AIB Group PLC on Friday reported a surge in profit and a rise in operating and net income in its half year, as it entered the final stage of its three-year transformation strategy.

AIB, the Dublin-based bank, said its pretax profit in its first half ended June 30 increased 84% to €987 million, from €537 million the year before.

Operating income in the half year was €2.21 billion, a 73% rise from €1.27 billion the prior year.

Net interest income in this period was up 98% at €1.77 billion from €895 million, due to the changed interest rate environment and higher average customer loan volumes.

Net interest margin was 2.94%, with AIB guiding 2.90% for all of 2023. The bank also provided guidance for 2023 net interest income of greater than €3.6 billion and a net interest margin of greater than 2.90%.

Chief Executive Officer Colin Hunt said: ‘As we enter the final stages of our three-year transformation strategy, AIB Group has delivered a strong financial and operational performance with after-tax profit of €854 million in the first half as we welcomed large numbers of new customers against the backdrop of an evolving banking market, a higher interest rate environment and a resilient Irish economy.’

AIB had a net credit impairment charge in the first half of €91 million, compared to a €309 million write back the previous year. This was driven by a charge in relation to commercial property, including additional post-model adjustments, to address the potential adverse impacts from higher interest rates and lower valuations.

Costs increased by 15% to €897 million from €782 million, a reflection of the inflationary environment, higher employee numbers and the cost of servicing an expanded customer base

AIB said it expects 2023 to be a ‘very strong year’ and that it was planning its next strategic cycle.

Net interest income is expected to be greater than €3.6 billion, and net interest margin more than 2.90%. Other income is expected to be around €780 million. AIB said costs are estimated to be around €1.8 billion, with a cost income ratio in the low 40 percentages. Bank levies are anticipated to be around €165 million, and exceptional costs around €150 million

‘In a changed operating environment, our strategy has positioned us well for the future. 2023 is expected to be a very strong year and with a transformed group, we are now planning for the next strategic cycle. Our focus remains on supporting our customers, creating shareholder value and delivering sustainable returns,’ AIB said.

Shares in AIB were up 6.5% at 364.44 pence in London on Friday morning.

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