AIB Group plc
Annual Financial Report
For the year ended
31 December 2023
For the life
you’re after
This copy of the statutory annual report of AIB
Group plc for the year ended 31 December 2023
is not presented in the ESEF-format as specified
in the Regulatory Technical Standards on ESEF
(Delegated Regulation (EU) 2019/815). The ESEF
annual report will also be published on: https://
aib.ie/investorrelations/financial-information/
results-centre/2023-financial-results
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AIB Group plc
Annual Financial Report 2023
01
Inside
this report
Our wider reporting suite:
We are publishing this Annual Financial
Report 2023 in conjunction with our
Sustainability Report 2023.
For our wider reporting suite, visit:
aib.ie/investorrelations.
Annual Review
Business Performance
AIB Group at a Glance
Business Model
Compelling Investment Thesis
Chair’s Statement
Chief Executive’s Review
Economic Overview
For the Life You’re After
Our Strategy
Sustainability in AIB
Risk Summary
Principal Risks
Top and Emerging Risks
Value Creation
Business Review
Operating and Financial Review
Capital
ESG Disclosures
Task Force on Climate-Related Financial Disclosures
Non-Financial Information Statement
EU Taxonomy
Governance and Oversight Report
UK Corporate Governance Code Compliance Statement
Chair’s Introduction to the Corporate Governance Report
Governance in Action
Board of Directors
Our Executive Committee
Board Leadership and Company Purpose, Culture and Division of
Responsibilities
Key Focus Areas
Section 172 Statement and Stakeholder Management
Audit Committee Report
Risk Committee Report
Nomination and Corporate Governance Committee Report
Remuneration Committee Report
Remuneration Statement
Technology and Data Advisory Committee
Sustainable Business Advisory Committee
Viability Statement
Directors’ Report
Schedule to the Directors’ Report
Other Governance Information
Supervision and Regulation
Risk Management
Risk Management Approach
Individual Risk Types
Financial Statements
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
AIB Group plc Company Financial Statements
Notes to AIB Group plc Company Financial Statements
General Information
EU Taxonomy Disclosure Tables
Shareholder Information
Forward Looking Statement
Glossary of Terms
Principal Addresses
Index
2
4
6
7
8
10
16
18
20
22
26
27
31
32
33
49
54
59
64
66
66
68
70
74
76
80
81
85
90
93
98
101
109
110
113
114
117
119
120
122
125
199
200
210
216
315
318
325
329
330
331
337
338
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Annual Financial Report 2023
02
Business Performance
2023 Results
Financial Performance
Profit After Tax
Net Interest Income
Net Credit Impairment Charge
€2,058m
€3,841m
€172m
Profit before tax up €1.5bn to €2.4bn
Operating profit1 of €2,730m (operating income up
64% with operating expenses up 10%), an
impairment charge of €172m and exceptional
items of €150m
Interest income up 83%
Benefiting from the impact of a higher interest rate
environment and higher average customer loan
volumes. Net interest margin (NIM) of 3.11%, up
142 basis points
Cautious, forward-looking approach
Asset quality remains resilient. Impairment charge
primarily driven by commercial property to
address the potential adverse impacts from higher
interest rates and lower valuations partially offset
by writebacks in business
New Lending
Net Loans
Non-Performing Exposures2
€12.3bn
€65.5bn
€2.0bn
New lending down 2%
Growth in corporate and personal lending is offset
by lower property and mortgage lending. Mortgage
market share 33%, in line with the prior year
Net loans increased 10% to €65.5bn
Net loans up €5.9bn driven by the acquisition of
loans from Ulster Bank and new lending
exceeding redemptions
NPE ratio now 3.0%
Non-performing exposures (NPEs) decreased by
€0.2bn to €2.0bn
Return on Tangible Equity3
CET1 Ratio (Fully Loaded)
4
Absolute Cost Base5
25.7%
15.8%
€1,826m
Return on tangible equity (RoTE) benefiting from
increased profitability and substantially ahead of
medium-term target
Earnings per share (EPS) 75.7 cent
Strong capital position, well in excess of regulatory
requirements and medium-term target
Proposed dividend €696m and share buyback
€1bn
Cost income ratio5 39%, prior year 57%. Costs up
10% primarily reflecting the enlarged Group,
inflationary impacts and an allowance for limited
variable remuneration
4
1. Operating profit before impairment losses and exceptional items.
2. NPEs refers to non-performing loans (NPLs) and excludes €93m of off-balance sheet commitments.
3. Return on Tangible Equity is based on the target CET1 capital on a fully loaded basis. For definition and basis of calculation, see pages 47 and 52.
4. Excluded the impact of the share buyback completed in April 2023 of €215m, CET1 impact -0.4%.
5. Before exceptional items, bank levies and regulatory fees. For exceptional items, see pages 38 and 47.
€2,058m€765m20232022€12.3bn€12.6bn2023202225.7%9.6%20232022€3,841m€2,095m20232022€65.5bn€59.6bn2023202215.8%16.3%20232022€172m€7m20232022€2.0bn€2.2bn20232022€1,826m€1,659m20232022 Annual
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Non-Financial Performance
Green Finance
Amount of new lending 2019-2023 for climate
action1
Digitally Active Customers
Number of active customers on digital channels
Customer Satisfaction
Transactional Net Promoter Score3
Measured after customer transactions for key
touch points
€11.6bn
2.19m
+45
Continued growth in green finance delivered by
strong performance in mortgages to energy-
efficient homes, green mortgage products and
lending for green buildings and renewable energy
Target
€10bn by 2023
2
Continued increase in digital activity levels as well
as increase in number of active customers. Rate
of increase of active digital customers slowing
due to the relative maturity of digital and the
cumulative effect of high adoption rates in
previous years
Customer First is a core pillar of AIB’s strategy
and we know that we have more to do to increase
customer satisfaction. We have taken on board
our customers’ feedback and have seen an
improvement of +6 vs last year. We remain
committed to further enhancing our customer
experience in 2024 and beyond
Target
Target
>2.25m by 2023
+53 by 2023
Inclusion & Diversity
Women as % of management
42%
4
Reduction in Operational Emissions
% reduction in Scope 1 & 2 GHG emissions
year-on-year
17%
6
7
Maintained gender balance across Board,
Executive Committee and all management. Focus
on sustaining a strong pipeline of female leaders,
particularly at senior management level
Our property strategy coupled with our energy
management system made a substantial
contribution to our GHG reductions
Target
Gender Balanced
(Ongoing)
5
Target
Net Zero by 2030
(Own Operations)
1.
2.
In H2 2023, our new green lending definition was expanded to include new mortgage lending to energy-efficient homes (BER A1-B2 / EPC A-B), aligned to our Sustainable Lending Framework
(SLF). Our green mortgage products may include lending to homes with a B3 BER rating. The SLF is an internal AIB Framework that outlines the key parameters on which a transaction can be
classified as green. This expanded definition has been applied to all relevant lending activity for the full year.
In 2019, our Climate Action Fund was launched, aiming to lend €5bn in green finance in five years. In 2021, the fund was doubled to €10bn due to strong demand. As at 31 December 2023,
we exceeded the target amount, having reached €11.6bn in new green lending since 2019. In 2023, we also announced a new target for our Climate Action Fund of €30bn by 2030.
3. Transactional Net Promoter Score (NPS) is an aggregation of 20 customer journeys across Homes, Personal, SME, Digital, Retail, Direct and Day-to-Day Banking.
4. Payzone, Goodbody, contractors, AIB staff on career break or unpaid leave as well as Board and Executive Committee members are excluded from the figure.
5. The Equileap annual Gender Equality Global Report & Ranking equates ‘gender balanced’ with between 40% and 60% women.
6. 2023 verified figures, include nine months’ actual data and three months’ estimations.
7. 2022 figures have been updated as per last re-statement, issued in 2023. This exercise was completed in accordance with the GHG Protocol guidance and allowed the incorporation of
12 months of actual data.
€11.6bn€7.9bn2023202242%42%202320222.19m2.10m2023202217%8%20232022+45+3920232022 Annual
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Annual Financial Report 2023
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AIB Group at a Glance
Well Positioned
in Key Sectors
In 2023, AIB Group operated three core segments, predominantly
in Ireland and the UK, furthering our ambition of being at the heart
of our customers’ financial lives. From 2024, these will be
complemented by a new Climate Capital segment, which is being
created to increase the bank’s capability in funding significant
sustainable infrastructure projects and to support the transition
to a zero-carbon future. We look forward to reporting on our four
core segments from 2024.
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Retail Banking
3.02m Active customers1
€39.2bn Net loans
Retail Banking supports our personal and business customers with
a comprehensive range of banking and financial services, delivered
through our branch and digital channels with an expanded reach via
EBS, Haven, Payzone, AIB life, AIB Merchant Services and Nifti.
Capital Markets
Relationship-driven model
€19.4bn Net loans
Capital Markets, which includes Goodbody, serves the Group’s large
and medium-sized business customers as well as our private banking
customers, providing deep-sector expertise combined with our
comprehensive product offering.
AIB UK
264k Active customers1
£6.0bn Net loans
AIB UK operates in two distinct markets of Great Britain and Northern
Ireland. Across both regions, AIB supports our corporate customers
with sector-specific expertise. In Northern Ireland, we offer full-service
retail banking.
1. Active customers defined as those meeting specific criteria under one or more of three
categories: Activity, Balance and Policy.
Operating Contribution by Segment
AIB UK
£230m
Retail Banking
€1.7bn
€2.5bn
FY2023 Total
Capital Markets
€617m
Operating contribution is before exceptional items. Total includes Group segment loss of €54m.
For further information see Segment Reporting on pages 42 to 46 in the Operating and Financial Review,
Annual Financial Report 2023.
Our brands
AIB is our principal brand across all our
geographies. AIB provides a range of products
and services to retail, business and corporate
customers. AIB holds market-leading positions
across key segments.
EBS is a predominantly mortgage-focused brand
within AIB Group, helping thousands of customers
buy their own homes in Ireland. It offers mortgage,
personal banking, savings and investment products
and services.
Haven is our mortgage broker channel, providing
mortgages through intermediaries on behalf
of AIB Group.
Goodbody offers wealth management, asset
management and investment banking services with
quality advice and exceptional client service at the
core of its offering.
AIB life is a joint venture with Great-West Lifeco,
providing protection, pensions and investments to
help customers on their path to financial security
one step at a time.
Payzone, a subsidiary of AIB Group, provides
comprehensive payment solutions to more than
7,500 retail stores, over 100 clients and over
500,000 app users across Ireland.
AIB Merchant Services is an associate of the
Group, with the other shareholder being Fiserv,
a global leader in fintech and payments. It is one
of Ireland’s largest payment solution providers and
one of Europe’s largest e-commerce acquirers,
with a global customer base.
Nifti is an associate of the Group, with the other
shareholder being Nissan Ireland Ltd.
NiftiBusiness and Nifti Personal Leasing promote
mobility solutions including more sustainable
offerings. NiftiBusiness assists companies in
achieving their fleet management goals; Nifti
Personal Leasing offers personal car leasing to
consumers via AIB’s new Personal Contract
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Annual Financial Report 2023
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Business Model
Creating
Sustainable Value
Guided by our strategy and underpinned by our values, we are
committed to generating sustainable value and long-term resilience
for our business, our customers and all of our stakeholders.
Purpose
Empowering people to
build a sustainable future.
Strategic ambition We will be at the heart of our customers’ financial lives by comprehensively
and sustainably meeting their personal and business life-stage needs while
consistently doing the right thing.
Strategic pillars
Customer
First
Simple
& Efficient
Risk
& Capital
Talent
& Culture
Sustainable
Communities
Our values
Put
customers
first
Be one
team
Show
respect
Own the
outcome
Drive
progress
Eliminate
complexity
How We Create Value
A Pillar Bank in Ireland
Along with our mobile apps and Internet and Phone Banking
services, AIB maintains the largest branch network in Ireland,
with market-leading positions across multiple personal, SME
and corporate products and services.
A Leading Mortgage Provider
With a dedicated team of mortgage experts, AIB provides
application options in branches, over the phone or online.
EBS is our mortgage-focused brand and Haven is the Group’s
broker channel. AIB, EBS and Haven all offer competitive
Green Mortgage products.
Leading Sustainability Agenda
We are committed to supporting our customers in the
transition to a low-carbon future while making progress on our
own net zero commitments. We offer green mortgages across
our AIB, EBS and Haven brands, along with green loans for
personal customers and sustainable lending for corporates.
In addition, AIB has regular issuances of green and social
bonds for responsible investors and has issued €5.75bn in
ESG bonds since 2020.
Business Customer Focus
AIB supports business customers in their daily banking and
funding requirements. While we offer relationship-driven
supports to all industry sectors in Ireland, we are focused
on mid to large corporates in certain sectors in the UK.
Our US team is focused on syndications, with an increasing
focus on syndicated renewables finance.
Bespoke Treasury Solutions
AIB provides a range of Treasury services, including foreign
exchange, interest rate risk, trade finance and corporate cash
management solutions. We regularly undertake and publish
economic research to keep our customers and stakeholders
informed on the evolving macroeconomic environment.
Wealth Management
To support our customers to achieve their financial goals, we
provide a range of pensions, savings and investment options
and advice. With the acquisition of Goodbody and the
establishment of AIB life, our joint venture with Great-West
Lifeco, we expect further growth in this area.
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Annual Financial Report 2023
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Compelling Investment Thesis
Transformed,
Reshaped and
Revitalised Group
Exceptional financial performance over the last three years
Supportive domestic macroeconomic backdrop
Well-positioned enlarged Group with customer-centric focus
Resilient balance sheet; conservative credit management
Leader in sustainability
Focused on targeted growth and operational efficiency
Strong capital generation and distributions
Sustainable returns 15% RoTE target
Three strategic areas of focus:
Customer First:
Developing deeper
relationships with our
customers.
Greening the Loan Book:
Amplification of Group’s ESG
leadership position, including
new green and transition
lending, net zero ambitions
and enhanced focus on the
Climate Capital segment.
Operational Efficiency:
Enabling our colleagues
to deliver for our customers
by investing in capabilities
and capacity.
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Chair’s Statement
“We enter the next strategic cycle in arguably
the strongest position in the Group’s history,
with our largest ever customer base and
an enhanced suite of products and services
to offer these customers.”
Jim Pettigrew
Chair
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Our community involvement is an important
element of one of our strategic pillars and is
always a source of great pride for us. Colin’s
Review covers the collaboration between our
customers and employees in raising much
needed funding throughout the year for GOAL,
one of our strategic charity partners, and for
the AIB Community €1 Million Fund which
benefited 80 other charities in Ireland and
the UK.
Looking Forward
Building on what has been achieved by the
Group in recent years, we enter the next
strategic cycle in arguably the strongest
position in the Group’s history, with our largest
ever customer base and an enhanced suite
of products and services to offer these
customers. We also have a hard-working,
loyal and innovative team who put our
customers at the heart of everything they and
we do. On behalf of the Board, I want to thank
our customers for their continued loyalty and
the trust they place in us and our employees
for going the extra mile for our customers
every day.
We are a strong bank with an excellent
franchise and we are committed to deploying
our resources in helping our customers to
achieve net zero in their own operations as we
all seek to arrest the impact of climate change
on our planet and on our economy. This way
we can ensure we will continue to deliver
quality and sustainable results in the future
for the benefit of our many stakeholders.
Thank you for your continued support.
Jim Pettigrew
Chair
5 March 2024
When I prepared this report last year, I wrote
about our optimism which was based on the
strength of our franchise in our chosen markets
and sectors. 2023 was the year in which this
optimism was rewarded as our very strong
results demonstrate.
The Group generated net interest income
of €3,841m, an increase of 83.3% over 2022
as monetary policy tightening by central banks
took effect. Profit before taxation amounted
to €2,394m compared to €880m in 2022
and this has allowed the Board to reward
shareholders with an increased dividend for
the year.
Central to our strategy however are our
customers. 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. 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.
Dividend and Capital
Profit after tax for the year amounted to
€2,058m translating to attributable earnings of
€2,061m. Earnings per share amounted to
75.7 cent. From this, your Board has decided
to distribute a total of €1.7bn by way of a
combination of a share buyback and a cash
dividend to shareholders. Subject to approval
by shareholders at the Annual General Meeting
on 2 May 2024, a cash dividend of 26.6 cent
per share will be paid on 10 May 2024 to
shareholders on the register at the close of
business on 22 March 2024.
Separately, your Board has resolved to
distribute €1bn by way of a share buyback.
Approval for this reduction in capital has been
received from the European Central Bank. Our
preference is to undertake this on a directed
basis by agreement with the Minister for
Finance and discussions with the Department
of Finance are currently underway.
Furthermore, a buyback of €1bn from the
Minister for Finance would require the approval
of independent shareholders, which, subject to
agreeing the terms of the buyback with the
Department of Finance, the Group will seek in
due course.
Continued Sell Down by the Irish State
and Share Buyback by AIB
During the year, the Minister for Finance
continued to reduce the Irish State’s holding
of shares both through its now well established
on-market share trading plan and through two
accelerated book builds in June and November
2023 of 5% each. In addition, on 25 April 2023
the Group announced that it had agreed to
make an off-market purchase of 54.7 million
shares from the Minister for a total
consideration of €215.3m under the authority
renewed by shareholders at the 2022 AGM.
The foregoing transactions resulted in the
Minister for Finance, through the National
Treasury Management Agency (NTMA),
controlling 40.77% of the Group’s shares
at year end. This compares to 56.89% at
31 December 2022, and 71.12% at 31
December 2021. The Minister announced that
he had restarted the on-market share trading
plan on 9 January 2024. AIB welcomes all of
these transactions undertaken by the Minister,
each an important step in returning the
State’s investment in the Group and, for AIB,
achieving a normalisation of the share
register. AIB owes the Irish taxpayer an
immense debt of gratitude for its support
during the financial crisis.
Strategy
2023 was the final year of the most recent
three-year strategic cycle. I believe that what
has been achieved over the last three years
has transformed the Group, de-risked our
balance sheet, diversified our income streams
and strengthened our franchise through
deepening our relationships with our
customers, who have grown materially
in number over the period.
