is it broad-based? Are you seeing any of the fiscal infrastructure plan feeding into the economy yet? So I'd be interested to get some color on that.

And then secondly, maybe just a follow-on on the last question. I'd like to get your thoughts on the competitive environment. We've had a few more neobanks enter the segment. We've had BAWAG's recent offer for PTSB. So more of a longer-term question, but your thoughts around lending and deposit margins considering the pickup in competition.

Okay. Thanks so very much indeed, Sheel, for the questions. We do believe that the national development plan is going to have a material impact on activity in our business. But we're really not going to see that in a material way until '27, '28. Very, very pleased with the progress that has been made in terms of -- or that is currently being made in terms of the reduction of barriers to the swift implementation of the government's ambitious NDP. The pipeline that we're referring to this morning is the pipeline that we see across our various operating divisions. So it's the pipeline in mortgages, it's the pipeline in corporate, good strong performance in business banking. And of course, Climate & Infrastructure Capital having a very, very strong start of the year and with a very strong pipeline ahead of us. So we're not yet seeing the impact of that NDP, but that will be a positive carrying us into '27 and '28, we believe.

In relation to the competitive environment, obviously, it is evolving in front of our eyes. We continue to see very, very strong flow in terms of new account openings. You have heard me talk in the past about us having a share of new account openings in Ireland of 49% to 50%. That is -- we believe that, that remains very stable in terms of our share. That said, it is an evolving competitive environment. We're going to continue to monitor it very, very closely. But we have the strongest franchise in the country, and we know what we need to do. What we need to do is to ensure that we have an attractive range of products and services that are appropriately priced and presented to our customers in the way that they want. And we do that every single day through our digital channels, through our customer engagement centers and through 170 branches.

Now we're going to take our next question, and the question comes from the line of Mike Evison from Autonomous.

Yes. I mean I'll just pick up on 2 things. On the loan growth point, obviously, it looks like the loan growth didn't come through new mortgage growth, which is broadly sort of flat year-on-year despite probably stronger system level trends. So I wondered if you could say anything to what you're seeing in housing completions or the housing market and the possible for mortgage growth there or whether you see growth coming from other lines, so that's of green lending and corporate lending.

And then just if you have any thoughts on the sort of ever-changing topic of investment accounts and SIU in Ireland. So it seems like the government might be moving away from the [ ISK ] style accounts. I wondered if you had any comments on what you saw as the potential impact there, please?

Okay. On the mortgage market, I can tell you that the -- obviously, we made some rate adjustments at the back end of last year. And the first impact you're going to see that is in terms of application activity and then that flows through to approvals. And we've seen some drawdown impacts in the month of March. And in fact, our market share in the month of March was the strongest that we've seen for about 13 months. So we're building a nice head of steam there in the mortgage market.

On the completion side, we have about 36,000 units last year, that was just a bit ahead of expectations. As a house, we expect completions this year to be about 39,000. We would have financed just shy of 1/3 of the new build last year in terms of output of homes, and we'd expect something similar on the development side. And in fact, our development pipeline is the strongest that it's been in many, many -- our development lending pipeline is the strongest it's been in many, many years. And we -- that augurs very positively for activity on the building side and indeed on the mortgage side going into '27 and indeed beyond.

On the SIUs, we've been -- we believe we have a responsibility to support the medium- to long-term financial well-being of all our customers. We strongly welcome the initiative in terms of SIAs. There seems to be now more of a preference on the part of government for an ISA style model. And -- but whatever shape that model takes, whatever is the final proposal brought or the final product shape proposed by the government, we'll be ready to go with it. We have a team. We have working groups established already within the organization to ensure that when that product is launched, and we expect to be launched later on this year, that we'll be ready to put it on the shelves of all our stores and have it in the hands of our customers.

Now we're going to take our next question, and the question comes from the line of Fatima Ghaznavi from KBW.

Just a couple from me. So on the share of new lending, you mentioned this is flat versus the end of 2025. Is this sort of a normalized level? Can we expect a 30% share of new lending going forward? Because sort of in 2025, we were seeing more of a decrease in the market share. And so would you say that's flattened out now?

And then also, when I look at the quarterly NII, it leaves a bit of work to do in the second quarter to meet consensus for the second half. Can you talk a bit more about the moving parts on the margin and whether you're sort of expecting that to pick up in the second quarter and whether these new hedge volumes will help that?

Yes, I'll take the second one. Yes, on NII, you're absolutely right, we do expect to see a pickup in the second quarter. A little bit of that is going to be driven by the cumulative effect of the higher asset growth. But obviously, we do expect to see some liability growth as well. So those 2 factors alone will lead to some improvement. And then obviously, in the second half of the year, we are expecting to see some rate effects.

On the mortgage market share, we don't specifically target market share. For all of our products, we're very disciplined in our pricing approach. Our market share is, in some respects, an outcome for us, but we remain very focused on the direct-to-consumer market for our main brands, where we're able to capture more financial activity with our customers. But we do expect the mortgage market to increase year-on-year, driven by those increased housing completions that Colin referenced. And obviously, AIB will have a very large role to play in that market.

And certainly, Fatima, the trend that we're seeing coming through in terms of applications and approvals is very comforting at this point.

Now we're going to take our next question, and the question comes from the line of Seamus Murphy from Carraighill.

Just one relatively straightforward question. Just in terms of the FTE evolution in the quarter, I'm just wondering, I think I have -- I think you previously guided we have FTEs down 3% in the year, and they just a small amount in Q1. Can we still think in that context for '26 and '27, please?

Yes, we would expect our headcount to come down, Seamus. We would expect our headcount to come down by something in the order of 3% this year and the same number in next year, and that's very much in line with our experience in 2025 and the business plans for the year are fully in line with that reduction in total headcount of about 3%, and we expect that to continue into '27 as well and potentially beyond.

Now we're going to take our next question, and the question comes from the line of Borja Ramirez, Citi.

I have 2 questions, please. Firstly is on the capital, it's quite strong. I would like to ask if it's ahead of your prior expectations.

And then my second question would be on deposit growth going forward. According to the Central Bank of Ireland, given the uncertainty, there could be an increase in -- potentially in individual savings because of precautionary savings. So I would like to ask what are your views on this point?

Borja, yes, look, obviously, financial performance for quarter 1 was very strong as it was throughout [ 2026 ]. So we remain very capital generative. I would say the capital number ended up being exactly where we expected it to be. Maybe asset growth was slightly ahead of where we had imagined. But overall, no surprises for us on that one.

On the deposit growth side, what I would say to date is that we have not seen any cautionary activity, whether that be on the asset side for new lending, for new projects or similarly any unusual increases on the liability side that could be driven by the same factors. So as of now for Q1 and even towards the end of April, I would say very little impact to date from the volatility that has been created from the Middle East conflict. But obviously, things can change on a week-to-week basis, and we remain very vigilant.

Yes. And what I would just add in relation to that, Borja, is that we're starting with a very high savings ratio. The savings ratio in this country is at the upper end of the range for Europe. And secondly, what I would say is that was the most immediate impact of what's happening in the Middle East is its impact on the amount of income available for saving because it's having a dampening impact on disposable income net of fuel and energy costs. So we wouldn't expect there to be a significant bump in deposit flow as a consequence of the conflict in the Gulf.

I believe that's our last question this morning. So I thank you all for your questions, and thank you all for joining us this morning. We obviously have our AGM later on this morning, and we're very much looking forward to presenting a good set of results for the first half on this day, 3 months' time, 30th of July. At that point, I'd say good morning to you all, and have a good day.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Good morning, and welcome to the presentation of AIB Group's results for 2025, a landmark year for our company. I'm going to spend some time outlining the macroeconomic backdrop and giving an overview of the progress on our '23 to '26 strategy before handing over to Donal, our CFO, who will bring us through the details of our financial performance. 2025 was another year of successful delivery by AIB Group against our strategic objectives, priorities and targets. We're pleased to be delivering a profit after tax of over EUR 2.1 billion, representing a RoTE of 25%.

In a looser monetary policy environment, our NII remained resilient, coming in ahead of expectations at EUR 3.75 billion. The strength of our financial performance and the scale of organic capital generation allowed us to grow our business, to invest in our business and to propose total distributions of EUR 2.25 billion, payout ratio of 105%, while still delivering an exceptionally strong capital outturn with CET1 ending the year at 16.2%. And 2025 was the year that AIB returned to full private ownership, having returned a cumulative circa EUR 21 billion to the Irish state.

