July 22, 2024

AIB mortgage share rises leaving top two banks with over 75% of market – The Irish Times

AIB’s share of new mortgage lending crept higher in the first few months of this year, leaving the top two banks in the country with a combined mortgage market share of more than 75 per cent.

The bank said in a trading statement on Thursday, ahead of its annual general meeting in Dublin, that its share of new mortgage activity was 35.4 per cent in the first three months of the year. That was up from 31 per cent from the same period last year and 33 per cent for 2023 as a whole.

Earlier this week, Bank of Ireland reported that its slice of new mortgage lending was 40 per cent for the first two months of the year. While it had dipped from 41 per cent last year, it remained well ahead of the 28 per cent share it recorded for 2022, as the domestic banks won back market share from nonbank lenders such as ICS Mortgages and Finance Ireland as their funding was squeezed amid rising market interest rates.

Banks have an advantage over nonbank lenders, with most of their mortgages funded by cheap customer deposits. PTSB’s market share was also squeezed last year as it struggled to compete with its larger rivals, as it must hold more expensive capital against every new home loan it writes, under regulatory rules.

AIB said its net interest income rose 27 per cent on the year in 2024, as it benefitted from a succession of European Central Bank (ECB) rate increases in the 15 months to last September. This saw the ECB’s deposit rate rise from minus 0.5 per cent to 4 per cent. AIB had over €33 billion of idle cash stored with the Central Bank of Ireland as of the end of last year.

The bank reiterated that it sees its full-year net interest income coming to more than €3.65 billion, down from last year’s €3.84 billion. However, this assumes that the ECB will cut its deposit rate by 1.25 percentage points, at a time when financial markets are now just pricing roughly half that level in cuts.

“The group had a very strong first quarter performance and, with continued momentum across our business and the embedding of our strategic priorities, we are confident in our outlook for 2024,” AIB chief executive Colin Hunt said. “AIB continues to be in a position of strength with a robust balance sheet, stable deposit base and growing loan book enabling us to support our customers and the wider economy.”

Gross loans increased by €1 billion from December to €68 billion at the end of March, as €2.8 billion of new lending outstripped that pace at which customers repaid loans.

The bank said it set aside a “small net” charge for potential loan losses during the quarter, even as its non-performing loans ratio remained stable at 3 per cent of its total portfolio.

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