During 2023, and in anticipation of the new
three-year strategic cycle we revised our
purpose, recognising our focus in recent years
to the area of sustainability, to “empowering
people to build a sustainable future”. The
Board approved our Strategy for 2024 – 2026
putting this purpose into action. Our new
strategy is centred on an informed view of
our customers’ needs and is anchored in
a progressive ESG agenda. This is covered
more expansively elsewhere in this Report.
Remuneration Restrictions
The remuneration restrictions introduced in
2009 remain in place for AIB and present
a material talent retention risk, placing AIB at
a significant disadvantage to our domestic and
non-domestic competitors in the retention and
attraction of talent. In this context, I note the
December 2023 Country Report on Ireland
by the International Monetary Fund. While
welcoming the reduction in the State’s
shareholding in AIB to below 50%, the report
noted “it is important to recognise the need for
domestic banks to retain talent and ensure
a level playing field for them in the face of
more nimble non-banks”. The Board has
a fiduciary duty to act in the best interests
of the Group. On behalf of the Board, I have
engaged, and will continue to engage, with the
Minister for Finance and his office to seek
mitigation of this material risk.
Sustainability and Community Involvement
Our Detailed Sustainability Report and the
ESG Disclosures section later in this Report
deal comprehensively with our evolved
sustainability strategy. The establishment of
a new segment dedicated to Climate Capital
underscores the centrality of the area of
sustainability to our overall strategy.
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Annual Financial Report 2023
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Chief Executive’s Review
“In the period under review, the Group
returned to majority private ownership and our
profitability and return on capital was boosted
by the strong performance of our business,
continued economic growth, and a return to
a more normal monetary policy environment.”
Colin Hunt
Chief Executive Officer
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2023 was a landmark year for AIB as we
concluded our three-year strategic cycle by
enhancing the suite of products and services
we offer our customers, significantly growing
our customer base to record levels and
transforming, simplifying and streamlining
our business.
In the period under review, the Group returned
to majority private ownership, an important
development in repaying the State’s
investment, and our profitability and return on
capital was boosted by the strong performance
of our business, continued economic growth
in our core market and a return, following
tightening by central banks, to a more
normalised monetary policy environment.
The growth we experienced in our core
business activity, customer base and net
interest margin delivered a very strong
financial performance in 2023. Profit before tax
amounted to €2,394m, our return on tangible
equity rose to 25.7% and our balance sheet
remained robust with a CET1 of 15.8%.
Notwithstanding the ongoing impact of geo-
political instability in Eastern Europe and more
recently the Middle East, along with the
stubborn persistence of inflationary pressures
throughout the year and subdued growth
overall, the Irish economy continued to support
high employment levels, solid consumer
demand and international trade. This backdrop
helped underpin the Group’s performance
across key sectors including corporate and
business lending, retail services and the broad
spectrum of personal loans.
Mortgage lending and the provision of finance
to enable our customers to retrofit their homes
and make them more sustainable are key
areas of activity for AIB. We remain a leader
in the market, focused on prudent pricing and
underwriting rather than the pursuit of
market share.
We are acutely aware that the change in ECB
monetary policy from mid-2022 that triggered
an unprecedented succession of interest rate
increases, combined with underlying inflation,
has caused financial challenges for some of
our customers.
capability of Goodbody through a collaboration
with AIB Private Banking and utilising AIB’s
distribution channels.
Against a fast-changing monetary policy
backdrop, AIB took a measured approach
to pricing on both sides of the balance sheet
and was mindful not to pass on the full extent
of the ECB rate increases to mortgage
customers. In the same context, we extended
our range of savings products and increased
our rates on fixed term deposits in particular.
Organic growth during the period was
bolstered by the further addition of new
business and personal customers. During
2023, the Group continued to welcome the
highest proportion of customers seeking
new banking relationships arising from the
departure of Ulster Bank and KBC from the
Irish market.
In total, AIB has opened in excess of 800,000
new accounts since the start of 2022, the
majority through our digital channels, and this
brings our overall customer base to 3.3 million.
We welcome them and thank them for their
custom. We also look forward to offering them,
and all customers of the Group, our extensive
range of financial products and services to
meet their changing needs and support the life
they’re after.
During the summer we completed the
acquisition of the Ulster Bank corporate and
commercial loan book and, notwithstanding
some initial challenges due to the sheer scale
of the operation, we are on track to complete
the migration of the performing tracker (and
linked) mortgage portfolio from Ulster Bank in
the course of 2024.
As we deepen and strengthen our relationship
with new and existing customers, one area of
focus is to provide attractive longer-term
savings, wealth and investment offerings, and
we delivered on two key objectives in this area
during 2023. In April we launched Goodbody-
Private, offering high-net-worth AIB customers
the product portfolio, services and recognised
June brought the official launch of AIB life,
a joint venture between AIB and Great-West
Lifeco. It is the first full-service, technology-led
life company to be designed and built in the
Irish market in a generation. A fully cloud-
based service, AIB life’s product suite is now
exclusively available to all our customers via
our AIB Mobile Banking App with support from
AIB’s existing network of financial advisors
nationwide. The initial customer response has
met our ambitious expectations.
We also continued to make great strides in
supporting our customers in the transition
to a low-carbon economy. Our green and
transition lending continues to grow with 30%
of Group new lending comprising green and
transition lending in 2023. The more green
lending we do, the more green capital we can
attract and we were pleased to have raised
€750m from issuing another green bond during
the year, our fifth in total.
Recognising rising customer demand and the
need to do more to help combat climate
change, towards the end of the year we
announced that we have tripled our Climate
Action Fund to €30bn available for green and
transition financing activities to 2030.
One area I have been determined to address
conclusively has been the often complex
legacy issues that have persisted from a prior
era in the bank. In August 2021, the Group
instigated a programme to review investments
in a series of investment property funds, known
as Belfry, which the Group sold during the
period 2002 to 2006 to c. 2,500 individual
investors. The programme has conducted
a case-by-case review of investments to
determine if redress may be due and payments
to investors commenced in the second half
of 2022 and are substantially complete.
An independent appeals process has been
established and is available to all investors.
“Recognising rising customer demand
and the need to do more to help
combat climate change, towards the
end of the year we announced that
we have tripled our Climate Action
Fund to €30bn.”
Supporting our customers in the transition
to lower carbon
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Financial Performance
Our 2023 financial performance is the strongest
in our history. For the year, we are reporting
a profit before tax of €2,394m. This includes an
operating profit of €2,730m before impairment
losses and exceptional items.
Total operating income €4,741m was 64%
higher than 2022. Net interest income of
€3,841m increased by €1,746m or 83% year-on-
year reflecting the impact of the higher interest
rate environment and growth in customer loan
volumes. Net interest margin (NIM) increased by
142 bps to 3.11% in 2023 compared to 1.69%
in 2022. Other income of €900m increased by
€100m or 13% compared to 2022 primarily
reflecting the forward contract for the acquisition
of the Ulster Bank tracker mortgage portfolio
and an 8% increase in net fee and commission
income partly offset by a reduction in
other items.
Total operating expenses of €1,826m
increased by 10% compared to 2022. Factors
impacting costs include wage and general
inflation, increased customer servicing for
a larger customer base, higher staff numbers
given the enlarged Group and an allowance
for limited variable pay. The Group’s cost
income ratio in 2023 was 39% compared to
57% in the prior year.
Overall credit quality remains robust against the
backdrop of inflation and higher interest rates.
There was a net credit impairment charge of
€172m in 2023 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. This was partially offset
by writebacks in the corporate & SME portfolio
reflecting strong credit performance and
repayments in Covid-impacted sectors.
Our overall approach remains conservative,
comprehensive, and forward-looking and is
reflected in an expected credit loss coverage
rate of 2.3%.
Exceptional items of €150m include
a charge of €88m primarily related to the
aforementioned Belfry investment property
funds, reflecting a provision for customer
redress of €77m and associated costs of
€11m. Exceptional items also include
inorganic transaction costs.
New lending of €12.3bn in 2023 was €0.3bn
or 2% lower compared to 2022. Irish mortgage
lending of €4.0bn, representing a market share
of 33% (2022: 32%) was 12% lower compared
to 2022 as the prior year benefited from a high
level of switching activity. Property related
lending was down 26% to €2.0bn reflecting
reduced activity levels in the commercial real
estate sector. Non-property lending of €5.0bn
was up 18% driven by continued growth in
renewable energy and infrastructure and
corporate lending in Ireland as well as
selective growth in syndicated lending partially
offset by lower UK lending. Personal lending
was up 23% to €1.2bn.
Gross loans at €67.0bn were up €5.8bn or 9%
compared to 31 December 2022 primarily
driven by the acquisition of loans from Ulster
Bank and new lending exceeding redemptions.
As at 31 December 2023, 92% of AIB’s loan
book is of strong or satisfactory quality (up
from 90% at 2022 year-end). Maintaining the
quality of new lending is critical, with >98% of
our new lending being of strong or satisfactory
credit quality in 2023.
Non-performing loans as a percentage of gross
loans to customers were 3% at 31 December
2023 compared to 3.5% at 31 December 2022.
We remain committed to carefully managing
non-performing exposures (NPEs) given the
impact on cost, capital requirements and
balance sheet resilience.
AIB’s funding and liquidity ratios remain robust.
The loan to deposit ratio increased to 63%
at 31 December 2023 compared to 58% at
31 December 2022 as growth in loans to
customers, which included the acquisition of
loans from Ulster Bank, outpaced growth in
customer accounts. We continue to have strong
liquidity metrics (Liquidity Coverage Ratio 199%
and Net Stable Funding Ratio 159%).
Debt securities issued of €8.4bn increased by
€1.2bn from 31 December 2022 primarily due
to further MREL related issuances of €2.4bn,
including €1.5bn social and green bond
issuances, partly offset by maturities of €1.4bn.
The Group has a strong capital base
with a reported CET1 ratio of 15.8% at
31 December 2023, well in excess of
regulatory requirements.
Digital
The great majority of our customers now
choose to interact with AIB Group through our
digital channels. Our digital base across the
Group continued its growth in 2023, reaching
2.19 million customers, up 5% on 2022. Within
Ireland, 81% of current account holders were
digitally active by the end of the year, up from
77% at the end of 2022.
Smartphones continue to dominate our
customers’ interactions as the most prominent
touchpoint for digital banking, while we
continue to see growth in the use of contactless
payments. Within Ireland, the base of active
mobile users exceeded 1.9 million customers
at the end of 2023, up 7% on the previous year.
Mobile activity itself increased, peaking at 3.3
million interactions in a single day (up 12%),
the number of Mobile Wallet transactions
throughout the year increased by 47%, while
eCommerce – for example, card purchases
online – volumes grew by 27%.
In Ireland, 62% of all new personal account
relationships were onboarded digitally in 2023,
allowing those new customers to join AIB
entirely at a time and place of their choosing.
We also witnessed mobile adoption in the over
65 age category which grew by a further 18%
throughout last year.
Online product sales continue to dominate,
with 78% of key consumer products sold
digitally in Ireland. Again, we witnessed growth
in digital applications across most products in
2023; our customers applied online for 67%
of overdrafts (2022 62%), 69% of credit cards
(2022 55%) and 89% of personal loans
(2022 no change), while 25% of mortgage
applications were made online (2022 22%).
“Our digital base across the Group
continued its growth in 2023, reaching
2.19 million customers, up 5% on 2022.
Within Ireland, 81% of current account
holders were digitally active by the end
of the year, up from 77% at the end
of 2022.”
Continued digital growth
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“We hosted the seventh AIB Sustainability
Conference, facilitating conversation about
the continued importance of environmental,
social and governance action amongst
our customers and other stakeholders.”
AIB Sustainability Conference
In our response to this ongoing digital
evolution, AIB has continued to invest in our
product offerings. In 2023, we enhanced our
credit offerings with streamlined, digitalised
processes. We also launched a new dedicated
AIB Business (iBB) App in June, providing
a more convenient way to review and approve
payments on the move. 15,000 of our business
customers were using the app by the end of
the year.
We remain committed to protecting customers
against the threats associated with fraud,
making significant investments to enhance
our systems and proactively drive ongoing
education and awareness in response to
new and existing threats. We also continue to
advocate for a cross-sectoral, multi-stakeholder
approach in order to limit the opportunities for
online platforms and telephone networks to be
misused for fraudulent communications.
Sustainable Communities
In November, we hosted the seventh
AIB Sustainability Conference, facilitating
conversation about the continued importance
of environmental, social and governance action
amongst our customers and other
stakeholders. I was very proud to welcome
Rt. Hon. Dame Jacinda Ardern to Dublin who,
along with comedian and author Trevor Noah
and a number of our own customers, provided
plenty of food for thought for the more than
9,200 attending in person and online. The
continued popularity of this annual event is
further evidence that sustainability remains
high on the agenda of global thought leaders
and customers alike.
It came as no surprise, therefore, that we
exceeded our previous target to provide €10bn
in green and transition funding by the end of
2023. Last year alone, we provided €3.7bn in
funding, bringing the total over five years to
€11.6bn. Along with our fifth green bond in
2023, we issued our second social bond in
January, bringing the total AIB has raised in
ESG bonds to date to €5.75bn.
It remains our ambition for our portfolio to be
net zero by 2040 (with Agriculture to be net
zero by 2050, in line with the Irish
Government’s target). Having now expanded
our Climate Action Fund to €30bn by 2030,
we intend to enhance our green products and
services over the coming years to ensure we
are both delivering against our ESG measures
and empowering people to build a sustainable
future. For further details of our sustainability
strategy, see pages 22 to 25.
We are aware, though, that the sustainability
journey can be a daunting one, and that
our customers are also now challenged by
cost-of-living constraints. We are focused on
continuous upskilling of our colleagues to
support our customers’ evolving needs, and
facilitating knowledge sharing both directly to
our customers and through our involvement
with like-minded organisations. In 2023, for
example, we were aware that the introduction
of the Corporate Sustainability Reporting
Directive (CSRD) would impact our business
customers, and aimed to support small
and medium-sized enterprises (SMEs), in
particular, through the provision of information
and a training webinar. In tandem, we rolled
out a comprehensive internal programme to
prepare ourselves for CSRD.
At the end of 2022, AIB Group entered
into a virtual Corporate Power Purchase
Agreement (vCPPA) with NTR to construct two
solar farms in Co. Wexford, which will not only
supply electricity to the Group but will also
provide much-needed extra capacity to the
national grid. Construction progressed swiftly,
and in January 2024 I was delighted to visit
the first solar farm from which we are now
purchasing renewable energy. This was the
first such vCPPA involving an Irish corporate,
and importantly, is a huge step in the Group’s
strategy to become net zero in our own
operations by 2030.
Unfortunately, 2023 further reminded us of the
harsh realities of war. I have been very proud
of the support AIB, along with our customers,
has provided to GOAL, an Irish organisation
providing vital humanitarian relief to the most
vulnerable people around the world. At the
end of the year, our communities came out
in greater than ever numbers to complete the
annual GOAL Mile, raising a record €630k,
some of which was raised directly via a new
‘Donate’ functionality on the AIB Mobile App,
which had been used for the first time earlier
in the year to support those affected by the
devastating earthquake in Turkey-Syria.
“At the end of the year, our communities came
out in greater than ever numbers to complete
the annual GOAL Mile, raising a record €630k,
some of which was raised directly via a new
‘Donate’ functionality on the AIB Mobile App.”
The GOAL Mile, proudly supported by AIB
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Chief Executive’s Review continued
“Our own AIB Community €1 Million
Fund provided direct support to
80 charities primarily throughout
Ireland and also in Great Britain.
The recipients of this fund are
charitable organisations nominated
by our customers, employees and
the general public.”
AIB Community €1 Million Fund
Closer to home, our own AIB Community
€1 Million Fund provided direct support to
80 charities primarily throughout Ireland and
also in Great Britain. The recipients of this fund
are charitable organisations nominated by our
customers, employees and the general public,
and in 2023, these nominations nearly trebled.
This engagement shows the important social
role AIB and our customers play in our
communities – both locally and globally.
Culture and Our People
In the final quarter of 2023, 81% of colleagues
were satisfied with AIB as a place to work, and
we remain committed to providing a supportive
and inclusive working environment where our
people are enabled to reach their full potential.
We continue to promote a culture of universal
inclusion in AIB, delivering our second
enterprise-wide Universal Inclusion campaign
in 2023. We also continued our focus on the
diversification of our talent pipeline through
the expansion of our Apprenticeship and
Internship programmes.
We were delighted to again be recognised
by the Grad Ireland Student Awards in 2023
as the Most Popular Graduate Recruiter in
Financial Services for the fourth year in
a row, and to receive external recognition via
multiple awards for our Graduate Programme
and Leaders Enabling a Difference
(LEAD) Programme, two of our core
development initiatives.
In 2023, we again enhanced our range
of workplace supports to help colleagues
navigate and thrive in their career, adding to the
progressive enhancements made to our family
leave policies. We broadened our existing
Marriage Leave offering of five days’ paid leave
into Significant Life Event Leave. We introduced
10 days’ paid Carers Leave to support
colleagues providing critical care to vulnerable
loved ones, and have partnered with Family
Carer’s Ireland to provide a holistic support
package to our working carers. We extended
our Compassionate Leave for pregnancy loss to
up to four weeks’ paid leave, with this leave
available to all employees regardless of
whether pregnancy loss occurs to them
personally, their partner or their surrogate.
Throughout 2023, we also delivered a number
of bespoke Wellbeing initiatives across the
organisation, supported by our Group-wide
network of advocates. In April, we launched
our first Financial Wellbeing Month, and we
held our third annual Mental Health Awareness
Month in September.
Following the easing of some Government
remuneration restrictions in December 2022
and AIB Group’s return to majority private
ownership, we announced in October the
provision for the first time of healthcare
benefits to all AIB employees in Ireland along
with the introduction of a measured variable
remuneration scheme subject to the
achievement of a range of performance targets
across the business.