So it was a landmark year, a year of progress and closure, a year that positions us to build an ever better, ever stronger, trusted AIB in the interest of all our stakeholders and the economies and the communities that we serve. We remain resolutely committed to the sustainability agenda, an agenda that sits at the core of our strategy and at the very heart of our purpose. We're making good progress towards meeting our long-established 2030 targets with almost EUR 23 billion of green and transition lending deployed since 2019. And last year's new green lending reached an all-time high for us of 43% of all new lending, well on track to hit the 70% target we've set for ourselves.

We're also continuing to decarbonize our own business with 92% of our electricity needs sourced from our virtual power purchase agreement from the output of 2 solar farms. The scale of the environmental and social lending opportunity and our excellent credentials in this space create the platform for continued success in ESG bond issuance, and I'm very proud of the fact that AIB is now one of the world's leading issuers of ESG paper globally.

Our confidence in the outlook for AIB in 2026 and beyond is underpinned by continuing solid and consistent performance by the Irish economy. Growth in modified domestic demand surprised somewhat on the upside in 2025, and is expected to hover around 2.5% to 3% over the next few years, a rate of expansion that is reasonable in an Irish context and stellar compared to our neighboring economies across the Irish sea and indeed further afield. Our population continues to grow, and it's likely to exceed 6 million in the next decade. And our labor force exceeded 2.8 million people at the end of last year, representing an increase of an incredible 59% since 2000. And now that demographic bounty is a key driver of Ireland's economic success, and it creates a very positive operating backdrop for AIB, Ireland's leading financial institution.

And while we've seen remarkable growth in the numbers of work in the country's GDP, the balance sheets of the country, businesses, households, individuals are all very conservatively positioned. Net government debt fell to 40% of gross national income last year and the downward trajectory is expected to remain a feature of the budgetary landscape over the coming years. Now the government is in a very strong position to deliver on its ambitious national development plan, which will see EUR 275 billion deployed in building a world-class public and social infrastructure here over the next decade.

And meanwhile, households continue to delever with debt to disposable income running at about 40% of the post-GFC peak with the savings ratio running at 15%, an indicator of which is very well reflected in our own liabilities performance. Ireland remains a preferred destination for foreign direct investment. Now we will, of course, continue monitoring the international trade climate, but it's only fair to say that the performance in 2025 surprised on the upside, both in terms of investment and also in terms of export volumes.

I made mention already of the government's NDP, a plan which will see a much needed ramping up of infrastructure -- of investment in critical infrastructure. And if this country is to consolidate and sustain its economic progress, we need to close existing gaps in housing, water, energy and transport infrastructure, and we need to do it at pace. We look forward to continued progress on the delivery of new housing with 2025 seeing over 36,000 new homes being completed. And that was the best output performance since the GFC, but it's still well a drift of the level of housing completions needed to satisfy demand.

And we expect to see housing output continuing to grow year in, year out with the level of completions forecasted 45,000 in 2028, representing an increase of some 25% on the 2025 performance. But given the scale of unsatisfied demand that's out there, housing supply is going to have to reach levels well ahead of in-year structural demand if the market is to return to equilibrium. So challenges remain, but we are seeing good progress, and we are optimistic about the supply outlook and the opportunities that creates for our lending businesses, both in mortgages and development finance.

Now looking back to the lending performance last year, new lending was 2% higher than in 2024. We saw a 4% decline in new mortgage lending in a growing market with our mortgage market share falling to 30%. Now I've remarked on many occasions that we do not target mortgage market share per se. Instead, we are focused on writing the right business at the right price. That said, it is important to note that not all mortgage market shares are the same. And we have a strong preference for having direct relationships with our customers as they embark on the biggest financial decisions of their lives. In the direct-to-consumer market, we remain by some distance, the leading player with a market share of 46% and the pipeline for the early months of 2026 looks very good.

Personal lending was 4% ahead and now 88% of personal loans are applied for digitally across the group. Total property lending saw an increase of 25% of the subdued base of recent years. Corporate lending had a good performance with new lending up 8%, but this was offset by a quieter year for Climate & Infrastructure Capital in a noisy external environment. A number of deals which we expected to close in December tipped into January, and that business is off to a very good start this year. Now given the macro backdrop and the strong and visible pipeline ahead for the operation divisions, we are confident in our ability to deliver a medium-term lending growth CAGR of 5% out to the end of 2027.

Our franchise remains exceptionally strong, and we are very pleased to be now serving more than 3.4 million customers with more new customers choosing AIB than any other financial institution in Ireland. And the trust that our customers, both long-standing and new place in us is underpinned by the resilience of our digital offering with level 1 service availability running at 99.99% in 2025 and by the strength of our physical presence with AIB having the largest branch network in Ireland. And that community engagement is key to our relationship with our customers, particularly for the very biggest moments in their financial lives who know that we are digitally trustworthy and we are there in person when it really matters.

I'm pleased with the response of our customers to our enhanced savings and investment offering through AIB Life and Goodbody with total AUM now comfortably exceeding EUR 18 billion with plenty of growth in the pipeline. On a stand-alone basis, AIB Life is now showing real traction with AUM reaching EUR 3 billion, which was a 20% increase in 2025. Now as Ireland ages and government policy evolves, we believe there is potential for significant additional growth in savings and investments in '26 and beyond. We remain the bank of choice for new account openings with the group enjoying a market share of 49% of the flow and 40% of the stock of current accounts in 2025.

Our Corporate and Business Banking franchise remains exceptionally strong, and we're going to continue to invest in secure and speedy digital enablement over the years ahead as we meet the evolving needs of these critical parts of Ireland's economic success. And of course, we remain the country's leading green bank, standing we will maintain as we grow the share of green lending and broaden and enhance the range of green products and services across the group.

Looking now at the first of our strategic priorities, the focus on customers, their expectations and their needs is key to the long-term success of AIB. Through a data-driven approach to customer segmentation, we understand those expectations and needs like never before. And that unrelenting focus on our customers is paying dividends in the form of Net Promoter Scores with all-time highs in 5 of the 6 key customer journeys being recorded in 2025.

Meanwhile, service levels in our customer engagement centers remain very strong, and we continue to invest in delivering an easier, more engaging and protective relationship with our customers. And we will use AI extensively to help us deliver that high-quality relationship of real trust. ABBYY, our AI digital assistant, whom we launched in December of 2024, is engaging now with an ever greater number of customers. Covering 66 customer journeys, ABBYY has assisted over 1.3 million customers since her rollout, and the feedback has been very positive, with particular reference being made to the speed and the ease of dealing with our digital assistant. 80% of our customers who call our engagement centers choose to continue dealing with ABBYY.

We are continuing to make steady progress on our second strategic priority, greening our business. We're playing an active role in financing the transition to a more sustainable future. We've now deployed almost EUR 23 billion of the EUR 30 billion Climate Action Fund. And we lent an additional EUR 6.3 billion in new green and transition lending in '25, with the greatest contribution coming from retail banking, predominantly in the form of green mortgages, which now account for 62% of all new Republic of Ireland mortgage lending.

Across corporate and business banking, we are the leading player in financing sustainable lending to the engines of economic development, while Climate and Infrastructure Capital is continuing to play an important role in funding solar, wind, bioenergy, waste-to-energy assets in Ireland, Britain, the European Union and in North America. The loan book in this division has now expanded to more than EUR 6 billion, and we expect to see further significant growth in '26 and beyond.

And notwithstanding our ambition to be a champion of the transition to a greener future, the scale of the opportunity is simply enormous and continues to grow, allowing us to be highly selective in choosing the technologies and the geographies where we are willing to put the group's capital to work. Our third strategic priority speaks to ever greater operational efficiency and resilience, and I am very pleased to report accelerating progress right the way across the organization. We've invested significantly in resilience because it is fundamental to customer trust, and trust is the prerequisite for any credible digital ambition.

We're continuing to strengthen, simplify and streamline AIB with a 40% decline in the number of legal entities within the group and ongoing decommissioning of legacy applications and increased digital automation of customer contact. We've invested wisely in AI with Copilot now deployed across the organization and the first wave of internal agentic assistance is now being deployed. We're making great progress in enhancing credit decisioning through nCino, which now handles 2/3 of all new SME lending. Our platforms remain resilient with world-class Level 1 service availability and 0 critical cyber incidents in 2025.

