The Goodbody report comes a month after AIB said it expects its net interest income to exceed €3.3 billion in 2023, compared to its previous forecast for about €3 billion as it continues to benefit from rising central bank rates. Bank of Ireland and Permanent TSB have also seen net interest income increase sharply of the same reason.
“We have not seen full pass-through from a fixed and variable rate mortgage pricing perspective and we therefore see less risk of rate reversals on fixed and variable mortgage stock and flow if base rates start to reduce,” Mr Cronin said. “Demand and term deposit rates remain very low relative to where base rates reside and any pressures that could emerge to push up deposit pricing materially further ... will potentially lessen considerably if base rates start to go into reverse,” he added.
AIB shares fell 0.3 per cent on Monday while Bank of Ireland slid 1.1 per cent. Permanent TSB added 3.7 per cent. On State ownership, Goodbody see the Government’s holding in AIB dropping below 50 per cent by autumn compared to just under 53 per cent now. On average, the State has been selling off about one per cent of its holding per month, but that could be increased through share placings, the broker added.
Both AIB and Bank of Ireland could boost shareholder returns next year, with the two banks expected to get the green light to start paying out hundreds of millions of euro worth of excess capital to investors. Cronin and Dunphy calculate AIB could have about €779 million of excess capital by the end of 2023, while Bank of Ireland may have about €603 million. Those returns though are more like to be a “multiyear process rather than a ‘big bang,” they said.