These new benefits recognise the contribution
our employees have made in supporting our
customers and putting the Group on a long-
term sustainable footing and will help AIB
retain and attract employees.
“In 2023, we again enhanced our range
of workplace supports to help colleagues
navigate and thrive in their career, adding
to the progressive enhancements made
to our family leave policies.”
Progressive Leave enhancements
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“Looking ahead, we are now
preparing to deliver on our new
three-year strategy, which places
an enhanced focus on serving
our customers, further greening
our loan book and driving greater
operational efficiency.”
A new strategic cycle
Outlook
Looking ahead, we are now preparing to
deliver on our new three-year strategy which
places an enhanced focus on serving our
customers, further greening our loan book,
driving greater operational efficiency and
delivering sustainable returns for all our
stakeholders. More details can be found on
pages 20 and 21.
With this focus in mind, we have taken the
opportunity to review the Group structure and
update our 2026 medium-term financial targets
to a RoTE of 15%, a CET1 ratio above 14%
and an absolute cost base below €2 billion,
with a cost income ratio of less than 50%.
In January 2024, we announced three new
additions to the Executive Committee. A new
Chief Customer Officer position has been
established to focus solely on our customers
and drive improved customer experience
through aligning our strategy, channels
and propositions. Sajid Arshad has been
appointed as interim Chief Customer Officer
while a selection process for the full-time role
is ongoing and will be announced in due
course. Paul Travers has been appointed to
the new role of Managing Director of Climate
Capital, supporting business growth and our
ambition to be a driving force in the transition
to a zero-carbon future in Ireland and selected
overseas markets. Barry Field has been
appointed Corporate Affairs Director, bringing
together the core enterprise activities of
Corporate Affairs and Communications in
support of the Group’s strategic direction.
Turning to the year ahead, modest growth is
anticipated for the global economy, with the
International Monetary Fund (IMF) forecasting
a similar pace of growth to the 1.6% gain in
2023 in advanced economies. This will be
characterised by relatively rapid US growth
(2.1%) and more sluggish growth in the
Eurozone (0.9%) in 2024. However, recent
forecasts from the Economic and Social
Research Institute (ESRI) and Central Bank
of Ireland (CBI) show they expect a pick-up in
Irish growth, assuming the drag on output,
exports and investment in the multi-national
sector abates. A number of factors should
underpin growth. Inflation is on the wane and
interest rates are expected to be cut over the
next couple of years. Combined with solid
wage growth, this will boost real household
disposable incomes. Fiscal policy is set to
remain expansionary in the context of the
healthy state of the public finances. The IDA
also reports that Ireland’s foreign direct
investment proposition remains strong against
a challenging international environment
heading into 2024. Meanwhile, private sector
balance sheets remain characterised by low
debt and high levels of savings. These buffers
will be vital if any downside risks emerge to
impact growth in the highly open Irish
economy.
As Ireland’s largest financial services provider,
AIB continues to be a driving force in the Irish
economy. I am pleased that our reshaped
Group is generating sustainable profits and
is well positioned to support our 3.3 million
customers, our shareholders and the wider
economy now and into the future.
We welcomed the decision and subsequent
transaction undertaken by the Minister
for Finance on 7 November, which led
to a further divestment of the State’s
shareholding in AIB Group plc to c. 40.8%.
It is another important development in the
process of returning the State’s investment in
the Group, enhancing liquidity and normalising
the share register.
AIB owes the Irish State and taxpayer an
immense debt of gratitude for its support
during the financial crisis. We remain focused
on our strategy to grow and strengthen the
Group to ensure we continue to support our
customers and generate sustainable returns
for all our stakeholders.
I would like to thank our customers for their
business in 2023. Our franchise has never
been stronger and we are determined to satisfy
the full breadth of our customers’ financial
needs and aspirations with agility, efficiency
and prudence. Finally, I would like to thank my
fellow Board and Executive Committee
members and all my colleagues across the
Group for their unwavering support in
delivering for our customers, our communities
and the wider economies we serve.
Colin Hunt
Chief Executive Officer
5 March 2024
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Economic Overview
Challenges Persist
Amid Subdued Growth
Subdued Performance by Global Economy
Marked Slowdown in Irish Economy
The global economy registered a subdued performance in 2023. The
impact of tighter monetary policy became increasingly visible as the
year progressed, business and consumer confidence turned down,
and the rebound in China faded. Although there was a stronger-than-
anticipated start to the year, helped by lower energy prices, this was
not sustained, apart from in the USA. Both the IMF and OECD
estimate that the world economy grew by a modest 3% in 2023.
Growth in advanced economies was even weaker at 1.5% according
to the IMF, with the UK and Eurozone economies expanding by
around 0.5%. As well as the substantial monetary policy tightening,
high inflation, elevated levels of uncertainty and bouts of risk aversion
also acted as headwinds to growth.
Labour markets, though, remained tight in 2023, with unemployment
rates remaining close to multi-decade lows in the main economies.
Headline inflation did fall sharply over the course of the year, helped
by lower commodity prices. Core inflation declined more slowly, amid
high wage inflation and remained well above the 2% target virtually
everywhere. As a result, central banks guided that monetary policy
would need to stay restrictive for a considerable time.
The Irish economy experienced a very sharp slowdown in growth
in 2023, following the very strong performances seen in 2021 and
2022, when GDP rose by 15% and 9.5%, respectively. The preliminary
estimate from the CSO is that GDP contracted in 2023, reflecting
a marked post-pandemic decline in manufacturing output in the
pharmaceuticals and ICT sectors, which had seen a surge in
production during COVID-19. Exports of goods, which had risen
by c. 20% on average in 2021 and 2022, fell by 6.5% year-on-year
in the first three quarters of 2023. The domestic economy also slowed
sharply in 2023, with modified domestic demand expanding by just
0.9% year-on-year over Q1-Q3, down from 9.7% registered for the
full year in 2022. Consumer spending, though, rose by 3.6% during
this period.
The Irish labour market continued to perform well in 2023.
Ongoing strong net inward migration and a further rise in the female
participation rate helped sustain robust growth in the workforce.
Employment rose sharply and was up by 3.4% year-on-year in the
fourth quarter. Meantime, the unemployment rate averaged 4.3%
for the year. Inflation fell sharply over the course of 2023, with the
annual HICP rate (standardised EU inflation measure), declining
to 3.2% by December.
Inflation
(%)
Irish Unemployment Rate
(%)
Source: CSO, EuroStat, ONS
Source: CSO
Jan 2020Jul 2020Jan 2021Jul 2021Jan 2022Jul 2022Jan 2023July 2023Jan 202445678IrelandEUUKJan 2020Jul 2020Jan 2021July 2021Jan 2022Jul 2022Jan 2023Jul 2023Jan 2024-2-10123456789101112 Annual
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Further Rise in Housing Output
Outlook for 2024
There was a further rise in housing output in 2023 following its sharp
increase in 2022 from the low levels seen during the COVID-19
pandemic. CSO data put house completions at 32,695 in 2023, up
from just below 30,000 the previous year and c. 20,500 per annum
in the period 2019-2021. Meanwhile, official government data show
housing commencements picked up over the course of 2023, totalling
32,801 for the year, up from 26,907 in 2022. House prices fell back
earlier in the year, before recovering from the summer onwards.
Overall, CSO data show residential property prices rose by 3.1% in
2023, following a 12.4% increase in 2022. CSO data also show an
easing in rental inflation during 2023.
All the main official international forecasters are projecting another
year of subdued growth for the global economy in 2024. High interest
rates, much tighter financial conditions, less supportive stance of fiscal
policy, continuing high levels of both uncertainty and elevated geo-
political risks are all expected to weigh on activity in the year ahead.
Growth in Europe is projected to remain very subdued for a second
consecutive year, while the pace of activity in the USA is expected to
slow down. Labour markets remain tight, though, so unemployment
is likely to stay relatively low. Furthermore, it is anticipated by markets
that central banks will begin lowering interest rates as the year
progresses in response to a further easing in inflationary pressures.
Household savings were maintained at a very high level in 2023.
Private sector deposits stood at €305bn by year end 2023, down
slightly from €312bn in December 2022, but up by 39% since
end-2019. Mortgage drawdowns amounted to €12.1bn in 2023,
down from €14.1bn in 2022, reflecting a fall-off in switching activity.
Meanwhile, Central Bank data show new lending to the SME sector
amounted to €2.8bn to end-September, 13.8% lower than the same
period in 2022.
The Irish economy is not immune to these trends but the pace of
growth here is expected to strengthen from the very weak levels seen
in 2023. The IDA reports that Ireland’s FDI proposition remains strong
against a challenging international environment. The public finances
are in strong shape, allowing fiscal policy to remain supportive of
activity. Private sector balance sheets are characterised by low debt
and high savings. Thus, most current forecasts are for Irish GDP to
grow by around 2.5% in 2024.
New Dwelling Completions
(Total, 4 Qrt Mov Avg)
Irish Private Sector Deposits and Household Savings Ratio
€bn
%
Source: CSO
Source: CSO, CBI
Q4 2016Q4 2017Q4 2018Q4 2019Q4 2020Q4 2021Q4 2022Q4 20239,00012,00015,00018,00021,00024,00027,00030,00033,000Dec 2018Jun 2019Dec 2019Jun 2020Dec 2020Jun 2021Dec 2021Jun 2022Dec 2022Jun 2023Dec 2023140160180200220240260280300320691215182124273033 Annual
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For the Life You’re After
Supporting Our
Customers in 2023
In 2023, we continued to support our
customers with their financial needs,
from enabling people to quickly and easily
support charitable causes, to facilitating
large-scale renewable energy development,
and enhancing our own product suite.
Everyday Business
Banking on the Go
In June, we launched the new AIB Business (iBB) App, which allows
our business customers to check their balances as well as make
and authorise their payments on the go. By the end of the year,
15,000 business customers were using the app.
Customer 1st
Academy
Donations
Made Easy
In October, we launched our Customer 1st Academy, an initiative
driven through a collaborative approach across Retail Banking
and Capital Markets. The academy aims to support colleagues in
customer-facing roles to deliver excellent services to our customers,
ensuring consistent customer engagement and customer
experience across AIB.
A ’Donate’ button was added in our AIB Mobile App to support
GOAL’s crisis appeal for the Turkey & Syria Earthquake Appeal
in February, and for the GOAL Mile at Christmas. Through the app,
we facilitated customer donations of c. €560,000 to GOAL in 2023
to support vulnerable communities in 14 countries.
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Supporting Europe’s
Largest Solar
Investor
Leading Irish Bank in
ESG Bonds
In March, AIB Group was approved for a total £50m participation in
a £275m Holdco RCF for Octopus Renewables. The purpose of the
approval was to amend and extend the company’s existing RCF to
facilitate the continued growth of its portfolio which includes a mix
of onshore and offshore wind, solar and biomass projects.
In January, AIB raised €750m from the issuance of our second
social bond. And later in October, we raised a further €750m from
the issuance of our fifth green bond, bringing total proceeds raised
from ESG bonds to €5.75bn.
Hello, AIB life
In May, AIB life, our joint venture with Great-West Lifeco,
was officially launched. This business will transform our
financial planning offering, delivering a full suite of innovative
and technology-led products to our customers. In 2023, we received
over 15k new customer sign ups to the new AIB life portal, and
conducted 13k customer advice meetings.
Supporting Social
Housing
AIB supported social housing by providing funding of €91m in 2023,
representing c. 500 homes. This delivers further progress towards
our 2024 target of €800m, bringing total fund utilisation up to €548m.
Supporting Wind
Energy Development
AIB secured credit approval for a €300m commitment in Ventient
Energy’s wind farm portfolio refinancing, with a final hold of €255m
achieved when the transaction reached financial close on
14 December. Ventient is Europe’s largest non-utility onshore wind
generator, with a 2,800MW portfolio (equivalent to c. 50% of the
Irish wind energy market).
Supporting
Sustainable Farming
In early June, AIB became the exclusive financial institution partner
to Carbery Group’s Farm Zero C project, which aims to create an
economically viable, climate neutral model for Irish dairy farming.
In this role, AIB supports the research, promotion and public
advocacy of the project work.
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Our Strategy
A New
Strategic Cycle
2024 marks the beginning
of a new three-year
strategic cycle for AIB
Group. Our purpose is
empowering people to build
a sustainable future, and
over the next three years,
we will develop deeper, more
enduring relationships with
our customers, by better
serving their financial needs.
Against an evolving Irish banking landscape,
we reshaped AIB Group, fundamentally
changing our business; delivering an
enhanced product suite, embedding inorganic
initiatives, transforming our operating model
with increased digitalisation, welcoming new
customers and leading the ESG agenda.
We close 2023 as a leading financial services
group well positioned for the future.
Over the next three years, supported by our
strategy, our values and our new Customer
Charter, we are going to empower customers
to get the most from AIB, for the life they’re
after. To do this, aligned to our existing
strategic pillars, we have clearly set out
three strategic areas of focus: Customer
First, Greening the Loan Book and
Operational Efficiency.
We will hold the customer at the heart of our
organisation, with a Customer First ethos deep
in our strategy and our culture, focused on
enhancing customer experience to better meet
customer needs. We are going to build deeper
relationships with our customers, delivering
seamless and intuitive journeys. To elevate the
process and create a step change in customer
centricity, the Group has introduced a new
Chief Customer Officer executive position
that will enable deep insight and focus on
the customer through aligning our strategy,
channels and propositions.
Recognising rising customer demand, the
need to do more to help combat climate
change and our ambition to be a driving force
in the transition to a lower-carbon future, we
are going to build a dedicated Climate Capital
segment to complement our other segments,
Retail Banking, Capital Markets and AIB UK.
The new Climate Capital segment will expand
our capability and capacity in this space, as
Customer First:
Developing deeper
relationships with our
customers.
Three strategic areas of focus:
Greening the Loan Book:
Amplification of Group’s ESG
leadership position, including
new green and transition
lending, net zero ambitions
and enhanced focus on the
Climate Capital segment.
Operational Efficiency:
Enabling our colleagues to
deliver for our customers
by investing in capabilities
and capacity.
a market leader in financing energy transition
and infrastructure. It will adopt a global
outlook, focusing on established renewables
technology in European, UK and North
American markets, reflecting AIB’s existing
footprint and funding, as well as the largest
and fastest growth markets for green financing
demand.
ambition to be at the heart of our customers’
financial lives, where positive customer
outcomes are at the beginning, middle and end
of everything we do.
The world is changing at pace. As people strive
to build a more sustainable life, AIB will support
them every step of the way.
We will continue to improve our digital
capability, across an agile and resilient
platform that delivers for customers’ financial
needs, improving their banking experience,
while offering and delivering our products
and services in a proactive, seamless and
innovative manner.
In terms of our workforce, we will focus on
having the right capabilities in place to enable
delivery of our priorities. We’ll use resilient
platforms to create an enhanced employee
experience that will support the Group’s
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Measuring Our
Performance
We have set key financial targets for the medium term and
will measure our ESG performance in line with our strategy.
2026 Medium-Term Financial Targets
Absolute Cost Base1
Cost of running the business
Return on Tangible Equity
A measure of how well capital is deployed to
generate sustainable earnings
CET1 Ratio (Fully Loaded)
A measure of our ability to withstand financial
stress and remain solvent
Target
<€2.0bn
with a CIR <50%
Target
15%
Target
>14%
Non-Financial Performance Measures
Greening Our Balance Sheet
Deploy €30bn Climate Action Fund
Helping Customers to Buy Their First Home
More than €6bn cumulative new lending to first
time buyers
Universal Inclusion
Ongoing gender balanced Board, ExCo
and Management
Target
€30bn
Target
>€6bn
Target
Gender
Balanced
2
By 2030
By 2026
Ongoing
1. Excludes bank levies, regulatory fees and exceptional items.
2. The Equileap annual Gender Equality Global Report & Ranking equates ‘gender balanced’ with between 40% and 60% women.
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Sustainability in AIB
Our Approach
to Sustainability
With a new segment dedicated to Climate Capital from 2024,
sustainability remains at the very core of AIB Group’s strategy.
Sustainable Communities continues to be
a foundational pillar of our Group strategy
and aligns strongly with our wider business
strategy. AIB continues to support the
transition to a low-carbon future, building
long-term resilience and sustainability for
our business, economy and society through
our purpose of empowering people to build
a sustainable future.
Sustainable finance is a recognised key
enabler of climate action and has a pivotal
role to play in building a more sustainable
economy and society. Financial institutions
can offer both the means and the motivation
for people to make greener choices at home,
in the workplace and in our communities.
With the International Monetary Fund (IMF)
estimating that Ireland alone will require an
investment of €20bn per annum to meet its
net zero transition requirements to 2030, we
continue to pledge to do more in this space.
We have endeavoured to be a leader in the
sustainability agenda in Ireland, including our
ambition for our own operations to be net zero
by 2030 and our lending portfolio to be net
zero by 2040, excluding Agriculture which is
aligned to the Government’s own target for
the sector in Ireland to be net zero by 2050.
As such, throughout our previous three-year
strategic cycle we set about transforming our
business operations to better align the Group
to best-in-class ESG practices, ensuring
sustainability practices are embedded across
our business and that we can continue to
support our customers throughout their own
sustainability journeys.
Our Refreshed Sustainability Strategy
We have reviewed and evolved AIB’s
ESG strategy in line with the Group’s strategic
ambition, best practice and aligned to
requirements of the new Corporate
Sustainability Reporting Directive (CSRD)
as well as material topics identified through
a stakeholder materiality assessment.
Our three-pillar ESG strategy has evolved:
Climate & Environmental Action, Societal &
Workforce Progress, and Governance &
Responsible Business. Funding renewable
energy and infrastructure projects forms
an important part of our proposed strategy
along with ongoing education and supporting
our wider customer base. Our evolved
sustainability strategy sharpens our focus
across the environmental, social and
governance pillars and aligns strongly with our
wider business strategy.