And the rollout of push notifications on our app is making a material difference to the quality of our everyday customer engagement. There is so much more to come with our next-generation app set to launch in the summer. And by design, it will be more agile and flexible than any other app previously deployed by us, and it will be capable of rapid and high-frequency enhancements. Allied with the imminent launch of Zippay across the Irish retail banks, our customers are going to enjoy and experience a significant improvement in the quality of their digital interaction with us over the coming months.

Now this foundation gives us the right to accelerate. Our new digital platforms can scale confidently because the underlying estate is stable, secure and well governed. The pace of technological change that we're seeing is unprecedented in the history of banking. Now our team has demonstrated clearly and consistently the efficiency, security, resilience and customer experience gains that they are capable of delivering. And given that track record of achievement and the speed of change that is now readily apparent, we believe that we can credibly build the future faster at AIB.

Our annual investment in the business has increased from an average of EUR 300 million recent years to EUR 350 million last year and will rise to EUR 400 million this year and beyond. And the bulk of that increase is devoted to strategic projects, which will allow us to continue enhancing our customer experience, our digital agility and the resilience and the durability of our systems. We will build the future faster here and in so doing, continue to earn the trust of our 3.4 million and growing customer base.

We are now well embarked on the final year of the strategic cycle. And while we're very focused on delivering on our targets for 2026 and continuing to generate attractive shareholder returns, our minds are inevitably turning to the next strategic cycle, which will bring us to 2030. And as we move through the months ahead, our plans and our targets will take more concrete form and we'll seek Board approval for what comes next in December before we share the full details with our investors and the analyst community.

Now it would be premature of me at this stage to outline the set of performance indicators and parameters, which will guide the next phase of AIB's development. However, they will, I believe, be fully reflective of my own 2030 ambitions for this organization. I want AIB to be the best bank in Europe and the most trusted brand in Ireland. Now these may be audacious aspirations, but they're grounded in what we have already achieved together. We have made huge progress in recent years in reshaping and transforming the group in the interest of all our stakeholders.

We have the leading customer franchise. We're generating shareholder value, including a RoTE of 25% and return on assets of 1.4%. Our organization is in great shape with 370 basis points of organic capital generation and EUR 2.25 billion return to our shareholders. And I'm very excited about what I know it can and will deliver over the months and years ahead.

Now 2025 was a landmark year. We delivered against the commitments we set for ourselves. We performed ahead of expectations, and we did so with positive momentum across the business. However, 2025 was a milestone. It wasn't a destination. We've come a huge way in recent years with a strong capital base, a very clear strategic ambition and a market-leading position. AIB is well positioned for the future, and I remain convinced that our best days still lie ahead as we work relentlessly to build a better, stronger, more resilient AIB in the interests of all those who put their trust in us. Donal?

Thank you very much, Colin, and good morning, everyone. I'm very happy and pleased to be able to deliver the financial highlights for AIB for 2025. We've delivered a profit after tax of EUR 2.1 billion with a return on tangible equity of 25% and earnings per share of EUR 0.933. Our total income was EUR 4.5 billion, which was down 8% on the year. That's broken down between a net interest income reduction of 9% and net fee and commission income increase of 4%.

Our costs were slightly lower than expected at EUR 1.99 billion, which is up 1% on the year, and that gave us a cost/income ratio of 44%, and our FTEs were 3% lower year-to-year. Our gross loans increased 2% or 3% on an underlying basis to EUR 72.3 billion, and that included EUR 14.7 billion of new lending, which was up 2% year-on-year. Our asset quality remains resilient and our ECL coverage remains at 1.6%. We had an ECL charge of EUR 172 million, which represents a 24 basis points cost of risk. And our NPEs finished the year at 2.2% of gross loans, which is the lowest for a number of years in AIB.

Our funding position remains exceptionally strong. We have customer deposits of EUR 117.2 billion, and that represents a 7% increase on the year, which is well ahead of our own expectations. Within wholesale markets, we issued AT1, Tier 2, Euro senior and Dollar Senior, leaving us with a very strong funding position. Our capital at the end of the year, our CET1 was 16.2%, well ahead of regulatory requirements, but that incorporates very strong organic capital generation of 370 basis points and very strong performance on RWA optimization initiatives.

Our total distributions for the year are EUR 2.25 billion, representing a 105% ratio. EUR 263 million was already paid in November as an interim. We have a EUR 988 million proposed final ordinary cash dividend. And we've announced and already begun to execute a EUR 1 billion on-market buyback. I'll say on the income statement, I don't want to really repeat myself too much. Obviously, income was down 8%, as I previously mentioned. But notwithstanding that fact, we can see earnings per share flat year-on-year. Total cash dividend per share of EUR 0.5858 is up 58%. So really strong performance there, we feel on the returns.

Our bank levies and regulatory fees were EUR 114 million in the year, and that includes EUR 94 million for the Irish banking levy. As we look into 2026, we don't expect any material exceptional items and our bank levies and regulatory fees, we currently estimate will be around EUR 140 million. Net interest income of EUR 3.748 billion, down 9%. I'll just try to walk through the moving parts here. There's a 42 basis points benefit from our structural hedge program. Obviously, related to this, a 45 basis points reduction in net interest margin from cash held with central banks. Customer loans and investment securities are down 22 and 19 basis points, again, just reflecting those lower interest rates.

And on the liability side, we had a strong benefit from wholesale funding costs of EUR 119 million, and we had an associated cost of EUR 88 million as customers termed out some of their deposits. Our Q4 exit NIM was 2.69%, and it ends the year overall at 2.73%. This is an important slide, I think, for us to show how we have managed our interest rate exposure through the last number of years. Obviously, interest rates going from minus 50% up to 4% and landing down at 2% has meant that we have been -- have had to proactively manage our balance sheet.

As we give our guidance for 2026, the assumptions that we make is that we'll have an ECB deposit rate of 2% and that deposit beta will remain at 20% as it was throughout 2025. We're very comfortable with our NII resilience, which we believe we have shown over the last number of years. And what gives me the great confidence going into '26 and beyond is that we have a growing and granular deposit base, which we have seen grow significantly over the last number of years. We see growth in all of our core markets of around 5% per annum, and we very proactively manage our balance sheet. We do this through our structural hedge program.

I think last year, in the midyear, I would have referenced a EUR 15 billion increase in our structural hedge in 2025. Already this year, in the last number of days, we have executed an additional EUR 10 billion of structural hedge. The average yield on that was 2.3% and the average life was 5 years. So the impact that has is reducing our NII sensitivity to 100 basis point move or shock from EUR 378 million down to EUR 286 million. Some of the other moving parts with the structural hedge are that we expect to have EUR 6 billion of swaps maturing in '26, EUR 6 billion of swaps maturing in '27.

Throughout '24, '25 and even earlier this year, I've talked about wanting to extend the duration, which is now expected to be 5% -- 5 years by the end of 2026. So we expect at the end of '26 to have a received fixed yield of 2.3% on euros and 2.7% on sterling. In addition, as we've talked about before, we have a large quantum of fixed rate mortgages of around EUR 21 billion. They have a yield of 3.1% and a weighted average life of 1.9 years, and that's relevant because we leave them unhedged, really to add a little bit of natural duration to our balance sheet.

So I've really tried to summarize the position for year-end. We'll have an average life of 5.1 years on our euro hedge, and that will remain in place over the next number of years. And our received fixed yield is around 2.3%, so at stroke in the money. So looking through that and looking at that, that's what really underpins and gives us the confidence for our NII guidance to be circa EUR 3.8 billion in 2026.

Other income was EUR 756 million, and our net fees and commissions were up 4% in the year. I think the main standouts really was in our cards business, which was up 11%, our wealth and insurance business, which was up 7%. And as we've talked about previously, this is a huge area of focus for the organization going forward. We have EUR 18.3 billion of AUM, as Colin would have mentioned, a number of years ago. Obviously, that would have been a much lower number or approximately 0. But obviously, post the acquisition of Goodbody, post the start-up of our joint venture with AIB Life, we feel we have a very strong foundation.

So the Goodbody AUM is EUR 15.3 billion, which grew by 7% in the year. The AIB Life AUM is EUR 3 billion, which grew 20% in the year. I think in the coming years, what you should expect to see in this area is AUM growth of 10% per annum and revenue growth of 15% per annum. But that is going to be a massive area of focus for the organization linked to the huge customer numbers that we have, obviously, linked to a lot of the activity we are embarking on with respect to digitalization and personalization.

