AIB Group PLC on Wednesday announced its intention to launch a €1 billion buyback, after posting an uplift in both net interest income and profit after tax, thanks in part to a higher interest rate environment.

For the year ended December 31, the financial services company reported net interest income of €3.84 billion, up from a restated €2.10 billion a year prior.

According to AIB, this result benefitted from a higher interest rate environment, as well as higher average customer loan volumes.

Profit after tax was €2.06 billion, up from €765 million, while earnings per share were 75.7 euro cents, up from 26.1 cents the year before.

Return on tangible equity came in ‘substantially’ ahead of AIB’s medium-term target at 25.7%, up from 9.6% thanks to ‘increased profitability’.

‘In the face of increasing interest rates, we managed to limit the effect of this on many of our borrowers at a time when they were faced with cost-of-living challenges. At the same time, and reflecting the importance to AIB of our depositors, we offered market-leading interest rates for those of our customers with surplus liquidity to invest, in a range of deposit products which they had to choose from,’ said Chair Jim Pettigrew.

‘Balancing the needs of these two customer groups was a key focus for the board and for management during 2023 given the emphasis we place on the value of quality long-term relationships with our customers,’ he added.

In a separate announcement, the firm proposed a final dividend for the year of 26.568 cents per share.

It also told investors that it has decided to distribute €1 billion by way of a buyback.

AIB has received approval for this capital reduction from the European Central Bank, and explained on Wednesday that its preference is to undertake the buyback on a directed basis by agreement with the Minister for Finance. Discussions with the Department of Finance are currently underway.

Looking ahead, it expects more than €3.65 billion in net interest income in 2024, based on an ECB rate of 2.75%

AIB Group shares were trading 3.2% higher at 388.50 pence each in London on Wednesday morning.

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