Our 2030 €30bn Climate Action Fund supports
our customers in the transition to a low-carbon
economy, and provides products and services
to help make a positive environmental impact
which ranked highly across all of our
stakeholders in our materiality exercise. A suite
of green products is already in place, including
our green mortgage offerings across AIB, EBS
and Haven, the AIB green personal loan, along
with green CRE lending and renewables
lending delivered by AIB, as well as EV car
leasing options through Nifti.
Our
Purpose
ESG
Strategic
Pillars
ESG
Principles
Empowering people to build a sustainable future
Climate &
Environmental Action
Societal &
Workforce Progress
Governance &
Responsible Business
• We will provide responsible green finance,
investments and advice to drive structural
change and support the transition to a low-
carbon future.
• We will strive to make a positive economic
• We will pride ourselves on acting
contribution and to be a positive influence on
society, improving the lives of people and their
communities and helping to build a brighter and
fairer future.
responsibly, with integrity and transparency,
while embedding ESG capabilities and
measures at the heart of our business.
Areas of
Focus
• Lend responsibly and steer our portfolios
towards net zero by 2040 (Agriculture
by 2050).
• Continue to proactively contribute to a robust
and sustainable future economy and society.
• Put our customers first, always treating them
• Reach net zero in our own operations by 2030.
Increase consideration and management of
•
climate and environment related risks.
• Contribute to protecting nature and
fairly and with respect.
• Empower own workforce and foster a safe,
inclusive and supportive work environment.
• Positively support sustainable communities
safeguarding natural ecosystems/habitats.
and local initiatives.
• Facilitate a culture that promotes our values
and fosters engagement.
• Board and management to work to the
highest standards to deliver long-term value.
• Operate responsibly at all levels, while
managing cyber security, data security and
operational resilience risks.
Some Key
Examples
of How
We Bring
Our ESG
Strategy
to Life
• We have increased our existing Climate Action
Fund from €10bn (by end-2023) to cumulative
€30bn by 2030.
• We will build a brighter and fairer future for
• We will act responsibly and build an inclusive
our customers by lending more than €6bn to
first time buyers by 2026.
workforce that reflects our culture and
promotes our values.
• We aim to have 70% of new lending to be
• We will continue to support sustainable
• We will further improve our efforts to
green or transition by 2030.
communities and local initiatives through
AIB’s community fund and charity donations.
manage cyber security, data security and
operational resilience risks, protecting
customers and bank.
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Capacity building and education are also of
central importance for both colleagues and
customers with a range of supports in place
and/or under development including dedicated
AIB Sustainability Champions throughout the
Group, an in-house ESG research function,
our regular customer publications, events and
webinars and an enhanced advisory service
offering via Goodbody and through the
acquisition of Clearstream. AIB facilitates ESG
knowledge transfer to our SME customers
through our support of programmes such
as Enterprise Ireland’s Plan it with Purpose
and the Dublin Chamber Sustainability
Academy, while also providing direct
guidance through the online AIB Green Living
Hub, our Sector Sustainability Guides and
informational webinars.
We have continued to grow our green lending,
to provide support for the transition, working
alongside key stakeholders.
Meeting Our Net Zero Ambitions
We have a strategy in place to ensure we meet
our emissions targets across Scope 1, 2 and
Scope 3 financed emissions via the annual
business planning process feeding into the
three-year strategy planning cycle. Annual
Financed Emissions Targets for 75% of our
lending portfolio (as at 31 December 2021)
outline what we need to achieve by 2030 in
terms of a reduction in emissions relating to
our lending portfolio, and have been adopted
by the Board and externally validated. These
targets are integrated into sustainability
planning outputs with progress against these
targets monitored on a regular basis. Levels of
green and transition lending are included within
business planning (% of total new lending) to
provide AIB with increased visibility on the
trajectory to achieve our 2030 target that 70%
of total new lending should be green or
transition.
We have made significant progress in reducing
our own carbon footprint, with a further 17%
reduction in 2022 as confirmed at the end
of 2023. From a Scope 1 and 2 perspective,
AIB modelled two new targets, committing to
reduce absolute Scope 1 GHG emissions by
34% by 2027 from a 2019 baseline year and
to increase annual sourcing of renewable
electricity to 100% by 2030. The first of two
solar farms constructed in Co. Wexford by
NTR as per our vCPPA in 2022 has been
energised, ready to significantly contribute
to the Group’s power requirements. That is
a significant step in reaching our ambition to
be net zero in our own operations by 2030.
Below: AIB was one of the official sponsors
of Kaleidoscope 2023 with our AIB Green Living
Challenge, which had over 2,000 participants.
Enhanced risk management of climate,
environmental and wider ESG risks is an
important component of the sustainability
strategy. As part of the Material Risk
Assessment (MRA) process, Climate
and Environmental Risk was approved as
a material risk for AIB Group plc and Allied
Irish Banks plc. For more information on
Climate and Environmental Risk, see
pages 193 to 196.
To oversee and embed sustainable practices
across our business, an integrated approach
is in place through our in-flight ESG
Transformation Programme delivering on our
regulatory, strategic and customer enablement
objectives. The programme includes delivery
of key strategic objectives and regulatory
expectations and is supported by teams across
the business with regular updates provided to
ExCo, the Sustainable Business Advisory
Committee (SBAC) and the Board.
Over the next number of decades climate
transition financing represents a significant
growth opportunity as the global economy
seeks to decarbonise and invest in green
infrastructure. As a result, we have reorganised
our business to establish a new, dedicated
Climate Capital segment, creating a step
change in AIB’s ability to finance energy
transition and ESG infrastructure and building
on our strong track record in Energy, Climate
Action and Infrastructure (ECAI) lending.
The threat of climate change to our entire
planet has become a reality, and so we
must think globally. Our new Climate
Capital segment will maintain a global
outlook, focusing on established renewables
technology in the European, UK and North
American markets.
Recognising the scale of our ambition, we are
increasing our existing Climate Action Fund
from €10bn (by end 2023) to a cumulative
€30bn by 2030. This fund is an important
statement of intent to the market and our
customers. These funds will be made available
for green and transition financing activities as
defined within AIB’s Sustainable Lending
Framework.
Over the short-term time horizon (0-3 years),
across the Climate Capital, Retail Banking,
Capital Markets and UK segments of our
business, we intend to broaden our green
product suite for personal, SME and corporate
customers to include new lending opportunities
and extend some of our current offerings in this
space. An enhanced suite of green products
will support our customers in their transition
and also help to deliver our sustainability
targets. Over the medium-term horizon (3-7
years), we will need to steadily increase new
green and transition lending to reach the 70%
target by 2030 by offering green finance
propositions and products, and through
improved data capture. Understanding our
green and transition lending will support long-
term management of climate related and credit
risk in our lending portfolio and reduce the risk
of adverse selection.
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Sustainability in AIB continued
As a Group, we have over 4,000 active
suppliers on our database, and we transacted
with 2,527 of these in 2023. Our Responsible
Supplier Code sets out our expectations of
suppliers, and includes the responsible
and ethical behaviours we look for in the
companies with whom we do business.
Based on our Code of Conduct, the
Responsible Supplier Code also references
our Anti-Bribery and Corruption policy,
Conflicts of Interest policy, Human Rights
Commitment and our Speak-Up policy. We
will only do business with suppliers that
adhere to this Code. We require evidence that
our suppliers have an ESG plan in place or
are working towards putting one in place, and
all successful suppliers are required to join
the Supplier Financial Qualification System
(FSQS). We also encourage our suppliers
to report their carbon emissions through the
CDP (Carbon Disclosures Project).
From a Scope 3 financed emissions
perspective, we have set Financed Emissions
Targets covering 75% of our Group loan
portfolio as at 31 December 2021, based on
decarbonisation scenarios with outcomes to
1.5°C. We were delighted in 2023 to receive
validation from the SBTi for our financed
emissions targets, and in so doing, AIB
became the first bank in the world to secure
a scientifically validated electricity generation
maintenance target. The attainment of these
targets remains a central tenet of our strategy,
and at the business level we will continue to
use identified drivers to support delivery
against them throughout our lending portfolio:
• For Residential Property and Commercial
Real Estate (CRE), these emissions
reduction targets have been translated into
what would need to be achieved in terms
of new lending to energy-efficient buildings.
For Residential Mortgages and Commercial
Real Estate, the reduction target set for
financed emissions is 58% and 67%,
respectively, in emissions intensity by 2030.
• Given the already low emissions from our
renewable-focused Electricity Generation
portfolio, the target is a maintenance
target range.
• For Corporate Lending, the required
emissions reduction targets relate to larger
entities with over 500 employees which have
themselves set and obtained externally
approved SBTi. For the Corporate Portfolio
Coverage, an increase in loan volume
covered by emissions targets from 12%
to 54% is targeted by 2030.
Above: Colin Hunt, AIB Group Chief Executive Officer, and Mary Whitelaw,
Chief Strategy & Sustainability Officer, at Kilmahon, The Nature Trust, Co Longford.
Within the business and financial planning
process, climate and environmental issues
have been considered as a key input to
the allocation of capital for each of the key
business segments. Financed Emissions
Targets covering Retail Banking, Capital
Markets, our new Climate Capital segment and
AIB UK were included in the process and were
a key parameter within planning, for example,
funding to propositions supporting green
financing in support of achievement of the
emissions targets.
Transitioning to a lower-carbon economy
will entail extensive policy, legal, technology,
regulatory and market changes to address
mitigation and adaptation requirements related
to climate change.
Business and Financial Planning
The financial impacts of climate and
environment are considered within two
key processes. Firstly, the financial impact
associated with our net zero targets is
a formal part of business and financial
planning. Business areas are required to
consider the impact on projected revenues,
costs and margins associated with meeting
these targets over the period of the plan and
outlook to 2030. Secondly, within the European
Central Bank (ECB) 2022 Climate Risk Stress
Test, analysis was completed based on the
scenarios of the Network for Greening the
Financial System (NGFS). These included
quantitative forecasts for short- and long-term
transitional risk, short-term drought/heat risk
and short-term flood risk.
Some examples of key opportunities aligned to
the strategic and investment planning process
include residential and commercial retrofits,
lending for sustainable farming measures,
sustainable lending for corporates that commit
to ESG targets, EV financing, ESG advisory,
research and customer supports.
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“We have re-organised our business to establish
a new, dedicated Climate Capital segment,
creating a step change in AIB’s ability to finance
energy transition and ESG infrastructure and
building on our strong track record in Energy,
Climate Action and Infrastructure (ECAI) lending.”
Climate Capital segment
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Risk Summary
Our Approach to Risk
Our prudent approach to risk management is fundamental
for the Group to achieve our strategic objectives.
Our Risk Management Framework sets out the governance, principles, arrangements, roles and
responsibilities in place for the Group to manage our risks. The Group’s risk management
principles are as set out below:
Strategy
1.
The Group Board has ultimate responsibility for the governance of all risk-taking
activity in the Group and risks assumed through our investments in joint ventures and
associated companies.
Identification and Assessment
2.
The Group identifies, assesses and reports all material risks through the Material Risk
Assessment review process.
3.
4.
5.
Risk management is embedded in the strategic planning, performance management
and strategic decision-making processes of the Group.
The Group develops and uses models across a range of risks and activities to inform
key strategic business and financial decisions.
The Group accepts that certain additional and measured risks may be taken across
the short-to-medium term to support environmental, social and governance (ESG)
initiatives for the benefit of all our stakeholders over the long term.
Monitoring, Escalating and Reporting
6.
The Group operates and manages risks in line with the Group’s Risk
Appetite Statement (RAS).
7.
8.
The Group understands, manages, measures, monitors and reports all risk it takes
or originates.
The Group aims to provide clarity in all communications, which will help to better
inform business decisions.
Risk Culture
9.
The Group supports the delivery of a strong risk culture, and risk management
capabilities are valued, encouraged and developed.
Control Environment
10.
The Group has a system of internal controls designed to mitigate rather than
eliminate risk.
11.
12.
A comprehensive, fit-for-purpose framework and policy architecture is in place to
support risk management and is reviewed regularly.
The Group has adopted a Three Lines of Defence (3LOD) model and risks are
managed in line with the model.
The Risk Management section, from pages 121 to 196, gives more detail on how risk is
managed within the Group, detailing the approach to risk governance including the Three Lines
of Defence, committee structures, risk appetite and stress testing
The Group operates an enterprise-wide
Risk Management Framework (RMF),
which is centred around the embedding
of a strong risk culture and ensures the
governance and capabilities are in place
to facilitate a consistent approach to risk
management across the Group, including
subsidiaries. The RMF aligns our risk
approach to the Group’s overall
strategic objectives.
The RMF is designed and maintained
by the Group’s Risk function, and is
subject to annual review and approval
by the Board.
The RMF governs the way in which the
Group identifies and manages our risks
and, given the growing risks linked to
climate change and to support the
Group’s strategy, it was agreed that
Climate and Environmental Risk would
be included as a Principal Risk in
2023. For more details, see pages 122 to
124.
The Group identified 10 Principal Risks
and emerging risks which are described
on pages 27 to 31.
On an annual basis, the Board sets out
the maximum amount of risk the Group is
willing to accept within our Risk Appetite
Statement (RAS). The approved risk
thresholds are monitored and reported
on an ongoing basis to the Board Risk
Committee to ensure the Group remains
within its risk appetite. RAS metrics are
also reported to the Board with both
committees part of the escalation process
for RAS breaches.
The Group tests the resilience of our
strategy across each of the Principal
Risks through scenario analysis and
stress testing. The scenarios used are
informed by the key emerging risks and
are used to assess the Internal Capital
Adequacy Assessment Process (ICAAP)
and the three-year financial plan.
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Principal Risks
Principal Risks are those risks that could have a material
adverse effect on our customers or the financial or
operational outcomes or reputational standing of the Group.
A. Business Model Risk
B. Credit Risk
What is the Risk?
The risk of not achieving the agreed Group
strategy or business plan, for example, as
a result of an inadequate implementation plan.
This also includes the risk of implementing an
unsuitable strategy or maintaining an obsolete
business model in light of known internal and
external factors.
Key Developments in 2023
In 2023, the Group recorded a very strong
financial performance, with return on tangible
equity exceeding >20% for the year. The
Group retained our commitment to the creation
of value for all our stakeholders and the
delivery of sustainable returns. The Group has
tripled our Climate Action Fund to €30bn while
maintaining our target of 70% green new
lending by 2030.
Key Risk Indicators
• Operating profit (before exceptional items)
• Risk Adjusted Return on Capital (RAROC)
• Return on Tangible Equity (RoTE)
Read more: page 189
What is the Risk?
The risk that the Group will incur losses as
a result of a customer or counterparty being
unable or unwilling to meet contractual
obligations and associated credit exposure in
respect of loans or other financial transactions.
Key Developments in 2023
The credit quality of the lending portfolio has
remained relatively stable during the year
and new lending is in line with targeted
quality levels. However, stress from ongoing
inflationary pressures and rising interest
rates has manifested in Stage 2 migration.
The Group’s Expected Credit Losses (ECLs)
reflect the vigilant stance to emerging risks
while maintaining a comprehensive approach
to assessing the credit environment, ensuring
the level of ECL stock remains appropriately
conservative. The migration of the Ulster Bank
portfolio acquisitions continued throughout
the year, with the final tranche of the corporate
and commercial loans completed in July.
The Group also migrated 80% of the tracker
mortgage portfolio in July, with the remaining
customers due to migrate in 2024.
Key Risk Indicators
• Asset class concentration risk metrics
• Country concentration risk metrics
• Non-Performing Exposures (NPE) as a %
of outstanding loans and ECL cover rates
to manage counterparty credit risk
Read more: page 125 to 176
The Group’s risks are reviewed as part of the
Material Risk Assessment (MRA), reflecting
the Group’s risk profile in light of internal and
external factors such as the Group’s strategy
and the regulatory environment in which
we operate.
During 2023, Climate and Environmental Risk
was included as a Principal Risk. This
recognises its importance to the Group’s
strategic pillar, Sustainable Communities,
in addition to its pervasiveness to other risks,
increasing societal expectations as well as
the need to adapt to the pace and volume
of regulatory developments in this area.
In December 2023, the Board Risk Committee
approved the Climate and Environmental Risk
Framework. In addition, a supporting Climate
and Environmental policy was approved by
Group Risk Committee. These outline the key
requirements for the identification, assessment
and management of Climate and Environmental
Risk and work continues to integrate and
embed this into our key risk activities.
Other changes to Principal Risks also
occurred during 2023. People Risk was
made a sub-risk of Operational Risk due to
its interconnectedness whereby decisions or
behaviours of individuals can directly influence
the Group’s other operational risks. While
Culture Risk remains a Principal Risk, it is
now combined with Conduct Risk.
The Group faces 10 Principal Risks across
our business, which are key areas of
management focus.
Link to strategy
Customer First
Simple & Efficient
Risk & Capital
Talent & Culture
Sustainable Communities
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Principal Risks continued
C. Operational Risk
D. Conduct Risk and Culture Risk
E. Regulatory Compliance Risk
What is the Risk?
The risk to the Group arising from inadequate
or failed internal processes, people and
systems, or from external events. This includes
legal risk, but excludes strategic
and reputational risk.
Key Developments in 2023
In 2023, there was continued emphasis on
cyber and information security risk, change
risk, third party management and technology-
related risk. Enhancements were made to the
ongoing oversight, review and challenge of the
change agenda, a refreshed operational risk
assessment and risk-integrated cyber strategy
in response to the evolving external threats.
Other developments included the prioritisation
of operational resilience and enhanced
oversight of third party service providers to
drive improved resilience. In addition, as
a result of the MRA, People Risk was made
a sub-risk of Operational Risk.
Key Risk Indicators
• Cumulative operational risk losses
• Cyber security and technology risk metrics
Read more: page 189 to 190
What is the Risk?
The risk that inappropriate actions or inactions
by the Group cause poor or unfair customer
outcomes or negatively impact market integrity.