Other income, some of the other line items can always be a little bit more volatile. I try to just update and guide as the year progresses. But overall, for 2026, other income greater than EUR 750 million. Our cost performance was strong in 2025, outturn of EUR 1.99 billion, which is up 1%. A few different moving parts here. Staff costs were down 1%, mainly due to reduction in headcount. G&A expenses up 6%. We're seeing some inflationary impacts there, higher business volume impacts there and also higher OpEx-related investment spend. So not all of our technology spends get capitalized, some also goes through our OpEx, and you will see it here.

And our depreciation number is down 3% on the year, as we really tightly manage the execution of our big programs. So overall, that gives us a cost/income ratio of 44%. Like I said, our FTE reduction was down 3%, ending the year with 10,207 employees. And this is a trajectory we expect to maintain in the coming years. We believe that we'll be able to do it on an organic basis, obviously, as we go through the next number of years.

Colin mentioned that we were going to increase our investment spend from EUR 300 million to EUR 350 million, up to EUR 400 million now in 2026. And we're going to really look to accelerate our digitization, which will enable faster innovation, scalability, enhanced security and obviously, operational efficiency. As a result of this, you can expect to see our depreciation grow by 3% or 4% per annum, but that is obviously going to be partially offset by ongoing cost-saving initiatives and efficiencies that come from the rollout of these large programs.

But for 2026, we expect our cost to increase by 2%. With respect to asset quality, we had an ECL charge of EUR 172 million for the year, which represents a 24 basis points cost of risk. I'll just really simply break it down into 3 different areas. We had a write-back of EUR 52 million from macros, and that's really reflecting the fact that the way we saw the different range of outcomes post Liberation Day, the outturn, particularly in Ireland, ended up being significantly better.

We had a EUR 210 million net charge relating to underlying credit performances, which is really just the normal movement of credit between stages. And lastly, with our PMA, we had a small charge of EUR 14 million in the year, leading us overall to that charge of EUR 172 million. So we have an ECL stock of EUR 1.1 billion and an ECL cover rate of 1.6%. We have PMA of EUR 254 million represents around 26% of our ECL stock. So notwithstanding all of the volatility that remains in the world at the moment, we feel we are very, very conservatively provided.

So for 2026, we expect a cost of risk within the range of 20 to 30 basis points, and I look to narrow that as the year progresses. Main movements on the balance sheet side. Obviously, loans increased 2%, liabilities increased 7%. That obviously gives us an excess liquidity position. So what you're seeing here is an increase in the amount of investments we make in the treasury world. We bought an additional EUR 2.4 billion worth of bonds in the sovereign and supranational space in the Eurozone. And for 2026, I think you can expect to see that grow by another EUR 4 billion or EUR 5 billion.

Loans to banks was EUR 48 billion, which included EUR 36 billion at the CBI and GBP 3.8 billion with the Bank of England. Overall, our loans increased by 3% on an underlying basis or 2% on a reported basis. Big FX impacts in the year, slight impact from some disposals in the year. But overall, I think we are more confident now than ever that we will be able to reach and achieve our 5% asset growth targets for '26 and '27.

What we saw in 2025, I would say, was our wholesale businesses performed very strongly. Property market, still a little bit muted, recovering from the interest rate changes and valuation shock. Our personal consumer business performed very, very strong. And on our mortgage business, we saw growth overall in the year. As I look to 2026, I think what you can expect to see is growth in all of these areas, just slightly more. So our funding and capital position remains very strong. LDR of 61%, LCR of 204% and a net stable funding ratio of 163%. Our MREL ratio was 35.2% in excess of our requirements. So very, very strong foundation there.

But I think the big story on the liability side or the balance sheet side for 2025 was really deposits and the deposit growth. So notwithstanding the fact that we had a movement of around EUR 2.4 billion of our customers moving to term, we actually had an increase overall in our current account and demand deposits. So 7% growth was an exceptionally strong outturn, though we do expect that to temper somewhat in 2026, more in line with modified domestic demand. There's no other reason there, no competitive environments that we're necessarily concerned about. It's just we feel that 2025 was maybe an unusually large growth area, but that remains to be seen, and we will obviously be able to watch that quarter-by-quarter.

Capital generation for 2025 in AIB was exceptionally strong. We started the year at 15.1%. And then early in Q1, we had a Basel IV impact of 120 basis points. We had organic capital generation of 370 basis points from our business activity. We have a reduction of 390 basis points for distributions, as we've talked about. We engaged with the government and we canceled the warrants that they were granted in 2017 around the time of the IPO, and that had a cost of 70 basis points.

Given our strong business performance, we had really strong DTA utilization benefit of 40 basis points. with some other equity movements of 20 basis points cost, which is really just AT1 coupons. And then in other RWA movements, we have a number of RWA optimization items where we had a strong outperformance. That includes execution of a mortgage SRT in quarter 4, the sale of our 49% shareholding in AIB Merchant Services and also the implementation of a new IRB model for our Climate and Infrastructure Capital business, which also had a positive benefit.

That doesn't even incorporate the EUR 1.2 billion directed buyback that we did with the government in the first half of the year where we bought back EUR 1.2 billion of stock at a price of EUR 6.25 because that was obviously deducted from the prior year's returns. So the outturn of 16.2% is very strong, over 6% of capital generated in the year, which is really, really strong, and we're very happy with that, obviously, comfortably above all of our buffers.

With respect to how we think about capital, same as prior years, come in on the 1st of January and drive a stronger business performance as is possible. So obviously, 370 basis points was the outturn for 2025, but I think you should be thinking even for the medium term, greater than 320 basis points on a sustainable basis and our deferred DTA benefit of circa 35 basis points steady state going forward. We're going to invest in our business in 2 ways. Number one, increase our investment spend and change in technology up to EUR 400 million. And we're obviously going to utilize more of our capital as we grow our balance sheet on a 5% annualized basis.

We will continue to optimize our balance sheet wherever we can in whichever format we can. So we will do this through SRTs, where we've already issued 2 transactions, 2 different asset types. Obviously, the corporate transaction was done in '24. The mortgage -- AIB mortgage transaction was done in '25. And in 2026, we will look to execute an SRT transaction within our project finance or Climate and infrastructure capital portfolio. IRB model adoption and development is an ongoing theme. We do expect to have 80% of our balance sheet on IRB models by 2028. I've mentioned the benefit from the project finance model. 2026, we have 2 different portfolios, which we're hoping to review and conclude that being EBS mortgages and commercial real estate, but it's a little bit too early to know what the outturns there are going to be.

And lastly, we look to deliver market-leading distributions. We've paid out over 100% in 2024 and 2025. We've paid out EUR 6.5 billion in distributions since 2023. For our ordinary dividend policy, we look to pay a sustainable dividend within a 40% to 60% payout range. Our ordinary dividend will be paid in cash. Our interim dividend will be paid up at 1/3 of the prior year's ordinary distribution -- ordinary dividend per share. With respect to additional distributions, we have capacity for above policy payouts, subject to annual review and necessary approvals. We have optionality to utilize share buybacks, special dividends or a combination of both as we look to move towards our medium-term target of greater than 14%.

So wrapping it all up, our 2025 performance, we feel was strong, already achieved or outperformed our 2026 targets. 2026 guidance will be interest income circa EUR 3.8 billion, other income greater than EUR 750 million. Costs are expected to grow by 2%. We expect a cost of risk between 20 and 30 basis points. Loans will grow by 5%, and we expect deposits to grow by 2% or 3% and we will deliver a return on tangible equity greater than 20%. So for 2026 and beyond, we expect to deliver a strong performance in the final year of our strategy.

Moving into the next strategic cycle, we have a lot of positive momentum in our business. Sustainable business growth and returns, strong organic capital generation, increased investment in our business and market-leading shareholder distributions. Our medium-term targets continue to guide the business and will be refreshed for our next strategic cycle this time next year.

Thank you all very much.

Thank you very much indeed, Donal. And now we're going to take some time for questions, and we're going to the phone lines.

The first question comes from Denis McGoldrick in Goodbody.

Just 2, please, if I may. So firstly, you're guiding to circa EUR 3.8 billion NII for 2026. Can you talk us through the moving parts within that year-on-year, along with any color you could give on NII beyond this year, please? And then secondly, you delivered 7% deposit growth in 2025. But could you talk us through the mix within that between interest and noninterest-bearing and how you see that evolving this year?

