AIB Group (AIBRF) Q4 2025 Earnings Report

The call portrays a strong overall performance in 2025 with robust profitability (RoTE 25%), exceptionally strong organic capital generation, healthy deposit growth, resilient loan growth and substantial progress on green lending and wealth businesses. Headwinds include an 8% decline in total income driven by NII compression, weaker new mortgage volumes and some volatility/credit provisioning in specific wholesale portfolios (notably fiber within Climate & Infrastructure Capital). Management has clear mitigation plans: active balance-sheet hedging, increased strategic investment (EUR 400m), targeted RWA optimization (SRTs/IRB adoption) and conservative provisioning guidance. On balance, the positive operational, capital and funding outcomes materially outweigh the manageable challenges and uncertainties raised.

Management guided 2026 NII of circa €3.8bn and other income >€750m, with costs expected to rise c.2% as investment spend increases to €400m; loan growth is targeted at ~5% (5% medium‑term lending CAGR to 2027) and deposits are expected to grow 2–3%, supporting a return on tangible equity >20%. They expect a cost of risk of 20–30 basis points (to be narrowed through the year), assume an ECB deposit rate of 2% with a 20% deposit beta, and estimate bank levies/regulatory fees around €140m for 2026. Balance‑sheet and hedging metrics underpinning the guidance include structural hedges that have cut NII sensitivity to a 100bp shock from €378m to €286m (an additional €10bn of hedges executed at ~2.3% avg yield and a planned ~5‑year hedge duration, with €6bn of swaps maturing in both 2026 and 2027), c.€21bn of fixed‑rate mortgages (3.1% yield, 1.9yr WAL), and liquidity/capital buffers (2025 LDR 61%, LCR 204%, NSFR 163%, MREL 35.2%); the group retains a medium‑term CET1 ambition >14% supported by expected sustainable organic capital generation (>320bps) and DTA benefits.