Key Developments in 2023
Conduct and consumer interest continues
to be a primary focus for the Group, which has
been demonstrated throughout the significant
strategic evolution in 2023, including the
integration of Goodbody, the acquisition of
customers from Ulster Bank and KBC and the
establishment of AIB life providing protection,
insurance and investment offerings. In addition,
the Group continues to evolve our focus on
wholesale market conduct risk as a key pillar
of conduct risk management. Regulatory
communications in 2023 have continued
to emphasise the importance of a strong
conduct culture and we have reviewed and
benchmarked internal practices against these
standards, including the Consumer Protection
Outlook Report and the Securities Markets
Risk Outlook Report. The amalgamation
of Culture Risk within Conduct Risk has
commenced and further integration through
frameworks, policies, procedures and metrics
is planned for 2024.
Key Risk Indicators
• Number of complaints and time taken
to resolve
• Number of overdue product reviews
Read more: page 190 to 191
What is the Risk?
The risk of legal or regulatory sanctions,
material financial loss, or loss to reputation that
the Group may suffer as a result of a failure to
comply with principal laws, regulations, rules,
related self-regulatory codes and related
supervisory expectations that relate to the
Group’s regulated banking and financial
service activities, i.e. those activities in which
the Group is licensed to conduct business.
Key Developments in 2023
During 2023, Compliance continued
to strengthen the role and mandate of the
function through increased engagement with
business units, strengthened reporting in terms
of frequency, standard and audience, and
embedding compliance-by-design across the
Group. The introduction of a Regulatory Impact
Assessment has enabled more efficient,
targeted compliance engagement and has
helped to embed Regulatory Compliance Risk
as a focus at the outset of strategic proposals.
The regulatory change process has continued
to evolve and embed, with a wide range of
regulatory programmes supported across
2023, including the client assets requirements
and supporting the Basel IV, ESG
Transformation, the Individual Accountability
Framework and Consumer Rights
programmes. ESG remains a strategic priority
and, throughout 2023, there has been a strong
focus on increasing ESG regulatory
compliance and awareness, which will
continue in 2024.
Key Risk Indicators
• Number of data protection incidents
• % of suspicious transactions reported within
30 days
Read more: page 191 to 192
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29
F. Climate and Environmental Risk
G. Capital Adequacy Risk
H. Model Risk
NEW
What is the Risk?
Climate and Environmental (C&E) Risk
encompasses the financial and non-financial
impacts on the Group arising from climate
change, environmental change and the
transition to a sustainable economy. These
risks can affect the Group directly through
our operations or indirectly through our
relationships with customers and third
party suppliers.
Key Developments in 2023
In July 2023, the Board approved Climate
and Environmental (C&E) Risk as a new
Principal Risk for the Group. This reflects its
importance to the Group’s key strategic pillar,
Sustainable Communities. This is in addition
to its pervasiveness to other risks, increasing
societal expectations as well as the need to
adapt to the pace and volume of regulatory
developments in this area. The Climate and
Environmental Risk Framework and its
supporting policy were approved in December
2023, which outline the key requirements
for the identification, assessment and
management of the risk. The Group continued
to embed our risk management of C&E during
2023 through enhancements to the Group’s
ESG Sectoral Risk Heatmap, Physical Risk
Heatmap and Stress Testing Framework,
including the development of transition risk and
physical risk models, and the incorporation of
environmental sector-specific considerations
within the Group’s credit risk policies. Two
additional risk appetite statement metrics have
been developed and approved for 2024.
Key Risk Indicators
• Climate Stress as a % of Total Capital
Read more: page 193 to 196
What is the Risk?
The risk that the Group breaches, or may
breach, regulatory capital ratios and internal
targets measured on a forward-looking basis,
across a range of scenarios, including a severe
but plausible stress.
What is the Risk?
The loss the Group may incur, as
a consequence of decisions that could be
principally based on the output of models,
due to errors in the development,
implementation or use of such models.
Key Developments in 2023
The Group maintained a strong capital position
throughout 2023 with substantial buffers to
regulatory requirements for Fully Loaded
Common Equity Tier 1 (CET1) and Total
Capital ratios. Various stress testing activities
in 2023 demonstrated the robustness of the
Group’s capital position, including the annual
Internal Capital Adequacy Assessment
Process (ICAAP) and the biennial EBA Stress
Test. RAS metrics were reviewed during 2023
to ensure they continued to appropriately
reflect regulatory and internal requirements,
and a more robust quantitative approach to
determining the magnitude of management
buffers included in the RAS metrics was
adopted. During 2023, the Group redeveloped
our suite of Climate Stress Testing Models
(which assess physical and transition risks)
and formally approved the Group’s Climate
Stress Testing Framework, with climate stress
tests now incorporated into the annual
ICAAP assessment.
Key Developments in 2023
The establishment of the Internal Rating Based
(IRB) Enterprise Programme significantly
enhanced the project management and
comprehensive delivery of models, including
two IRB models approved in 2023. The Model
Risk landscape positively benefited from the
introduction of standards relating to IRB data
quality and model development, supplemented
by underlying procedures and standards
related to the validation of climate risk models.
As per the Group’s Model Risk strategy,
rationalisation of the model inventory is
underway, with 7% fewer live and approved
models in December 2023 than in
December 2022.
Key Risk Indicators
• Quarterly risk assessment of approved
models in use.
Read more: page 193
Key Risk Indicators
• Fully Loaded CET1 Ratio
• Fully Loaded Total Capital Ratio
• Fully Loaded Internal Capital Buffer
Read more: page 192
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30
Principal Risks continued
I. Liquidity and Funding Risk
J. Financial Risk
What is the Risk?
The risk that the Group will not be able to
fund its assets and meet its obligations as they
come due, without incurring unacceptable
costs or losses. Funding is the means by which
liquidity is generated, for example, secured or
unsecured, corporate or retail. In this respect,
Funding Risk is the risk that liquidity cannot be
obtained at an acceptable cost.
Key Developments in 2023
Customer deposits have continued to grow,
reflecting inflows associated with banks exiting
the Irish market coupled with higher income
and employment levels in the Irish economy.
In addition, there has been continued
precautionary saving due to the heightened
economic uncertainty and increasing
inflationary pressures. This has contributed
to higher volumes of excess liquidity held
with the Central Bank. The high interest rate
environment has seen the Group expand our
suite of fixed term deposit offerings.
Key Risk Indicators
• Liquidity Coverage Ratio (LCR)
• Survival Period
• Net Stable Funding Ratio (NSFR)
Read more: page 177 to 183
What is the Risk?
The uncertainty of Group returns attributable
to fluctuations in market factors. Where the
uncertainty is expressed as a potential loss
in earnings or value, it represents a risk to
the income and capital position of the Group.
Key Developments in 2023
Sustained inflation led to sharp interest
rate hikes and increased market volatility.
The Group responded by adapting our
strategic approach to managing and hedging
interest rate exposure, in particular as
regards to Net Interest Income (NII). In 2023
the Pension Capital at Risk model was
redeveloped and went live following a review
and validation process.
Key Risk Indicators
• Earnings Sensitivity
•
• Pension Capital at Risk
• Equity nominal investment
Interest Rate Capital at Risk
Read more: page 184 to 188
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31
Top and Emerging Risks
The Group identifies top and emerging risks that have the potential to increase in
significance and could have a material impact on the Group’s strategy, operations
and on our customers over the short, medium and long term. The table below
sets out the top and emerging risks identified as part of the Group’s Material
Risk Assessment processes, which continued to evolve during the year.
Top and Emerging Risks
How We Responded During 2023
Links to
Principal
Risks on
pages 27
to 30
Cyber Risk
The risk of diminished
operational capability
of the Group’s systems.
In addition, the potential
for legal liability, data risk,
fraud or loss of reputation
with our customers due to
an evolving cyber threat
landscape and heightened
threats associated with
cyber criminals,rogue
nation states.and
artificial intelligence.
Geopolitical Risk
The risk that geopolitical
tensions could escalate
and could negatively impact
the Group’s operations or
result in other financial
or macro impacts.
Macroeconomic Risk
(Monetary Tightening and
Cost of Living Squeeze)
The risk that the persistent
increases in interest rates
since 2022, combined with
the cost of living squeeze
from a prolonged period
of high inflation, will have
a negative impact on our
customers’ ability to meet
their loan obligations.
• Cyber Risk continued to be a top and emerging risk in 2023 due to its constantly evolving nature
A B C D H I
as well as the increased frequency, sophistication, impact and severity of cyber threats.
Consequently, cyber threat intelligence capability continued to mature in 2023, leveraging local
and global intelligence data to proactively protect customers’ information.
• The Group ran regular simulations against key cyber threat types to test our resilience to these
threats. These simulations also provided stakeholders (including the Board) with a better
understanding of the cyber ecosystem.
• The Group user awareness programme included mandatory cyber training, communications on
potential internal and external threats, frequent phishing testing and reporting facilities for
suspicious activities.
• The Board approved the Information Security (including Cyber) policy, received quarterly cyber
•
updates and undertook annual cyber training.
Industry leading approaches including the NIST (National Institute of Standards and Technology)
Cybersecurity Framework were used to inform Group controls.
• As international sanctions regimes were adjusted, most notably in relation to Russia, the Group
applied these sanctions requirements in various jurisdictions as applicable.
• Geopolitical risk is taken into account in the design and calibration of scenarios used in the
A B C E G
H I J
calculation of expected losses and stress testing.
• The moderate downside scenario incorporates an escalation of geopolitical risk (e.g. Ukraine,
US/China tensions, global fragmentation) and the resultant macro impacts.
• High downside scenario weightings reflect, amongst others, the risks to the global economic
outlook from heightened geopolitical risks.
• Geopolitical developments and associated market/economic impacts continued to be considered
in various Group governance committees.
• The Group identifies economic headwinds on at least a quarterly basis, through scenario
A B G H I J
development and ongoing stress testing activity to ensure the financial plan is robust and is
aligned with the Group’s risk appetite.
In 2023, the severe scenario was adjusted to take account of the risks associated with significant
increases in interest rates (funding stress).
•
• High downside scenario weightings reflect, amongst others, the considerable risks to the
economic outlook from monetary tightening.
• The lags associated with monetary tightening (and ongoing transmission) were investigated.
This informed the bank’s risk appetite setting and lending policies.
• Proactive monitoring of credit quality trends, with a particular focus on customers most directly
impacted by higher rates (e.g. customers impacted due to tracker and variable rates increases,
as well as those with expiring fixed rates). The Group has credit management policies in place to
identify and support customers in difficulty.
• The mortgage model was adjusted to include a number of factors that were more sensitive to
inflation. Post Model Adjustments to ECL outcomes reflected emerging macro headwinds not
fully reflected in modelled outcomes.
Climate and
Environmental Risk
The risk of any negative
financial or non-financial
(e.g. reputational) impact
on the Group stemming from
climate and environmental
change and the transition
to a sustainable economy.
• Climate and Environmental Risk was made a Principal Risk during 2023 (see Principal Risks
section on page 29). Given its new and uncertain nature, it will continue to evolve and impact
the Group and customers in the medium to long term.
• Given the evolving nature of risks, an agile risk management approach has been adopted.
Various policies continued to be updated to incorporate ESG factors (see Non-Financial
Information Statement on pages 59 to 63).
• The Group has committed to continued learning and development associated with these risks.
This includes ongoing investment in research partnerships, as well as targeted training and
education for our customers and colleagues across the Group.
In 2023, the Group provided €3.7bn in new green lending. The Group also raised €750m through
the issuance of a green bond bringing the total outstanding issuance in of green bonds to €4bn.
•
A C D H I F
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Value Creation
Value Created
for Our Stakeholders
in 2023
Helping to deliver a more sustainable future for all is
at the heart of AIB’s agenda. As a recognised leader of
sustainability in Ireland, and through our Pledge to Do More,
we are committed to building long-term resilience and
sustainability for our stakeholders.
Key to Stakeholder Groups
g Our customers
g Our employees
g Our suppliers
g Our investors
g Regulators
g Society and community
2.19m
3.62m
9,430
15.8%
Digitally active customers
Daily digital interactions
First time buyers supported
CET1 (Fully loaded)
€4.0bn
€12.3bn
New mortgage drawdown
New lending
10,551
7
Employees
€912m
Employee salaries
and benefits
59%
Freefloat6
€10.8m
Community
investment
503
Social homes funded
€622m
Tax paid and collected5
No. 1
1,2
• SME business
current account3
• Personal loans4
• Personal main account
• Personal credit cards
2,527
Suppliers
€696m
Cash Dividend
9,300
Homes under development
Information as at 15 January 2024
1.
2. Customer Data Points source: Ipsos Personal Finance Market Pulse 2023
3. SMEs Market Monitor 2023 (Ipsos B&A on behalf of AIB)
4. Personal lending (excl. car loans) among banks
5.
‘Tax paid’ (€349m) refers to taxes borne by the Group, including corporate tax, bank levy, employer social insurance and irrecoverable VAT. ‘Tax collected’ (€273m) comprises taxes
collected from employees, customers and shareholders.
6. Freefloat shares represent the number of AIB shares that aren’t restricted and can be publicly traded.
7. Staff numbers are on a full time equivalent (FTE) basis.
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Business review
Operating and Financial Review
Capital
34
49
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Business Review –
1. Operating and Financial Review
Basis of presentation
The operating and financial review is prepared using IFRS and non-IFRS measures to analyse the Group’s performance, providing comparability
year on year. These performance measures are consistent with those presented to the Board and Executive Committee. Non-IFRS measures
include management performance measures which are considered Alternative Performance Measures (APMs). APMs arise where the basis
of calculation is derived from non-IFRS measures. A description of the Group’s APMs and their calculation is set out on page 47. These measures
should be considered in conjunction with IFRS measures as set out in the consolidated financial statements from page 210. A reconciliation between
the IFRS and management performance summary income statements is set out on page 48.
Figures presented in the operating and financial review may be subject to rounding and thereby differ to the risk management section and the
consolidated financial statements.
Change in presentation of interest income and expense
As set out in note 1(c) Accounting policies in the consolidated financial statements, the Group has adopted an amended accounting policy whereby
the interest income and expense on certain derivatives held with hedging intent, but for which hedge accounting is not applied (economic hedges) is
now included within the applicable components of net interest income with all other fair value movements recognised in net trading income. Figures
for the prior year have been restated on a comparative basis resulting in an increase in other income in 2022 by € 64 million and a corresponding
decrease in net interest income of € 64 million which reduced the net interest margin for 2022 by 5 basis points.
Basis of calculation
Percentages are calculated on exact numbers and therefore may differ from the percentages based on rounded numbers. The impact of currency
movements is calculated by comparing the results for the current reporting period to results for the comparative reporting period retranslated at
exchange rates for the current reporting year.
Management performance - summary income statement
Net interest income
Other income(1)
Total operating income(1)
Personnel expenses(1)
General and administrative expenses(1)
Depreciation, impairment and amortisation(1)
Total operating expenses(1)
Bank levies and regulatory fees(1)
Operating profit before impairment losses and exceptional items(1)
Net credit impairment charge
Operating profit before exceptional items(1)
Income from equity accounted investments
Loss on disposal of business
Profit before exceptional items(1)
Restitution costs
Restructuring costs
Inorganic transaction costs
(Loss)/gain on disposal of loan portfolios
Other
Total exceptional items(1)
Profit before taxation
Income tax charge
Profit for the year
2023
€ m
3,841
900
4,741
(901)
(630)
(295)
(1,826)
(185)
2,730
(172)
2,558
12
(26)
2022
€ m
2,095
800
2,895
(779)
(575)
(305)
(1,659)
(155)
1,081
(7)
1,074
37
—
%
change
83
13
64
16
10
-3
10
20
-68
2,544
1,111
(62)
(11)
(59)
(18)
—
(150)
2,394
(336)
2,058
(94)
(93)
(53)
36
(27)
(231)
880
(115)
765
(1) Performance has been adjusted to exclude items viewed as exceptional by management and which management view as distorting comparability of performance year-on-year. The adjusted
performance measure is considered an APM.
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Net interest income
Net interest income
€3,841m
Net interest income
Interest income(1)
Interest expense(1)(2)
Net interest income
2023
€ m
2022
€ m
%
change
4,643
2,332
(802)
(237)
3,841
2,095
83
-1
Average interest earning assets
123,563
124,210
Net interest margin (NIM)(2)
3.11
1.69
1.42
%
%
Change
Net interest income
€3,841m
Net interest income increased by
€ 1,746 million or 83% compared to 2022.
The Group operated in a negative or low interest rate environment in the
first half of 2022. Since July 2022 the ECB has increased euro interest
rates on a graduated basis by 450 basis points. In addition, since the
start of 2022 the Bank of England has increased the base rate by 500
basis points and the Federal Reserve has increased the federal funds
rate by 525 basis points.
Interest income
Interest income of € 4,643 million in 2023 increased by € 2,311 million
compared to 2022 primarily due to:
•
Increased asset yields primarily driven by higher euro, sterling and US
dollar interest rates.
• Higher average customer loan volumes reflecting the acquisition of
loans from Ulster Bank and new lending exceeding redemptions.
Interest expense
Interest expense of € 802 million in 2023 increased by € 565 million
compared to 2022. The increase in funding costs was primarily due to:
• Higher other debt issued and subordinated liabilities funding costs
•
•
reflecting interest rate impacts and increased MREL costs.
Increased customer account interest expense whereas 2022 included
the impact of the negative pricing strategy which was discontinued in
August 2022.
Increased interest expense on deposits by banks whereas 2022
included the favourable impact of TLTRO III funding.
Net interest margin
3.11%
NIM increased by 142 basis points to
3.11% in 2023 compared to 1.69%(2) in
2022 driven by the higher interest rate environment.
Average interest earning assets of € 123.6 billion in 2023 were in line
with 2022.