Thanks, Denis. I'll take that one. Look, on the liability side, I think it's fair to say that the savings ratio in Ireland is a little bit higher than what people would have imagined. And I think the impact on the Irish banking system was pretty consistent. Notwithstanding that fact, we do think that the deposit market will normalize in 2026, which is why we think that the increase will be 2% to 3%. So it seems like a big drop, but I would argue that that's more due to 2025 outperformance, but we will be able to keep an eye on this on a quarterly basis.

I think we don't expect any particular change in mix. Our deposit beta in 2025 was around 20% 2026. We expect to see something similar. So I would just use the same mix as you go forward. And overall, with NII, really nothing new here. I think -- I mean, taking the year-end position of 2025, believing and putting that 5% growth over the coming years, I think, is how you will be able to get closer to the numbers I have.

Indeed, as I look at -- if I look at consensus for 2026, '27, '28, I've obviously given you '26 numbers, which are slightly better than consensus. '27 is in and around where we see things. I think 2028 consensus seems a little bit light on loans and obviously, on associated interest income. But for all of those years, '27, '28 will be greater than 20% return on tangible equity as well. I can certainly commit to that.

Thank you very much indeed, Donal. We're now going to Diarmaid Sheridan at Davy.

Two, if I may, please. Just firstly, on the capital and distributions. Could I just invite you to maybe talk to us about when you expect to get to your greater than 14% target, please? And I guess, Donal, you provided some of the outlining measures. But just given how strong capital generation is, I mean, unless you're significantly exceeding your distributions that you've exceeded -- that you've delivered in the last couple of years, it's kind of hard to see how it gets to that level without something maybe from an inorganic or maybe is there something we're missing?

The second question just on new lending, just in terms of what the key drivers to get from to bridge from that kind of 2% to 5% growth. I appreciate underlying 3% in '25. And specifically, just on the mortgage market, I get the point you make around the direct channel. Clearly, the broker channel has become a much more significant part. I just challenge you as to whether it's sensible to remain out of that channel? Or is that an area that you're comfortable not to play a significant role in.

Well, first of all, we don't remain out of the mortgage channel out of the intermediary channel. We have a presence there through Haven. And we've had a big prioritization of green mortgages in the past number of years. And in the final quarter of last year, we made some adjustments to our non-Green mortgage rates. We haven't really seen a huge increase in the size of the intermediary channel in the past number of years. But we do prioritize our direct relationship with our customers. That's what we want to maintain that direct relationship with our customers.

But certainly, on foot of the quality of our digital engagement, quality of our in-branch advisory service, the length and breadth of the country and given those price adjustments we made for non-green rates in the closing quarter of last year, what we're seeing coming through now in terms of pipeline is very, very encouraging about the volume of mortgage growth we're reporting in 2026.

Diarmaid, yes, I think with respect to the capital question, the -- moving towards our medium-term target of 14% being ambition for quite a period of time. That obviously as a baseline represents the amount of capital the organization thinks that it needs to run the business successfully, which is why we are focused on trying to get to that as soon as we possibly can. I would say 2025 was more around a significant outperformance on the capital front than any reluctance to return capital.

I mean, and I'd say every of the big initiatives that we worked on, we came out on the right side of that, which isn't always the case. But generating 6% of CET1 in any particular year is a particularly large amount. But look, that's what we worked hard to do. And on any opportunity where we get to look at our balance sheet or any of our activities and make things more efficient, we are going to do that. Even if it drags me or pulls me further higher away from 14%, we will do that, okay? So we executed a mortgage SRT in quarter 4, cost me money, generated 25 basis points of CET1, but it was an implied cost of equity of 3% or 4%, okay?

So we will continue to look to do the right things to optimize our capital. And on an annual basis, that's what puts us in a stronger position as possible to move towards that 14%, give our stakeholders, the regulator, the Board, the comfort and confidence for us to maintain payouts similar to the last number of years.

Thanks, Diarmaid. Now we're going to Sheel Shah at JPMorgan. Good morning.

Two questions from my side, please. Firstly, on the distributions. So the dividend payout ratio looks to be at the top end of your target range. Can I ask how you're thinking about the split of distributions going forward into '26 and beyond. Would you expect EPS to, for example, grow considering that we're already at the top of the payout ratio range and maybe attributable profits may be taking a bit of a step down next year?

And then secondly, can I ask about the investment spend and maybe sort of leaning towards the mobile app and your data insights. Could I ask how much sense do you have of the number of AIB customers that can be potential wealth customers. And how much leakage do you have in terms of AIB customers that maybe go to other providers for services? I'm wondering how much of this you can capture within the group going forward?

I'll take the second question and then Donal can do the distributions. Do you want to go first, Donal?

Yes. Look, with respect to the distributions, I mean, from the half year, obviously, we knew the position that we were going to be in, by and large, financially speaking. So I mean, the way we try to look at our distributions, we'll talk to investors, we'll engage with the regulator and then we'll have our own particular thoughts on what the right mix is. This is the first year for us, obviously, being out of state ownership. We announced a new dividend policy, obviously, last year as well, and we were very focused on ensuring that we delivered cleanly, clearly and consistently against that. .

So then the makeup with respect to the buyback and the cash dividend, it was -- I mean, a number of factors we had to take into account, one of them being market liquidity as well. We do a buyback that was particularly larger, it might even be difficult to execute within a particular year as well. So that's something that goes into our thoughts. We came out for the first time last year, and we said we'll pay a cash dividend within the range of 40% to 60%. And we decided to pay out at the top end of that range for 2025. Obviously, that's a strong indication of our desire to deliver strong returns to our shareholders.

But look, on a go-forward basis, the most important thing, having a conversation around distributions, it goes back to how we think about capital and how we manage ourselves. When we come in on the 1st of January, work hard, deliver on the plans, then you'll generate strong returns. Like without doing that, you're not even having a conversation. So that really is our focus, and then we look and analyze the best makeup of returns in the last quarter of the year.

Thanks very much indeed. In relation to the app, yes, we have 3.4 million customers, 85% of our customers are digitally active. The app is in the final stages of development. In fact, we have a pilot out there, which is getting very, very positive reaction at the moment, and we look forward to launching it in the summer months. And it's going to be a significant change to what we currently offer. It's going to be far, far more intuitive, far, far easier to navigate, far, far better functionality, and it will encompass all aspects of your relationship with AIB Group.

The simple truth is that we really didn't have savings and investment products in the wealth space until we acquired Goodbody and until we established AIB Life. And we've seen our AUM now grow to the point of 18.3%. There's significant further gains to be made there. I've absolutely no doubt about it over the next number of years, and the app is going to make a difference in that regard as well. But that isn't the sole reason that we're increasing our investment spend. What we're looking at is a progressive transformation of our architecture. We've built a data warehouse in the cloud, world-class. We are investing in a new credit life cycle management system. We are building a unified mortgage platform, all of which will allow us to respond to our customers' needs in a far, far more agile, rapid and secure way because ultimately, this is about trust.

We're going to turn now to Aman at Barclays. Good morning.

I wanted to just come back on capital, please. There's quite a few moving parts in terms of capital generation going forward. In particular, the SRTs and potential headwinds. So I think previously, you've kind of called out CRE, the kind of give back of the CRE component within Basel as a potential headwind. I don't know if you could kind of give us a kind of updated take on whether you still think that is the case. And if you could, in any way, quantify that, that would be really, really helpful.

And I just wanted to just ask a bit more about SRTs and around the quantum -- like is there a limit on the amount of SRTs aggregate or cumulative SRTs that you'd be looking to have out at any one point in time? I just want to get a sense of the kind of ongoing run rate of SRTs beyond the kind of existing stock when we're thinking about building out capital from here?

Yes. Look, with respect to commercial real estate, huge beneficiary from Basel IV effective rough numbers, the risk weightings went from around 100% down to 80%. I don't think that I'm going to have line of sight on that outturn until probably the end of 2026. And I don't actually expect an inspection until 2027. But I'm naturally just going to assume that we'll be given up some of that, but I can't quantify that at the moment.

With respect to SRTs, the way we think about those and the way I've talked about this from the start, I want to have a program set up on multiple asset classes executed over multiple years. The reason I want to do this, it's not necessarily for capital generation, okay? We have plenty of capital. And obviously, with every SRT, I'm moving away from 14%, but it's really, for me, an RWA optimization tool and a risk management tool. It helps us at entity level or a business level manage returns.