Average balance sheet
Assets
Loans and advances to customers(3)
Investment securities
Loans and advances to banks(4)
Average interest earning assets
Non-interest earning assets
Total average assets
Liabilities & equity
Deposits by banks(4)
Customer accounts
Other debt issued
Subordinated liabilities
Lease liabilities
Average interest earning liabilities
Non-trading derivatives (economic hedges)(2)
Non-interest earning liabilities
Equity
Total average liabilities & equity
Net interest income
Average
balance
€ m
63,411
16,410
43,742
123,563
8,123
131,686
1,066
44,528
7,284
1,429
248
54,555
63,978
13,153
131,686
Year ended
31 December 2023
Average
rate
Interest(1)
€ m
2,391
712
1,540
4,643
4,643
42
175
436
97
9
759
43
%
3.77
4.34
3.52
3.76
3.96
0.39
5.98
6.86
3.47
1.39
802
3,841
3.11
Average
balance
€ m
58,681
16,456
49,073
124,210
7,754
131,964
11,108
48,419
6,206
1,454
315
67,502
51,443
13,019
131,964
Year ended
31 December 2022
Average
rate
Interest(1)
€ m
1,957
192
183
2,332
2,332
(11)
(11)
134
50
11
173
64
%
3.33
1.17
0.37
1.84
(0.10)
(0.02)
2.16
3.47
3.35
0.26
237
2,095
1.69
(1) Negative interest income on assets of € 2 million in 2023 (2022: € 96 million) is offset against interest income. Negative interest expense on liabilities in 2023 Nil (2022: € 83 million) is offset
against interest expense.
(2) As outlined on page 34 ‘Change in presentation of interest income and expense’ the comparative interest expense and net interest margin figures for 2022 have been restated.
(3) Income on Loans and advances to customers includes the negative impact of € 607 million from cash flow hedges in 2023 (2022: positive impact of € 70 million). See note 4 Interest and similar
income in the consolidated financial statements.
(4) Loans and advances to banks and Deposits by banks include Securities financing.
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Business Review –
1. Operating and Financial Review continued
Other income
Other income(1)
€900m
Other income(1)
Net fee and commission income
Net trading income
– Loan acquisition forward contracts
– Equity investments hedges
– Other(2)
Net gain on equity investments (FVTPL)
Net gain on loans and advances to customers (FVTPL)
Other operating income
Other income
Other income(1)
€900m
Other income increased by € 100 million
or 13% compared to 2022.
Net fee and commission income
2023
€ m
2022
%
€ m
change
Customer accounts
Card income
Customer related foreign exchange
Lending related fees
Stockbroking client fees and commissions
Payzone
Asset management and advisory fees
Other fees and commissions
240 226
148 112
88
54
46
19
4
34
83
50
47
17
12
41
Net fee and commission income
633 588
6
31
5
8
-1
9
-64
-16
8
%
change
8
2023
€ m
633
210
223
(15)
2
27
3
27
2022
€ m
588
100
62
(1)
39
88
13
11
900
800
13
A gain of € 223 million was recognised in 2023 in respect of loan
acquisition forward contracts comprising a gain of € 203 million on Ulster
Bank tracker (and linked) mortgages and € 20 million on Ulster Bank
corporate and commercial loans (2022: € 62 million) reflecting income
earned on the portfolios since the Group acquired an economic interest
and changes in valuation parameters since the original transaction
pricing(3).
Net trading income (excluding the loan acquisition forward contracts and
equity investment hedges) of € 2 million in 2023 compared to a gain of
€ 39 million in 2022 which included favourable movements on derivative
valuation adjustments (XVA) and other interest rate related gains.
Net gain on equity investments(4) was € 12 million in 2023 compared
to € 87 million in 2022, as the prior year benefited from a higher gain
on revaluation and disposal of equity investments including a gain of
€ 61 million following the partial conversion and disposal of Visa Inc
Series B Preferred Stock.
Net gain on loans and advances to customers (FVTPL) of € 3 million in
2023 (2022: € 13 million) represents income recognised on previously
restructured loans carried at fair value through profit or loss.
Net fee and commission income of € 633 million in 2023 increased by
€ 45 million or 8% compared to 2022 primarily reflecting higher card
interchange fees and higher transaction volumes which included the
full year impact of customers onboarded from banks exiting the
Irish market.
Other operating income of € 27 million in 2023 (2022: € 11 million)
included other Goodbody income of € 13 million (2022: € 4 million) and
a gain on disposal of individual loans for credit management purposes of
€ 10 million (2022: € 1 million). The prior year also included a gain
on disposal of investment securities of € 7 million.
Asset management and advisory fees in 2023 were negatively impacted
by external market conditions.
IFRS basis
On an IFRS basis other income, including a net loss of € 19 million on
exceptional items(1), was € 881 million in 2023 compared to € 818 million
in 2022.
(1) Other income before exceptional items. A loss of € 19 million on exceptional items in 2023 comprises a € 19 million net loss on disposal of loan portfolios (2022: net gain on disposal of loan
portfolios € 18 million).
(2) As outlined on page 34 ‘Change in presentation of interest income and expense’ the comparative net trading income figure for 2022 has been restated.
(3) For further information see note 44 Fair value of financial instruments in the consolidated financial statements.
(4) Net gain on equity investments comprises a net gain on equity investments (FVTPL) of € 27 million in 2023 (2022: € 88 million) and a loss on equity investment hedges of € 15 million in 2023
(2022: € 1 million).
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Operating expenses
Total operating expenses(1)
€1,826m
Operating expenses(1)
Personnel expenses
General and administrative
expenses
Depreciation, impairment and
amortisation
Total operating expenses
2023
2022
%
€ m
901
€ m change
779
630
575
295
305
1,826
1,659
16
10
-3
10
10
11
Staff numbers at period end(2)
Average staff numbers(2)
10,551
10,200
9,590
9,221
Total operating expenses(1)
€1,826m
Total operating expenses of
€ 1,826 million increased by
€ 167 million or 10% compared to 2022.
Personnel expenses
Personnel expenses increased by € 122 million compared to 2022
primarily due to higher average staff numbers, salary inflation and an
allowance for variable pay.
Staff numbers at 31 December 2023 were 10% higher than
31 December 2022 reflecting an increase in staff numbers to
support higher business volumes, insourcing and a transfer of staff from
Ulster Bank as part of the acquisition of the corporate and commercial
loan portfolio.
General and administrative expenses
General and administrative expenses increased by € 55 million
compared to 2022 driven by inflationary pressures, the cost of servicing
the enlarged Group and technology related transformation costs.
Depreciation, impairment and amortisation
Depreciation, impairment and amortisation decreased by € 10 million
compared to 2022 primarily due to a reduced impairment charge in
2023.
Cost income ratio(1)
39%
Costs of € 1,826 million and income of
€ 4,741 million resulted in a cost income
ratio of 39% in 2023 compared to 57% in 2022.
Bank levies and regulatory fees
€185m
Bank levies and regulatory fees
Irish bank levy
Deposit Guarantee Scheme
Single Resolution Fund
Other regulatory levies and charges
2023
€ m
2022
€ m
37
86
36
26
37
55
38
25
Total bank levies and regulatory fees
185
155
Total bank levies and regulatory fees of € 185 million increased by
€ 30 million compared to 2022 primarily due to a higher Deposit
Guarantee Scheme (DGS) fee.
The DGS fee for 2023 reflected an industry wide increase in the funding
rate to facilitate the build-up of the DGS Contributory Fund to the target
level.
IFRS basis
On an IFRS basis total costs, including bank levies and regulatory fees
of € 185 million and the cost of exceptional items(3) of € 131 million,
were € 2,142 million in 2023 compared to € 2,063 million in 2022. This
results in a cost income ratio (IFRS basis) of 45% in 2023, compared to
71% in 2022.
(1) Before bank levies and regulatory fees and exceptional items.
(2) Staff numbers are on a full time equivalent (FTE) basis.
(3) The cost of exceptional items of € 131 million in 2023 (2022: € 249 million) comprised: Personnel expenses € 10 million (2022: € 17 million), General and administrative expenses € 121 million
(2022: € 195 million) and Depreciation, impairment and amortisation Nil (2022: € 37 million).
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Business Review –
1. Operating and Financial Review continued
Net credit impairment charge
€172m
Total exceptional items
€150m
There was a net credit impairment charge of € 172 million in 2023
(2022: € 7 million) comprising a € 189 million charge on loans and
advances to customers (2022: € 5 million) partially offset by a
€ 17 million writeback for off-balance sheet exposures (2022: Nil). The
prior year also included a € 2 million charge on investment securities.
The charge on loans and advances to customers in 2023 reflected a:
• Property and construction portfolio net credit impairment charge of
€ 261 million (2022: € 38 million) including additional post model
adjustments to address potential adverse impacts from higher interest
rates and lower valuations.
• Residential mortgage portfolio net credit impairment charge of
€ 30 million (2022: € 20 million writeback).
• Other personal portfolio net credit impairment charge of € 36 million
(2022: € 17 million).
• Non-property business portfolio net credit impairment writeback of
€ 138 million (2022: € 30 million) reflecting strong credit performance
and repayments.
For further information see pages 125 to 176 in the Risk Management
section.
Loss on disposal of business
€26m
The loss on disposal of business of € 26 million in 2023 (2022: Nil)
primarily reflected the transfer to the income statement of a portion of
the foreign currency translation reserves following repatriation of part of
the capital of foreign subsidiaries which have ceased trading.
Income tax charge
€336m
The income tax charge was € 336 million in 2023, representing an
effective tax rate of 14% compared to a tax charge of € 115 million in
2022 (effective tax rate 13%). The effective tax rate is influenced by
geographic mix of profit streams which may be taxed at different rates.
For further information see note 14 Taxation and note 27 Deferred
taxation of the consolidated financial statements.
Total exceptional items
Restitution costs
Inorganic transaction costs
(Loss)/gain on disposal of loan portfolios
Restructuring costs:
- Termination benefits
- Property transformation
- Loss on UK portfolio sale
- Other restructuring
Other
2023
€ m
(62)
(59)
(18)
(11)
(10)
—
(1)
—
—
2022
€ m
(94)
(53)
36
(93)
(7)
(44)
(18)
(24)
(27)
Total exceptional items
(150)
(231)
These gains/costs were viewed as exceptional by management.
Restitution costs includes a charge of € 88 million related to a series of
investment property funds (known as Belfry) which were sold to
individual investors during the period 2002 to 2006, reflecting a provision
for customer redress of € 77 million and associated costs of € 11 million
(2022 provision of € 101 million). It also includes a writeback of
customer redress provisions recognised in prior periods.
Inorganic transaction costs include costs associated with the
acquisition of a portfolio of Ulster Bank corporate and commercial loans
and a portfolio of Ulster Bank tracker (and linked) mortgages.
(Loss)/gain on disposal of loan portfolios in 2023 reflects a loss of
€ 18 million primarily relating to the disposal of non-performing loan
portfolios in prior years.
Restructuring costs reflect the implementation of the Group’s strategy
(Strategy 2023) including termination benefits, impairment and other
costs associated with the reduction in the Group’s property footprint,
changes to the Retail network in ROI and the exit from the SME market
in Great Britain.
Other in 2022 reflects a charge of € 27 million relating to the conclusion
of the Central Bank of Ireland enforcement investigation in respect of
tracker mortgages at AIB and EBS.
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Assets
Net loans to customers
New lending
€65.5bn
€12.3bn
31 Dec
31 Dec
Assets
Gross loans to customers
ECL allowance
Net loans to customers
Investment securities
Loans and advances to banks
Securities financing
Other assets
Total assets
2023
€ bn
67.0
(1.5)
65.5
17.4
39.3
6.5
7.6
2022
%
€ bn
change
61.2
(1.6)
59.6
16.3
39.7
6.3
7.9
9
-6
10
7
-1
3
-4
5
136.3
129.8
Net loans to customers
€65.5bn
Net loans increased by € 5.9 billion or
10% compared to 31 December 2022
driven by the acquisition of loans from Ulster Bank and new lending
exceeding redemptions.
The Group completed the migration of a further € 0.9 billion of Ulster
Bank corporate and commercial loans in 2023 bringing the total fair
value of loans migrated to € 3.0 billion.
In July 2023, the Group completed the migration of Ulster Bank tracker
(and linked) mortgages with a fair value of € 3.8 billion with the migration
of the remaining eligible loans to be completed in 2024.
New lending
€12.3bn
to 2022.
New lending of € 12.3 billion in 2023
was € 0.3 billion or 2% lower compared
New lending comprises € 10.7 billion term lending in 2023 (€ 10.8 billion
in 2022) and € 1.6 billion transaction lending in 2023 (€ 1.8 billion in
2022).
Irish mortgage lending of € 4.0 billion, representing a market share of
33% (2022: 32%) was 12% lower compared to 2022 as the prior year
benefited from a high level of switching activity.
Personal lending was up 23% to € 1.2 billion.
Non-property lending of € 5.0 billion was up 18% driven by continued
growth in renewable energy & infrastructure and corporate lending in
Ireland as well as selective growth in syndicated lending partially offset
by lower UK lending.
Property related lending was 26% lower at € 2.0 billion reflecting
reduced activity levels in the commercial real estate sector.
Non-performing loans
€2.0bn
Non-performing loans ratio
3.0%
Non-performing loans decreased by € 0.2 billion or 9% to € 2.0 billion at
31 December 2023 primarily reflecting redemptions of € 0.7 billion and
the disposal of non-performing loan portfolios of € 0.3 billion partially
offset by the net flow to non-performing of € 0.9 billion.
Non-performing loans ratio
Non-performing loans as a percentage of gross loans to customers was
3.0% at 31 December 2023 compared to 3.5% at 31 December 2022.
ECL allowance
€1.5bn
The ECL allowance on loans (at amortised cost) of € 1.5 billion at
31 December 2023 decreased from € 1.6 billion at 31 December 2022.
Non-performing loans cover
32%
Non-performing loans cover
The ECL allowance cover rate on non-performing loans decreased to
32% at 31 December 2023 compared to 35% at 31 December 2022
driven by the disposal of non-performing personal loans with higher
cover rates.
Summary of movement in loans to customers
The table below sets out the movement in loans to customers from 1 January 2023 to 31 December 2023.
Loans to customers
Gross loans (opening balance 1 January 2023)
New lending
Redemptions of existing loans
Portfolio acquisitions
Portfolio disposals
Net movement to non-performing
Write-offs and restructures
Foreign exchange and other movements
Gross loans (closing balance 31 December 2023)
ECL allowance
Net loans (closing balance 31 December 2023)
Performing
loans
€ bn
Non-performing
loans
€ bn
Loans to
customers
€ bn
59.0
12.3
(10.3)
4.7
—
(0.9)
—
0.2
65.0
(0.9)
64.1
2.2
—
(0.7)
—
(0.3)
0.9
(0.1)
—
2.0
(0.6)
1.4
61.2
12.3
(11.0)
4.7
(0.3)
—
(0.1)
0.2
67.0
(1.5)
65.5
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Business Review –
1. Operating and Financial Review continued
Assets continued
The tables below summarise the credit profile of the loan portfolio by asset class and includes a range of credit metrics that the Group uses in
managing the portfolio. Further information on the Group’s risk profile and non-performing loans is available in the Risk management section on
pages 125 to 176.
At amortised cost
At FVTPL(1)
Loan portfolio profile
31 December 2023
Gross loans to customers
Of which: Stage 2
Non-performing loans
Total ECL allowance
Residential
Other
Property and
Non-
property
mortgages
personal
construction
business
€ bn
34.8
2.4
0.7
0.3
€ bn
2.9
0.2
0.1
0.1
€ bn
9.2
2.8
0.7
0.5
€ bn
20.1
2.3
0.5
0.6
Total
€ bn
67.0
7.7
2.0
1.5
Total ECL allowance cover (%)
ECL allowance cover Stage 2 (%)
ECL allowance cover non-performing (%)
0.9 %
3.2 %
29.7 %
3.3 %
13.0 %
54.7 %
5.9 %
9.6 %
2.9 %
11.5 %
2.3 %
8.3 %
29.3 %
34.6 %
31.9 %
31 December 2022
Gross loans to customers
Of which: Stage 2
Non-performing loans
Total ECL allowance
€ bn
30.3
1.1
0.6
0.3
€ bn
2.7
0.3
0.2
0.2
€ bn
8.6
1.4
0.4
0.3
€ bn
19.4
3.2
0.8
0.8
€ bn
61.0
6.0
2.0
1.6
Total ECL allowance cover (%)
ECL allowance cover Stage 2 (%)
ECL allowance cover non-performing (%)
0.9 %
3.3 %
31.2 %
6.5 %
13.7 %
64.4 %
3.7 %
8.4 %
4.3 %
2.7 %
14.1 %
10.7 %
29.3 %
34.7 %
35.1 %
Total
€ bn
0.0
€ bn
0.2
0.2
Total
€ bn
67.0
7.7
2.0
1.5
€ bn
61.2
6.0
2.2
1.6
Investment securities
Investment securities of € 17.4 billion, primarily held for liquidity
purposes, increased by € 1.1 billion from 31 December 2022.
Other assets
Other assets of € 7.6 billion comprised:
• Deferred tax assets of € 2.6 billion(2) decreased by € 0.4 billion from
Loans and advances to banks
Loans and advances to banks of € 39.3 billion, including € 33.3 billion
of cash and balances at central banks, were € 0.4 billion lower than
31 December 2022.
Securities financing
Securities financing of € 6.5 billion increased by € 0.2 billion from
31 December 2022.
31 December 2022.
• Derivative financial instruments of € 2.4 billion were broadly in line
with 31 December 2022.
• Remaining assets of € 2.6 billion increased by € 0.2 billion from
31 December 2022.
(1) Loans at FVTPL in 2022 relate predominantly to the property and construction asset class.
(2) For further information see note 27 Deferred taxation in the consolidated financial statements.
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Liabilities & equity
Customer accounts
Equity
€104.8bn €15.1bn
Liabilities & equity
Customer accounts
Deposits by banks
Debt securities in issue
Subordinated liabilities
Other liabilities
Total liabilities
Equity
Total liabilities & equity
Loan to deposit ratio
Customer accounts
€104.8bn
31 Dec
2023
€ bn
31 Dec
2022
€ bn
%
change
104.8
102.4
2
1.8
8.4
1.5
4.7
0.5
7.2
1.4
6.0
121.2
117.5
15.1
12.3
136.3
129.8
17
5
-21
3
22
5
Debt securities in issue
Debt securities of € 8.4 billion increased by € 1.2 billion from
31 December 2022 primarily due to further MREL related issuances of
€ 2.4 billion, including € 1.5 billion social and green bond issuances,
partly offset by maturities of € 1.4 billion.
Subordinated liabilities
Subordinated liabilities of € 1.5 billion were broadly in line with
31 December 2022.
Other liabilities
Other liabilities of € 4.7 billion comprised:
• Derivative financial instruments of € 1.9 billion, decrease of
€ 1.1 billion primarily reflecting interest rate movements in the period.
• Securities financing € 0.6 billion, € 0.3 billion decrease from
31 December 2022.
• Remaining liabilities of € 2.2 billion, € 0.1 billion increase from
31 December 2022.
%
63
%
Change
58
5
Equity
€15.1bn
Equity increased by € 2.8 billion to
€ 15.1 billion compared to
Customer accounts increased by
€ 2.4 billion or 2% compared to
€ 12.3 billion at 31 December 2022.
The table below sets out the movements to 31 December 2023.
31 December 2022 driven by an increase in personal balances and
includes inflows from banks exiting the Irish market.
Equity
Opening balance (1 January 2023)
Interest bearing customer accounts of € 46.1 billion at
31 December 2023 increased by € 3.0 billion or 7% compared to
31 December 2022 driven by an increase in term deposits. Non-interest
bearing current accounts of € 58.7 billion at 31 December 2023
decreased by € 0.6 billion or 1% compared to 31 December 2022.
Profit for the year
Distributions paid
Cash flow hedging reserves
Other
€ bn
12.3
2.1
(0.4)
1.2
(0.1)
15.1
Loan to deposit ratio
The loan to deposit ratio increased to 63% at 31 December 2023
compared to 58% at 31 December 2022 as growth in loans to
customers, which included the acquisition of loans from Ulster Bank,
outpaced growth in customer accounts.
Deposits by banks
Deposits by banks of € 1.8 billion increased by € 1.3 billion compared to
31 December 2022 driven by higher deposits by central banks and cash
collateral received from derivative counterparties.
Closing balance (31 December 2023)
The increase in the cash flow hedging reserves during the year reflected
fair value movements on interest rate swaps due to the reduction in
interest rate expectations and the amounts transferred to the income
statement as the hedged item affected the income statement.
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Business Review –
1. Operating and Financial Review continued
Segment overview
The Group’s performance in 2023 was managed and reported across the Retail Banking, AIB Capital Markets (Capital Markets), AIB UK and Group
segments. Segment performance excludes exceptional items.
Retail Banking
Our leading Irish retail franchise provides a comprehensive range of products and services to over 3.2 million customers delivered through our
branch, digital and phone banking channels; with an expanded reach into the retail customer base via EBS, Haven, AIB Merchant Services,
Payzone, Nifti and AIB life.
• Homes & Consumer are responsible for meeting the everyday banking needs of customers in Ireland by delivering innovative products,
propositions and services and for growing our market leading positions. Our aim is to achieve a seamless and transparent customer experience
across all our products and services including mortgages, current accounts, personal lending, payments and credit cards, deposits, insurance and
wealth.
• SME serves our micro and small SME customers through our sector-led strategy and local expertise with an extensive product and services
offering. Our aim is to help our customers create and build sustainable businesses in their communities.
• Financial Solutions Group (FSG) is our dedicated centre of excellence for the management of the vast majority of the Group’s non-performing
exposures (NPEs), with the objective of supporting our customers in difficulty and delivering the Group’s strategy to reduce NPEs.
Capital Markets
Capital Markets provides institutional, corporate and business banking services to the Group’s larger customers and customers requiring specific
sector or product expertise. Capital Markets’ relationship driven model serves customers through sector specialist teams including: corporate
banking, real estate finance, business banking and energy, climate action & infrastructure.
In addition to traditional credit products, Capital Markets offers customers foreign exchange and interest rate risk management products, cash
management products, trade finance, mezzanine finance, structured and specialist finance and equity investments, as well as private banking
services and advice. Capital Markets also has syndicated and international finance teams based in Dublin and in New York. Goodbody offers further
capabilities in wealth management, corporate finance, asset management and wider capital market propositions.
AIB UK
AIB UK offers corporate, retail and business banking services in two distinct markets:
• a sector-led corporate bank with a comprehensive range of lending and deposit products, offering specific sector expertise across both
Great Britain and Northern Ireland; and
• a full service retail bank in Northern Ireland (AIB NI) to personal and business customers with a focus on mortgage and business lending.
Group
Group comprises wholesale treasury activities and Group control and support functions. Treasury manages the Group’s liquidity and funding
positions and provides customer treasury services and economic research. The Group’s control and support functions in the period included
Technology, Operations, Finance, Risk, Legal, Corporate Governance & Customer Care, Human Resources, Sustainability and Corporate Affairs,
Enterprise Development and Group Internal Audit.
Segment allocations
Under the Group’s cost allocation methodology, substantially all of the costs of the Group’s control, support and Treasury functions are allocated to
Retail Banking, Capital Markets and AIB UK. In addition, certain Bank levies and regulatory fees, such as the Irish bank levy, are allocated to the
Retail Banking and Capital Markets segments.
Funding and liquidity income/charges are based on each segment’s funding requirements and the Group’s funding cost profile, which is informed by
wholesale and retail funding costs. Income attributable to capital is allocated to segments based on each segment’s capital requirement.
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31 Dec
31 Dec
2023
€ bn
2022
%
€ bn
change
3.9
1.2
0.1
0.9
6.1
4.5
1.0
0.1
0.9
6.5
33.4
28.7
2.8
0.5
3.1
39.8
(0.6)
39.2
46.7
33.8
80.5
2.6
0.5
3.0
34.8
(0.7)
34.1
45.4
30.4
75.8
-5
14
-14
15
3
11
6
Retail Banking
Retail Banking
2023
contribution statement
€ m
2022
€ m
%
change
Retail Banking
balance sheet metrics
Net interest income
Other income
Total operating income
Total operating expenses
Bank levies and regulatory fees
Operating contribution before
2,409 1,186
662 418
3,071 1,604
(1,253) (1,151)
(50)
(51)
58
91
9
2
Mortgages
Personal
Property
Non-property business
New lending
impairments and exceptional items
1,767 403
Net credit impairment (charge)/
writeback
Operating contribution before
(57)
144
Mortgages
Personal
Property
exceptional items
1,710 547
Non-property business
Income from equity accounted
investments
7
7
Contribution before exceptional items
1,717 554
Net interest income
€2,409m Net interest income has increased by € 1,223 million
compared to 2022 primarily driven by the favourable
impact of a higher interest rate environment and an
increase in average loan volumes.
Other income
€662m Other income increased by € 244 million compared to
2022 driven by a gain in respect of the loan acquisition
forward contract to acquire tracker (and linked)
mortgages from Ulster Bank. There was also an increase
in net fee and commission income reflecting higher card
interchange fees and higher transaction volumes which
included the full year impact of customers onboarded
from banks exiting the Irish market.
Total operating expenses
€1,253m Total operating expenses increased by € 102 million in
2023 primarily due to higher personnel as well as general
and administrative expenses.
Net credit impairment charge
€57m
There was a net credit impairment charge of € 57 million
in 2023 (2022: € 144 million writeback). This comprised
a € 60 million charge on loans and advances to
customers (driven by a charge of € 29 million on
mortgages and € 36 million on personal partially offset by
a writeback of € 5 million on non-property business) and
a € 3 million writeback for off-balance sheet exposures.
Gross loans
ECL allowance
Net loans
Current accounts
Deposits
Customer accounts
New lending
€6.1bn
New lending was 5% lower at € 6.1 billion driven by
lower mortgage lending as the prior year benefited from
a high level of switching activity partially offset by growth
in personal lending.
Net loans
€39.2bn Net loans increased by € 5.1 billion or 15% to
€ 39.2 billion primarily due to growth in performing
loans driven by the migration of Ulster Bank
mortgage and commercial loans and as new lending
exceeded redemptions.
ECL allowance
€0.6bn
The ECL allowance of € 0.6 billion in 2023 decreased
by € 0.1 billion compared to 31 December 2022.
Customer accounts
€80.5bn Customer accounts increased by € 4.7 billion
compared to 31 December 2022 driven by higher
personal balances.
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Business Review –
1. Operating and Financial Review continued
exceptional items
615 359
71
Gross loans
Capital Markets
Capital Markets
contribution statement
2023
€ m
2022
%
€ m change
Net interest income
Other income
Total operating income
Total operating expenses
Bank levies and regulatory fees
Operating contribution before
impairments and exceptional items
Net credit impairment charge
Operating contribution before
896 565
192 233
1,088 798
(373)
(325)
(12)
(12)
703 461
(102)
(88)
59
-18
36
15
—
52
-14
Income from equity accounted
investments
Gain on disposal of business
—
25
2 —
Contribution before exceptional items
617 384
61
Net interest income
€896m Net interest income increased by € 331 million compared
to 2022 primarily due to an increase in average loan and
investment securities volumes as well as the favourable
impact of a higher interest rate environment partly offset
by higher funding costs.
Other income
€192m Other income decreased by € 41 million compared to
2022 due to lower income from the loan acquisition
forward contract to acquire corporate and commercial
loans from Ulster Bank.
Total operating expenses
€373m Total operating expenses increased by € 48 million
compared to 2022 due to higher personnel as well as
general and administrative expenses.
Net credit impairment charge
€88m There was a net credit impairment charge of € 88 million
in 2023 (2022: € 102 million). This comprised a
€ 99 million charge on loans and advances to customers
(driven by a charge of € 219 million on property and
construction partially offset by a writeback of
€ 121 million on non-property business) and an
€ 11 million writeback for off-balance sheet exposures.
Income from equity accounted investments
€0m
Income from equity accounted investments in 2022
of € 25 million reflected the profit on disposal of an
investment in an associate entity.
Capital Markets
balance sheet metrics
31 Dec
2023
€ bn
31 Dec
2022
€ bn
%
change
Mortgages
Personal
Property
Non-property business
New lending
Mortgages
Personal
Property
Non-property business
ECL allowance
Net loans
0.0
0.0
1.3
3.5
4.8
0.5
0.1
6.5
13.0
20.1
0.1
0.0
2.0
2.6
4.7
0.5
0.1
6.4
12.2
19.2
(0.7)
(0.7)
19.4
18.5
3
5
5
Investment securities
2.4
2.2
11
Current accounts
Deposits
Customer accounts
11.1
12.4
4.1
3.8
15.2
16.2
-10
8
-6
New lending
€4.8bn New lending of € 4.8 billion was € 0.1 billion or 3% higher
than 2022 driven by continued growth in renewable
energy & infrastructure and corporate lending as well as
selective growth in syndicated lending partially offset by
lower property lending.
Net loans
€19.4bn Net loans increased by € 0.9 billion or 5% to
€ 19.4 billion primarily due to the migration of additional
Ulster Bank corporate and commercial loans and growth
in renewable energy & infrastructure partly offset by a
reduction in syndicated loans.
ECL allowance
€0.7bn The ECL allowance of € 0.7 billion as at December 2023
was broadly in line with 31 December 2022.
Investment securities
€2.4bn Investment securities of € 2.4 billion were € 0.2 billion
higher than 31 December 2022.
Customer accounts
€15.2bn Customer accounts decreased by € 1.0 billion compared
to 31 December 2022.
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AIB UK
AIB UK contribution statement
Net interest income
Other income
Total operating income
Total operating expenses
Bank levies and regulatory fees
Operating contribution before
impairments and exceptional items
Net credit impairment charge
Operating contribution before
exceptional items
Income from equity accounted investments
5
4
Contribution before exceptional items
230 112
Contribution before exceptional items € m
264 133
2023
£ m
2022
%
£ m change
AIB UK balance sheet metrics
370 250
39 48
409 298
(160) (147)
(1)
(1)
248 150
(23) (42)
225 108
48
-18
37
9
66
-45
20
98
AIB GB Corporate
AIB NI Retail
New lending
AIB GB
AIB NI
Gross loans
ECL allowance
Net loans
Current accounts
Deposits
Customer accounts
31 Dec
2023
£ bn
31 Dec
2022
£ bn
%
change
1.1
0.1
1.2
5.0
1.2
6.2
(0.2)
6.0
4.0
3.0
7.0
1.1
0.2
1.3
5.2
1.2
6.4
(0.2)
6.2
5.2
2.9
8.1
-3
-36
-8
-4
-4
-7
-3
-24
4
-14
Net interest income
£370m Net interest income increased by £ 120 million compared
to 2022 driven by the favourable impact of a higher
interest rate environment partly offset by higher
funding costs.
Other income
£39m Other income of £ 39 million in 2023 decreased by
£ 9 million as the prior year benefited from favourable
movements on derivative valuation adjustments.
Total operating expenses
£160m Total operating expenses increased by £ 13 million
compared to 2022 primarily due to higher personnel
expenses.
Net credit impairment charge
£23m There was a net credit impairment charge of £ 23 million
in 2023 (2022: £ 42 million). This comprised a
£ 26 million charge on loans and advances to customers
(driven by a charge of £ 36 million on property and
construction partially offset by a writeback of £ 10 million
on non-property business) and a £ 3 million writeback for
off-balance sheet exposures.
New lending
£1.2bn New lending of £ 1.2 billion in 2023 decreased by
£ 0.1 billion or 8% compared to 2022.
Net loans
£6.0bn Net loans of £ 6.0 billion decreased by £ 0.2 billion or 3%
compared to 2022.
ECL allowance
£0.2bn The ECL allowance of £ 0.2 billion at 31 December 2023
was in line with 31 December 2022.
Customer accounts
£7.0bn Customer accounts of £ 7 billion at 31 December 2023
were £ 1.1 billion lower compared to 31 December 2022
driven by an increase in customer spending due to the
higher cost of living and the residual impact of the
Group’s decision to exit the SME market in Great Britain.
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46
Business Review –
1. Operating and Financial Review continued
Group
Group contribution statement
Net interest income(1)
Other income(1)
2023
€ m
2022
%
€ m change
111
1
50
93
Group balance sheet metrics
Investment securities
Securities financing
Total operating income
112
143
-22
Customer accounts
31 Dec
2023
€ bn
31 Dec
2022
€ bn
14.9
14.1
6.5
1.2
6.3
1.2
%
change
6
3
Total operating expenses
Bank levies and regulatory fees
Operating contribution before
impairments and exceptional items
Net credit impairment charge
Operating contribution before
exceptional items
Income from equity accounted
investments
Loss on disposal of business
Contribution before exceptional items
(15)
(11)
(121)
(92)
36
32
(24)
(1)
40
0
(25)
40
(1) —
(28) —
(54)
40
Net interest income
€111m Net interest income of € 111 million increased by
€ 61 million compared to 2022 reflecting the impact of
a higher interest rate environment as well as higher
average securities financing volumes.
Other income
€1m
Other income decreased by € 92 million compared
to 2022 as the prior year benefited from higher income
from equity investments including a gain of € 61 million
following the partial conversion and disposal of Visa Inc
Series B Preferred Stock as well as favourable
movements on derivative valuation adjustments and
other interest rate related gains.
Total operating expenses
€15m Total operating expenses of € 15 million increased by
€ 4 million compared to December 2022.
Bank levies and regulatory fees
€121m Bank levies and regulatory fees increased by € 29 million
compared to 2022 primarily due to a higher Deposit
Guarantee Scheme (DGS) fee.
Loss on disposal of business
€28m The loss on disposal of business of € 28 million in 2023
(2022: Nil) reflected the transfer to the income statement
of a portion of the foreign currency translation reserves
following repatriation of part of the capital of foreign
subsidiaries which have ceased trading.
Investment securities
€14.9bn Investment securities of € 14.9 billion, primarily held for
liquidity purposes, increased by € 0.8 billion from
31 December 2022.
Securities financing
€6.5bn Securities financing of € 6.5 billion increased by
€ 0.2 billion from 31 December 2022.
Customer accounts
€1.2bn Customer accounts of € 1.2 billion are in line with
31 December 2022.
(1) As outlined on page 34 ‘Change in presentation of interest income and expense’ the comparative net interest income and other income figures for 2022 have been restated.
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Alternative performance measures
The following is a list, together with a description, of APMs used in analysing the Group’s performance, provided in accordance with the
European Securities and Markets Authority (ESMA) guidelines.
Average rate
Average balance
Absolute cost base
Cost income ratio
Interest income/expense for balance sheet categories divided by the corresponding average balance.
Average balances for interest-earning assets are based on daily balances for all categories. Average
balances for interest-earning liabilities are based on a combination of daily/monthly balances, with the
exception of customer accounts which are based on daily balances.
Total operating expenses excluding exceptional items, bank levies and regulatory fees.
Total operating expenses excluding exceptional items, bank levies and regulatory fees divided by total
operating income excluding exceptional items.
Cost income ratio (IFRS basis)
Total operating expenses divided by total operating income.
Exceptional items
Loan to deposit ratio
Net interest margin
Non-performing exposures
Performance measures have been adjusted to exclude items viewed as exceptional by management
and which management view as distorting comparability of performance year on year. The adjusted
performance measure is considered an APM. A reconciliation between the IFRS and management
performance summary income statements is set out on page 48. Exceptional items include:
• Restitution costs includes a charge related to a series of investment property funds (known as Belfry)
which were sold to individual investors during the period 2002 to 2006. It also includes customer redress
compensation and associated costs.
• Restructuring costs reflect the implementation of the Group’s strategy (Strategy 2023) including
•
termination benefits, impairment and other costs associated with the reduction in the Group’s property
footprint, changes to the Retail network in ROI and the exit from the SME market in Great Britain.
Inorganic transaction costs includes costs associated with the acquisition of a portfolio of Ulster Bank
corporate and commercial loans and the acquisition of a portfolio of Ulster Bank tracker (and linked)
mortgages.