So corporate transaction done successfully in '24, AIB mortgages in '25. Similar sizes, like we look to target 20, 25 basis points of CET1 per transaction. We don't look to be very aggressive and do massive jumbo deals, okay, because it's -- that is not the exercise that we're trying to execute. 2026, we look at our Climate & Infrastructure business. It has a newly approved project finance model, a slotting approach. I'm going to imagine it will be -- there will be less inefficiencies. So the SRT may be less effective than others that we've done. It's just I want to have that asset class in an SRT program, which will help us risk manage it going forward.

Beyond that, I will look at commercial real estate. I need to understand all of the data that we're getting from our IRB analysis, and then that will help me figure out how we want to target that market. That's more than likely going to be 2027. And then EBS mortgages as well is another area and another portfolio that I want to look at. I need to wait for the EBS to complete and conclude its own IRB on-site inspection, again, so we can see what the underlying data is telling us.

I think they're the main asset classes that I want to get up and running. I want to have them up and running. They will endure. They will remain in perpetuity, certainly as long as they're allowed. I think the question sometimes comes up if different firms maybe max out, let's say, quantums, et cetera, then there's kind of questions from the regulator around associated counterparty risk. But we kind of want to do regular smaller transactions, very diverse investor base over the coming years. But each transaction look to save 20 to 25 basis points of CET1. Each transaction probably going to cost EUR 10 million, EUR 15 million. Cost of equity to date has been very, very attractive for us, but they are the kind of metrics you should be thinking about.

Thanks very much indeed. And now we're turning to Guy Stebbings at BNP. Good morning, Guy.

I think most of my questions are covered. But just one bigger pitch question for Colin. You talked about wanting to be the best bank in Europe in sort of longer term. Could be seen sort of quite an ambitious statement. I guess best bank means different things to different people. So just interested in terms of what sort of metrics you would be thinking about when benchmarking this as such.

Yes, it's an interesting question and one that was predicted to be landed on top of me today. Ultimately, this is -- we won't decide if we're the best bank in Europe. It will be our stakeholders that do. So whatever -- how do our customers regard us? How do our shareholders regard us. How do our employees regard us and of course, very importantly, how do our regulators look at us. And so it will be a compendium of their views that will determine if we will be a judge to be the best bank in Europe.

I know what the team here are capable of. I know the scale of the ambition that we have, and I am very confident that we are going to do our utmost to be ranked amongst all those stakeholder groups as the best bank in Europe. And we'll obviously be updating you in 12 months' time when we have the actual parameters and metrics around how we are going to evaluate that. But it will be in the eyes of the various important stakeholder groups that we deal with every single day.

Now turning to Rob Noble, Deutsche Bank.

Two for me, please. So the Climate Capital segment is the one that's growing fastest and presumably will grow fastest going forward as well. There's quite a pickup in Stage 3 loans and the cost of risk has stepped up. So what's going on in this division? And what sort of returns do you see that part of the business generating compared to the group as it scales up. And then just a follow-up on all the capital questions. At the bottom line, what sort of RWA growth you're expecting in 2026 pre the unknown IRB changes? And then do those IRB changes, do they affect your Pillar 2 requirement at all? And could that potentially lead you to lower the 14% core Tier 1 target?

Rob, thanks for the questions. I'll take that. With respect to Pillar 2, let's wait and see. Overall, we have very detailed programs in place, working with the regulator where we're trying to close out various items on the to-do list. We've been very, very, I would say, efficient in closing those down and over the last number of years have seen a slow, steady improvement in our add-ons, but we are very ambitious in this area as obviously, our add-ons are one of the key ingredients to our medium-term targets.

With respect to climate capital, a few different things there. So I mentioned that we have a new slotting model, which is approved, which is really what is used for the bulk of the activities in that area. We've begun to roll that out in quarter 3 and quarter 4. But looking through it all, if it had a -- if that business had a risk weighting density of around 90% pre that model, post the model, it's around 75%, okay? So that's one of the key inputs that you need for your returns analysis.

The margins on the business are pretty consistent in different jurisdictions. And I would probably think about that being like a 2.2% margin business or certainly, that's what we model for when we're looking at the business and its growth and its trajectory. Costs are very low, obviously, given it's a very small professional wholesale team. And then it comes down to the cost of risk. For 2025, that division stand-alone had a very high cost of risk of around 110 basis points.

Within that, there was around EUR 0.5 billion, EUR 500 million worth of fiber type transactions, all originated around 2019, 2020. And that's to do with the rollout of fiber throughout Europe, okay? Ireland, U.K., France, Germany, Italy, et cetera. So all of those deals are now -- or a lot of them, some are performing exceptionally well, such as in Ireland. U.K., not so much, delays from COVID, et cetera, et cetera, they are coming through now. So we took a few PMAs, quite an amount of PMAs, really just to ensure that in all eventualities, we were really well provided for.

So you are seeing refis and equity recaps happening in that business at the moment. But if you took out that fiber portfolio, the cost of risk for that book was probably 5 or 6 basis points. Certainly for our planning assumptions, we use a cost of risk of less than 20 basis points. So if you put all that together, you can see the growth trajectory, and you can see that this is an accretive business for AIB and very heavily supported and strategically important for us.

Thank you. Now I go to RBC. Good morning, Pablo.

I wanted to ask on fee income first. So you're guiding to AUM CAGR of 10% to 2028 with related revenue growth above that at 15% per year. So could you just please provide a bit more detail on what will drive that revenue growth going forward besides the demographic trends that you have already mentioned and perhaps also what the required investment -- additional investments are in that part of the business going forward?

My second question was more on your deposit growth. I know that you've mentioned you expect that deceleration to -- from the 7% that you saw in 2025 to be more in line with the evolution of MDD. And I believe you also mentioned that you didn't necessarily expect a material headwind from changes in the competitive environment in Ireland. So I just wanted to check what you have been seeing in the last months in this year as well. And if you expect any material disruption given potential new entrants into the market, the ongoing transaction in Ireland, et cetera?

Yes. Look, on the wealth, the way we're set up, and I'll just try to explain the guidance we gave you a little bit there. We imagine 10% AUM growth. I'd like to imagine that, that is on the conservative side. We have 2 businesses, high net worth within Goodbodys and then more mass market through AIB Life. Goodbody is obviously -- I mean, if we're able to acquire any smaller roll-up businesses in that space, we're really aggressively looking to pursue that avenue. And that will be, I would say, in Ireland, we would say EUR 1 million up of net worth.

The AIB Life business has performed really, really well. It only started up a number of years ago. That is now fully functioning within the AIB construct. So it's a joint venture with Great-West Lifeco, where there's 140 advisers operating throughout the country and working through AIB branches with AIB colleagues. I think the statistics were maybe 40,000 face-to-face meetings or 35,000 face-to-face meetings last year with our customers. And we do expect this to just grow as we continue to roll out new products. And obviously, as the population matures and also educates a bit more on wealth products.

So that's what gives us the confidence in this area, massive area of focus for us, not just with respect to customer acquisition, but also connectivity with our mobile presence and mobile banking apps as well, making that as easy as we possibly can for customers. On deposits, it's -- look, it's where -- I'm trying to be as open and clear about this as possible. And I will admit over the last number of years, I have underestimated liability growth for the organization. We're certainly very comfortable with our position in the market, okay? 49%, 50% of all new accounts being opened, and that's a huge area of focus for us, 40% of the stock.

So we have no concerns necessarily over competitive threats in this area. It's just we felt that at some stage, a normal savings ratio deposit impact is going to come to pass. I was expecting a slightly different outturn in 2025. Obviously, I was wrong, and it was an outperformance. So let's see how it turns out in 2026. Is it conservative? I mean, who knows. But certainly, that's what our econometric models would show us. And indeed, if it's wrong, I'm sure we'll know it at the next quarterly Central Bank of Ireland report in any case.

Now we're past the top of the hour, and we're going to draw matters to a close there. Thank you so much indeed for your attendance and for your questions this morning. If you have any other questions or any points of clarification, please do reach out to Niamh, to Siobhain, to John and Bernie on the IR team, and we look forward to engaging with you and indeed our investors face-to-face as the roadshow commences later on today. Thank you so much indeed.

Good morning, and welcome to the AIB Group Q3 2025 Trading Update Conference Call.

[Operator Instructions]

I would like to advise all participants that this call is being recorded. I will now pass you over to our speakers for today's session, CEO, Colin Hunt and CFO, Donal Galvin. Mr. Hunt, please go ahead.

Thank you so much, Nadia. Good morning, everybody. We are pleased to report another strong performance in the third quarter of this year, demonstrating the ongoing resilience of our business. On the back of this morning's release and pretty clear visibility now to the end of the year, we are nudging our NII guidance higher to greater than EUR 3.7 billion for the year as a whole, reporting 5% growth in new lending to the end of September with some particular strength being seen in personal lending and in our capital markets and U.K. businesses.

Our lending book remains very resilient, and we are now guiding our cost of risk for the full year at the lower end of the previously advised 20 basis points to 30 basis points range. The domestic economic backdrop remains supportive of our business, and we will enter 2026 with good momentum in terms of both activity and pipeline. I'm going to stop there for the moment, and I'm going to open to the floor for questions.

And now we're going to take the first question and it comes from the line of Diarmaid Sheridan from Davy.

Maybe firstly, on net interest income. Obviously, Colin, you referred to nudging off. I guess I wonder what the implications for 2026 are, if you look at the run rate in Q3. I guess we're going to assume there's going to be a little bit of growth given some of the other factors that you talked to in terms of balance sheet growth. So is a level of around EUR 3.8 billion, is that acceptable? Or is that something that you think is possibly achievable for 2026 net interest income?

And just secondly, I appreciated Q3, it will be decided upon at Q4. Just thoughts in terms of capital and distributions. Obviously, another very strong quarter in terms of capital generation. It's not in the number appreciated. But if we look out how much capital do you think you can return to get back to that 14% because you're trending very, very strongly at the moment. Each quarter is a little bit stronger than expected there. So is it still your expectation that you can get to 14% by full year 2027?

Hi Diarmaid, thank you very much. Look, on NII, I think as the year has progressed, we've got increasingly more confident on the outturn for the year, which is why we're very happy to upgrade our guidance greater than EUR 3.7 billion. Obviously, the moving parts there are interest rates, where I think we have well, certainly for 2026, a lot of confidence on where they're going to be. On the asset side, we do see growth of 3%, and we are expecting a strong fourth quarter from lending.

And then on the liability side, that has been really, really strong throughout the year. I think we started the year off with kind of a 2% growth target. It's more like more like 4% as we are now. November, December, normally quieter months for obvious reasons with respect to growth, but overall, a really, really strong outturn on deposits. I think that's going to have a natural follow-through into '26 and '27. We're not going to give guidance for '26 or '27. But I think if you take the '26 outturn, that is going to inevitably lead to a stronger performance for '26 and '27. And then you can adjust wherever you see ECB rate moves beyond that. But look, overall, very, very happy with the outturn for 2025.

On the distribution side, as you know, our goal is always on the first of January to come in and deliver a strong performance as we possibly can. We're very pleased with the performance year-to-date, really strong capital appreciation. We also managed to resolve and agree with the government, the retiring of the warrants, which is a very -- I think that's positive news for us and for investors as well. Just having a potentially dilutive instrument off the balance sheet. And in Q4, we also have in early December, we're going to look to close a mortgage SRT transaction. So a lot of positive things still to come towards the back end of the year. Look, as you rightly say, we engage in conversations with both our Board and our regulator towards the back end of the year, and normally we will update the market as year-end results with respect to our distribution thoughts.

You will see that we have throughout the year, not reported in your earnings really just to accrue those, and that's to give both the Board -- to give the Board maximum flexibility around its distribution deliberations. With respect to medium-term targets and reaching up 14 -- greater than 14% CET1 target, like all of our medium-term targets. These are very much key areas of focus for the organization, and we will drive towards exceeding and beating all of those targets.

Now we're going to take our next question and it comes from the line of Denis McGoldrick from Goodbody.

Just two please, if I may. One is just in relation to loan book growth. So that was up 1% year-to-date to the end of September. Maybe if you could talk us through the reasons why you're still comfortable that you can deliver the plus 3% this year and then the CAGR of 5% over the medium term? And then secondly, just on exceptional items in 2025. Obviously, that's been upgraded now to a credit of EUR 150 million. Maybe if you could again just talk us through the moving parts. Has the gain on Merchant Services landed a little bit higher than you expected?

On the loan book growth, Denis, on the loan book growth, like we've got 10 months activity now fully booked, and we have very clear line of sight to the end of the year. We're very comfortable with where the pipeline is and very comfortable with our expectation that we will deliver loan growth for the full year of the number that you alluded to earlier. So it's requiring less forecasting at this point of the year, as doubtless you're aware, but the pipeline is strong. And momentum into 2026 is going to be very good as well. So the business is in very big good shape, and we're very happy with where we're positioned across the various products.

Yes. And I mean I would add to that. I mean we had imagined we'd see growth of 5% in 2025 on a reported basis. We've adjusted that to 3% really to account for changes in foreign exchange of around 1%, and then we would have delevered some noncore assets, which had an effect of a 1% as well. But the underlying business areas, and the business growth and where we'd expect to see the growth is very much in line with our expectations, which is why we're very comfortable with the 3% for '25 and indeed, the 5% for '26 and '27.

On the exceptional side, a couple of things. The gain on sale from AIB Merchant Services is obviously the main driver there. But as we would have talked about previously, we've put behind us a lot of the old legacy type of items that may have found their way through that line in the past. And so there's just very little costs coming through related to any of those legacy type of items. I wouldn't be imagining that there will be gains going forward, but certainly, given those big restitutions and legacy items are closed. Going forward, we don't expect to see charges coming through that line.

The next question comes from the line of Benjamin Toms from RBC.

The first one just in relation to your NII guidance going into next year. One of your peers has talked about or implied guidance implies a material pickup in competition impacting margins into next year. How are you currently thinking about the potential for the increase in competitive pressure as we go into 2026? And then secondly, you've reiterated your cost guidance of less than EUR 2 billion for next year. Consensus isn't quite there yet. What are your confidence levels on this guidance? And what are the moving parts here?

Okay, good morning, Benjamin. On the competitive pressure, like we -- obviously, we've seen very significant structural change in the Irish banking market in the past 5 years with the departures of KBC and Ulster. We put ourselves into a position where we were the lead consolidator for the market, welcoming roughly half of all the customers who were migrating from the departing banks. But the competitive landscape just doesn't include just 3 financial institutions. We have competition every single day from credit unions, from neobanks, from fintechs, from the post office. So we are living in a competitive environment, I would argue already, and I don't see a material change in terms of the competitive landscape as we move into 2026.

It is important to note that we have a pretty consistent approach in this business about how we price products. We always maintain that we price them rationally, that we underwrite conservatively, and we're not driving our business forward on the back of significant temporary tightening of margins. We're very, very comfortable with where we stand, and we're very comfortable with the medium to long-term focus of our approach to pricing and underwriting.

Yes. Just coming in there on costs. Certainly, for 2025 between now and the end of the year, we're comfortable to hold that 3% number. Main driver really there is a slow gradual decrease in overall headcount, which you will have seen over the last number of quarters. That's obviously going to move into 2026 as well as we continue to automate and make our processes more efficient, we would expect to see headcount gains.

What I would say though is against that, you're obviously going to have inflationary impacts, which remain quite volatile, and then investment in technology that we make in our business as well. So all of those things put together is making up the overall cost base. But look, our medium-term target is EUR 2 billion. And like all of our medium-term targets, we will look to achieve or beat all of those.

Now we're going to take our next question, and it comes from the line of Chris Cant from Autonomous.

I just wanted to ask about capital, please. So Donal, you mentioned an SRT transaction in fourth quarter. I think consensus has in 58% and change RWAs for full year '25. So with the SRT, is that the right place for us to be set, please? Just conscious, you were actually a bit below that in the first half. And I know there's a bit of back-end loaded growth, but if you could give us a steer because I think some banks have talked about op risk RWA inflation coming through in the fourth quarter, too, that would be helpful.

And then just in terms of thinking about the capital ratio, if I take your 59% pro forma for the warrant, and I add in the year-to-date profits of 250 , you had a 46 bps interim dividend and then you've got another quarter of profit to come, it looks like you should be coming out somewhere around 18.7% in the fourth quarter and maybe a little bit higher if there's a meaningful impact from the SRT. If I think about where consensus is on an equivalent basis to kind of pre-distribution, it looks like consensus is about 18.5%, I think. But just, if you could comment on that because the capital, I understand why you've done the nonaccrual of profit, but it does make it quite difficult to track how the businesses capital position is trending relative to consensus, it looks to me like even with the warrant surprise, which is 70 bps rather than the 40 you guided earlier in the year, it looks like the business is probably 20 bps ahead of consensus at the year-end and maybe a touch higher given the SRT?

Yes. Thanks very much, Chris. Look, you walk through the CET1 numbers are absolutely bang on the money. So they're accurate. As you referenced, we have not reported any of our in-year profits. And really, the reason for that, we feel it is a conservative position, and it also gives us maximum flexibility in our deliberations and conversations with both the Board and the regulator at year-end when we review what our overall payout makeup is going to look like.

Look, I think as you rightly say, and as I look at consensus, it's probably fair to say that the benefit or the impact of the mortgage SRT is not fully incorporated. Now I do accept that at the half year, I didn't provide very much detail on that. But we will look to transact in early December on a mortgage SRT. There will be EUR 2 billion worth of loans. We'll look to save EUR 1 billion of RWAs and we expect the cost of equity of that to be less than 5%, and the CET1 benefits will be between 20 and 30 basis points. So I think that's perhaps where consensus could be slightly behind, so I'd encourage you to adjust for that.

But look, overall, as you rightly say, the business is very capital generative at the moment and notwithstanding the fact that we are generating a lot of core earnings from our business. We will continue to execute transactions like SRTs, where we think they make sense from an overall capital perspective, so that we can be as efficient with our overall capital stock as possible.

The next question comes from the line of Borja Ramirez from Citi.

I have one, in particular, linked to the Irish National Development Plan, which seems to be a sizeable investment into infrastructure and housing. I would like to ask what could be the potential opportunities for mortgage growth and maybe SME lending as well, please?

Good morning Mr. Borja. The most pressing issue facing the Irish economy in our society today is housing output. We've built something in the order of 33,000, 34,000 units in 2025 against the market backdrop, which probably needs something of the order of 60,000 units. And recognizing the primacy of the concerns around housing, the government has published a national development plan, which will commit total capital expenditure of about EUR 275 billion. So a very substantial amount of resource in the context of the size of the Irish economy, and that commitment is for a 10-year period. Very much focused on was enabling a significant increase in housing and indeed investment in transport and other critical social services as well.

Some of the resource will be deployed in modernizing our electricity grid and investing in water utilities and in so doing enabling an increase in the supply of service land, which should lead to an increase in total housing output. If you think about the housing market as it stands today, we finance the development of about 1/3 of the output. So if you are going to see investment which enables a significant increase in output, that is obviously going to have a positive impact in terms of the amount of capital we deploy to support residential development in this country, and we have an appetite so to do. It will obviously also have a positive impact in terms of the amount of mortgages being drawn in the economy as well.

So certainly, on the supply side, the MDP will have a pretty positive impact on the medium- and long-term performance of the business. And in the event that there needs to be support coming from the private sector for that capital deployment, we're very well equipped given our expertise in project finance in our Climate and Infrastructure Capital division to support the rollout of that much needed investment.

We take our next question Aman Rakkar.

Thanks very much for the chance to ask some questions. I had 2, please. One was just on your deposit guide for full year. I just wanted to check if you're expecting any meaningful seasonality in Q4 in deposits. I think at face value, your guide for full year deposits probably implies a flat outturn in Q-on-Q. So I kind of just wanted to interrogate whether that was a conservative comment or if there's any kind of noise in the balance sheet that you might want to point us to? Obviously, it's an important driver of net interest income at the moment. So that would be helpful.

And a follow-on capital. Look, clearly, you're set to end the year with really quite substantial levels of surplus capital despite the warrant charge, particularly post SRTs. I was kind of interested in what some of the constraints are that we should think about around your potential or prospective deliberations around distributions at year-end. It looks like based on consensus in your prior comments that payout ratio above 100% is clearly not an issue. So could you help us think about what the kind of parameters are that you'll be looking to operate within and to what extent it's kind of within AIB's control to determine how much it wants to distribute versus, say, a conversation with the regulator?

No problem. Listen, I would say on the liability side, we have -- we're really strong performance and outturn on growth throughout 2025 particularly in the Republic of Ireland, which is our core market. And that's across retail consumer segments and also SME and business segments. We're not prevalent, large in the wholesale corporate space. It's a little bit more competitive, but in that retail and SME space, very, very strong. So we've given guidance overall of 4%, which is an upgrade from 3%. We're always a little bit cautious really just coming into the end of the year, December, given one can naturally expect to see increased expenditure. Maybe a little bit conservative there. I would say, technically, it's probably more like 4.5% growth.

But historically, we have seen liabilities flat line throughout November and December. But overall, I would say, trajectory throughout the year really consistent. We do expect to see maybe just flat for November, December and then January '26, probably return to that more normalized type of runners. On the capital side, as you know, our dividend policy will state that there's a 40% to 60% cash dividend payout and then anything above that would be deemed as special or exceptional. So the 40% to 60% conversation is sort of within the gift of AIB and the Board, and that will be reviewed and agreed upon in December, where we'll also look at our overall capital, our overall capital position and the trajectory looking forward.

The outlook is very important. How do we see the macro environment? Do we see any significant troubles ahead? And obviously, in a world of increased uncertainties, there's always different scenarios you can imagine. But first and foremost, it's the responsibility of the Board to get comfortable and agree, and approve whatever applications are made to the regulator and their conversations that happened throughout November and December. And we feel like we've put ourselves in a very strong position, with a very strong performance and obviously, we've maintained a conservative stance with respect to our CET1 reporting by not reporting any of our in-year profits.

We're going to take our next question that comes from the line of Sheel Shah.

Can I ask about your level of confidence for the 2026 target of less than EUR 2 billion costs, please? Because that would imply maybe a sort of a flattish to maybe even down cost trajectory from '25 to '26 and considering inflation may be running a touch hotter than expected in Ireland IT expenditure, cyber and whatever else is probably going up, investments are probably increasing as well. So just to understand some of the moving parts to get to that EUR 2 billion number, especially because consensus maybe less optimistic on that number compared to where you stand?

Thanks,. What I would say on all of our targets, we obviously set them -- we set them about 2 years ago now. And we remain very committed to them. They are the key metrics by which we manage the business and on the cost target of less than EUR 2 billion for the year 2026, that is a vitally important management tool for us as we steer the bank through the months and quarters ahead towards the end of 2026. It is a real target. It is a firm target, and it is one that the executive team and the Board remain very, very committed to. It is worth, I suppose, I was pointing out that we are seeing through retirements and natural attrition. We are seeing an ongoing reduction in our total head count.

So if you look at the position at the end of September this year compared to the end of September last year, our total headcount is down by something in the order of about 20% and that's a trend that we would expect to see continuing as we move through 2026. We're not planning nor will we be doing any sort of special severance packages for the special voluntary severance programs, but we are seeing ongoing attrition. And of course, you always then have retirements in the normal course. And I would expect that the combination of that will see our head count edging lower as we move into '26 and towards the end of next year.

And now we're going to take our last question for today. And it comes of Robert Noble from Deutsche Bank.

Can I just -- the numbers on capital generation in Q3. It looks like you generated 100 basis points in profit. Does that include the exceptional gain from Merchant Services? Or is that just pure organic capital? If it is, I presume that if it's pure organic capital, I presume the cost of risk is near 0 this quarter. Is that the right way to think about it?

And just on like whether you put profits and capital or not, I'm not really sure what the difference is. I mean, we all know it's there. How does that actually legitimately change the conversation with the Board or the regulator? Because I mean it's exactly the same what payout ratio difference does it make in reality?

Yes. Look, I'll take the second question first. I think from the way I look at it is just, it's a very strong statement of intent from the very start of the year with respect to management's ambitions, with respect to how the view distributions and overall returns. And we wanted to be very clear and very strong on that from the very start of the year for that reason and no other. On the Q3 profits, the gain on sale for Merchant Services is included in there. So that's obviously a one-off item.

And then I think you touched on cost of risk there. Overall, as Colin said, it looks like it to be at the lower end of the range of 20 to 30 basis points, but we will look at our macros and our weightings in November or December as we normally do, and that's going to have an impact as well. Obviously, in the first half of the year, things looked a little bit more uncertain post Liberation Day. And we're really just trying to figure out how we see the macro environment in Ireland playing out in the coming years. But I would say it looks marginally better now than what it did 6 or 9 months ago.

Thank you, dear speakers, there are no further questions for today. This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.