•
(Loss)/gain on disposal of loan portfolios relates to the disposal of non-performing loan portfolios.
• Other in 2022 reflects a charge relating to the conclusion of the Central Bank of Ireland enforcement
investigation in respect of tracker mortgages at AIB and EBS.
Net loans and advances to customers divided by customer accounts.
Net interest income divided by average interest-earning assets.
Non-performing exposures as defined by the European Banking Authority, include loans and advances
to customers (non-performing loans) and off-balance sheet exposures such as loan commitments and
financial guarantee contracts.
Non-performing loans cover
ECL allowance on non-performing loans as a percentage of non-performing loans.
Non-performing loans ratio
Non-performing loans as a percentage of total gross loans.
Return on Tangible Equity
(RoTE)
Management performance –
summary income statement
Profit after tax less AT1 coupons paid, divided by targeted CET1 capital on a fully loaded basis.
Details of the Group’s RoTE is set out in the Capital Section on page 52.
The following line items in the management performance summary income statement are
considered APMs:
• Other income
• Total operating income
• Personnel expenses
• General and administrative expenses
• Depreciation, impairment and amortisation
• Total operating expenses
• Bank levies and regulatory fees
• Operating profit before impairment losses and
exceptional items
• Operating profit before exceptional items
• Profit before exceptional items
• Total exceptional items
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Business Review –
1. Operating and Financial Review continued
Reconciliation between IFRS and management performance summary income statements
Performance has been adjusted to exclude items viewed as exceptional by management and which management view as distorting comparability of
performance period on period. The adjusted performance measure is considered an APM. A reconciliation of management performance measures to
the directly related IFRS measures, providing their impact in respect of specific line items and the overall summary income statement, is set out
below.
IFRS - summary income statement
Net interest income
Other income
Total operating income
Total operating expenses
Operating profit before impairment losses
Net credit impairment charge
Operating profit
Income from equity accounted investments
Loss on disposal of business
Profit before taxation
Income tax charge
Profit for the year
Adjustments - between IFRS and management performance
Other income
of which: exceptional items
Loss/(gain) on disposal of loan portfolios
Total operating expenses
of which: bank levies and regulatory fees
of which: exceptional items
Restitution costs
Restructuring costs
Inorganic transaction costs
Other
Management performance - summary income statement
Net interest income
Other income(1)
Total operating income(1)
Total operating expenses(1)
Bank levies and regulatory fees(1)
Operating profit before impairment losses and exceptional items(1)
Net credit impairment charge
Operating profit before exceptional items(1)
Income from equity accounted investments
Loss on disposal of business
Profit before exceptional items(1)
Total exceptional items(1)
Profit before taxation
Income tax charge
Profit for the year
2023
€ m
3,841
881
4,722
(2,142)
2,580
(172)
2,408
12
(26)
2,394
(336)
2,058
2022
€ m
2,095
818
2,913
(2,063)
850
(7)
843
37
—
880
(115)
765
19
185
(18)
155
62
10
59
—
94
75
53
27
131
249
3,841
900
4,741
(1,826)
(185)
2,730
(172)
2,558
12
(26)
2,544
(150)
2,394
(336)
2,058
2,095
800
2,895
(1,659)
(155)
1,081
(7)
1,074
37
—
1,111
(231)
880
(115)
765
(1) Performance has been adjusted to exclude items viewed as exceptional by management and which management view as distorting comparability of performance year-on-year. The adjusted
performance measure is considered an APM.
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Business Review –
2. Capital
Objectives
The objectives of the Group’s capital management policy are to at all times comply with regulatory capital requirements and to ensure that the Group
has sufficient capital to cover the current and future risk inherent in its business and to support its future development. Detail on the management of
capital and capital adequacy risk can be found in ‘Risk management 2.8’ on page 192.
Regulatory capital and capital ratios(1)
Equity
Less: Additional tier 1 Securities
Proposed ordinary dividend
Proposed share buyback(2)
Regulatory adjustments:
Intangible assets and goodwill
Cash flow hedging reserves
IFRS 9 CET1 transitional add-back
Pension
Deferred tax
Calendar provisioning(3)
Other(4)
Total common equity tier 1 capital
Additional tier 1 capital
Additional tier 1 issuance
Other
Total additional tier 1 capital
Total tier 1 capital
Tier 2 capital
Subordinated debt
Instruments issued by subsidiaries that are given
recognition in tier 2 capital
IRB Excess of provisions over expected losses eligible
IFRS 9 tier 2 transitional adjustment
Other
Total tier 2 capital
Total capital
Risk-weighted assets
Credit risk
Market risk
Operational risk
Credit valuation adjustment and settlement risk
Total risk-weighted assets
Common equity tier 1 ratio
Tier 1 ratio
Total capital ratio
Transitional basis
Fully loaded basis
31 December
2023
€ m
31 December
2022
€ m
31 December
2023
€ m
31 December
2022
€ m
15,077
(1,115)
(696)
(1,000)
12,266
(1,115)
(166)
—
15,077
(1,115)
(696)
(1,000)
12,266
(1,115)
(166)
—
(535)
287
223
(26)
(2,218)
(77)
(52)
(2,398)
9,868
(537)
1,470
411
(12)
(2,192)
(115)
(65)
(1,040)
9,945
(535)
287
—
(26)
(2,458)
(77)
(52)
(2,861)
9,405
1,115
(3)
1,112
10,980
1,115
(3)
1,112
11,057
1,115
(3)
1,112
10,517
(537)
1,470
—
(12)
(2,724)
(115)
(65)
(1,983)
9,002
1,115
(3)
1,112
10,114
1,500
1,500
1,500
1,500
29
111
(65)
(3)
1,572
12,552
53,409
342
5,822
70
59,643
%
16.5
18.4
21.0
27
135
(135)
(3)
1,524
12,581
50,886
291
4,302
79
55,558
%
17.9
19.9
22.6
30
111
—
(3)
29
135
—
(3)
1,638
12,155
1,661
11,775
53,229
342
5,822
70
59,463
%
15.8
17.7
20.4
50,661
291
4,302
79
55,333
%
16.3
18.3
21.3
(1) Prepared under the regulatory scope of consolidation.
(2) A proposed share buyback of € 1,000 million has been included as a foreseeable distribution, in line with the new EBA Q&A 2023_6887 released in quarter 4 2023. The prior year comparative
December 2022 proposed share buyback of € 215 million is not included as a foreseeable distribution, if it was the pro-forma December 2022 fully loaded CET1 would be 15.9%.
(3) Calendar provisioning is a Supervisory Review and Evaluation Process (“SREP”) recommendation to ensure minimum coverage levels on long term NPE exposures. The difference between the
SREP recommended coverage levels and the IFRS 9 ECL coverage is taken as a CET1 deduction.
(4) Other includes prudent valuation adjustment for the Ulster Bank forward contract.
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Business Review –
2. Capital continued
Key Points
• The Group is reporting a fully loaded CET1 ratio of 15.8% at
31 December 2023 against a regulatory requirement of 11.13%
• Proposed share buyback of € 1.0 billion and an ordinary dividend of €
0.7 billion from profits of € 2.1 billion
• The Pillar 2 requirement (P2R) has decreased from 2.75% to 2.60%
Capital ratios at 31 December 2023
Fully Loaded Ratio
The fully loaded CET1 ratio decreased to 15.8% at 31 December 2023
from 16.3% at 31 December 2022.
for 2024
• Revised CET1 target of greater than 14.0% in 2024 (previously
greater than 13.5%).
Profit for the year attributable to equity holders of the parent (+3.7%)
less proposed ordinary dividend (-1.3%) and share buyback (-1.8%)
is offset by increased Risk Weighted Assets (“RWAs”) (-1.2%).
Capital requirements
The table below sets out the capital requirements at 31 December 2023
and the pro forma requirements for 31 December 2024.
Actual
Pro Forma
31 Dec 2023
31 Dec 2024
The increase in RWA is mainly as a result of the acquisition of the Ulster
Bank tracker (and linked) mortgage portfolio (-0.5%)1, increased
operational risk RWA due to higher average income (-0.5%) and
increases in respect of IRB models (-0.4%). Elsewhere increases in new
lending are largely offset by further application of CRR RWA related
efficiencies.
4.50 %
4.50 %
The fully loaded total capital ratio decreased to 20.4% from 21.3% at
31 December 2022. The decrease in the ratio was primarily driven by
the CET1 ratio movements outlined above.
Regulatory Capital
Requirements
CET1 Requirements
Pillar 1
Pillar 2 requirement (P2R)
1.55 %
1.46 %
Capital Conservation Buffer (CCB)
2.50 %
2.50 %
Other Systemically Important
Institutions Buffer (O-SII)
Countercyclical buffer (CCYB)
Impact
CET1 Requirement
AT1
Tier 2
1.50 %
1.50 %
1.08 %
1.44 %
11.13 %
11.40 %
2.02 %
2.69 %
1.99 %
2.65 %
Total Capital Requirement
15.84 %
16.04 %
In addition, under Article 104a any shortfall in AT1 and Tier 2 must be
held in CET1. The AT1 shortfall at 31 December 2023 is 15bps and
accordingly increases the CET1 requirement to 11.28%.The table does
not include Pillar 2 Guidance (“P2G”) which is not publicly disclosed.
The UK Countercyclical capital buffer (“CCyB”) increased to 2%
in July 2023. The CCyB for Irish exposures also increased to 1.0%
in November 2023, with a further increase to 1.5% to take effect
in June 2024.
Transitional Ratio
The transitional CET1 ratio decreased to 16.5% at 31 December 2023
from 17.9% at 31 December 2022. This decrease is driven by the
fully loaded CET1 ratio movements detailed above and an additional
year’s phasing of the deferred tax asset deduction and the IFRS 9
transitional addback.
At 31 December 2023 the transitional total capital ratio decreased to
21.0% from 22.6% at 31 December 2022.
Model Redevelopment
During 2023 the Group has received a decision in relation to its
redeveloped mortgage model, the impact of the decision has resulted in
a c.€1 billion increase in RWA (-0.3% CET1).
The Group has submitted a redeveloped corporate model for regulatory
approval. In the interim an internal scalar has been applied to the
existing corporate model to bring RWA in line with the redeveloped
model resulting in increased RWA of c.€ 0.3 billion (-0.1% CET1).
A decision in relation to the redeveloped SME model has been received
with the redeveloped model resulting in a largely neutral capital impact.
(1) RWA includes an adjustment for the remaining eligible loans to be migrated in 2024
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Distributions
Proposed Dividend
The Board proposes to pay an ordinary dividend of 26.6 cent per share
from 2023 profits (totalling € 696 million based on the total number of
ordinary shares currently outstanding). This is subject to shareholder
approval at the Annual General Meeting in May 2024.
Proposed buyback of ordinary shares
The Group has received regulatory approval from the European Central
Bank to undertake a buyback of its ordinary shares in an aggregate
consideration amount of € 1 billion. Discussions with the Department of
Finance in relation to a potential directed buyback of ordinary shares
from the Minister for Finance are currently underway. Any buyback of
ordinary shares would be subject to the approvals of the Board and the
Minister for Finance. Furthermore, a buyback of € 1 billion from the
Minister for Finance would require the approval of independent
shareholders, which, subject to agreeing the terms of the buyback with
the Department of Finance, the Group will seek in due course.
Leverage ratio
The fully loaded leverage ratio is 7.5% at 31 December 2023 (7.6% at
31 December 2022).
Leverage Ratio Metrics
Total Exposure (Transitional)
Total Exposure (Fully Loaded)
Tier 1 Capital (Transitional Basis)
Tier 1 Capital (Fully Loaded)
Leverage Ratio (Transitional basis)
Leverage Ratio (Fully Loaded)
2023
€m
2022
€m
140,774
133,971
140,289
132,968
10,980
11,057
10,517
10,114
7.8 %
7.5 %
8.3 %
7.6 %
Finalisation of Basel III
The Group is progressing on the implementation of Basel III standards,
and whilst a material change in RWA is not anticipated, this remains
subject to final requirements. In relation to RWA floors, the Group’s high
RWA density makes it less likely to be severely impacted by their
introduction.
Minimum Requirement for Own Funds and Eligible Liabilities
(“MREL”)
At 31 December 2023 the Group has a MREL ratio of 34.0% of RWAs
(33.7% at 31 December 2022).
The Group’s MREL ratio is in excess of the target for 2023 indicating
that the Group has sufficient loss absorption and re-capitalisation
capability. In the 12 months to 31 December 2023, the Group issued
€ 2.4 billion MREL bonds (€ 1.2 billion net of maturities).
The Group’s January 2024 requirement is 29.7% of RWAs including
the combined buffer requirement.
The Group continues to monitor developments in the Single Resolution
Board’s (“SRB”) MREL policy which has the potential to impact on the
Group’s MREL requirements.
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Business Review –
2. Capital continued
Ratings
AIB Group plc and Allied Irish Banks, p.l.c. are rated at investment grade
with Moody’s and Standard & Poor’s (S&P).
AIB Group plc
On 14 Jun 2023, S&P upgraded the credit rating by one notch to BBB
and changed the outlook to Stable from Positive. This upgrade reflects
multiple factors including: AIB’s asset quality to remain robust, and
a more efficient, profitable, and diversified business model.
On 5 Dec 2023, Moody’s revised the outlook to Positive from Stable and
reaffirmed the ratings. This reflects Moody’s view of improved asset
quality, strong capitalisation and significantly improved profitability.
Long term Ratings
Long term
Outlook
Investment grade
Long term Ratings
Long term
Outlook
Investment grade
Allied Irish Banks, p.l.c.
Long-term Ratings
Long term
Outlook
Investment grade
Long term Ratings
Long term
Outlook
Investment grade
31 December 2023
Moody’s
A3
Positive
√
S&P
BBB
Stable
√
31 December 2022
Moody’s
A3
S&P
BBB-
Stable
Positive
√
√
31 December 2023
Moody’s
A1
S&P
A
Positive
Stable
√
√
31 December 2022
Moody’s
A1
S&P
A-
Stable
Positive
√
√
Return on Shareholder Equity (“RoE”)/ Return on Tangible Equity
(“RoTE”)*
The RoTE for 2023 is 25.7% (2022: 9.6%).
Return on Tangible Equity (RoTE)/
Return on Shareholder Equity (RoE)
Profit after tax
AT1 coupons paid
Attributable earnings
2023
€m
2,058
(65)
1,993
2022
€m
765
(65)
700
Average Shareholder Equity
12,555
11,848
Return on Shareholder Equity
15.9%
5.9%
Average RWA
RWA * 13.5% CET1 target
57,398
53,846
7,749
7,269
Return on Tangible Equity
25.7%
9.6%
As part of Strategy 2024-2026, the Group has now set a revised
financial target for RoTE of 15% in the medium term (applicable from
2024).
In addition, the Group has revised its CET1 target to greater than 14.0%
(previously greater than 13.5%). This leaves a buffer over MDA of at
least 2.5%.
The Return on Shareholder Equity (RoE) at 31 December 2023 is 15.9%
(2022: 5.9%).
Return on Assets
The Return on Assets (RoA) at 31 December 2023 is 1.5%
(2022: 0.5%).
* RoTE is considered an Alternative Performance Measure.
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ESG Disclosures
Task Force on Climate-Related Financial Disclosures
Non-Financial Information Statement
EU Taxonomy
54
59
64
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ESG Disclosures – TCFD
Our TCFD Disclosures
In 2019, AIB was the first Irish Bank to become an official supporter of the Task Force on
Climate-Related Financial Disclosures (TCFD) to identify and assess our climate risks and
opportunities. During 2023 AIB continued to make good progress in aligning with TCFD
recommendations across the four key areas of Governance; Strategy; Risk Management; and
Metrics and Targets.
An overview of our progress against the TCFD recommendations is referenced in the
applicable sections of this report with further detail, where relevant, provided in the Detailed
Sustainability Report 2023.
Recommendation
TCFD
Pillar
e (a) Board’s oversight of climate-
related risks and opportunities.
c
n
a
n
r
e
v
o
G
(b) Management’s role in
assessing and managing
climate-related risks and
opportunities.
Recommendation
TCFD
Pillar
y (a) Climate-related risks and
opportunities (short, medium,
g
and long term).
e
t
a
r
t
S
AIB’s governance approach
Disclosure Location
Our governance structure provides clear oversight and ownership of the
Group’s sustainability strategy and management of climate risk at Board
and executive levels. The Board is ultimately responsible for promoting
the long-term sustainable performance of the Group, setting strategic
aims and risk appetite to support the strategy. The Board delegates
specific climate matters to its Committees.
Please see
Governance and
Oversight at p.66-79
and Detailed
Sustainability Report
at p. 57
The key management committees responsible for climate-related
activities are as follows:
• Executive Committee;
• Group Sustainability Committee;
• Group Disclosure Committee; and
• Group Risk Committee.
AIB’s strategy approach
• AIB considers transition risks and opportunities, as well as physical
risks over the short, medium and long term.
(b) Impact of climate-related
risks and opportunities on
businesses, strategy, and
financial planning.
• Sustainable Communities continues to be a foundational pillar of our
Group strategy and aligns strongly with our wider business strategy.
AIB continues to support the transition to a low-carbon future building
long term resilience and sustainability for our business, economy and
society through our purpose of empowering people to build a
sustainable future.
(c) Resilience of strategy, taking
into consideration different
climate related scenarios,
including a 2°C or lower
scenario.
• The impact of Climate and Environmental risk is incorporated in the
Group’s stress testing framework by conducting comprehensive
scenario analyses to evaluate the potential impact of various climate-
related events on the Group’s portfolios, operations and overall
financial position.
Please see
Governance and
Oversight at p.
110-112, Risk
Management at p. 195
and Detailed
Sustainability Report
at p.58
Disclosure Location
Please see
Sustainability in AIB at
p 22-24 and Risk
Management: Climate
and Environmental
Risk at p. 193-195
Please see
Sustainability in AIB at
p 22-24 and Detailed
Sustainability Report,
at p.31
Please see Risk
Management: Climate
and Environmental
Risk at p 194
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TCFD
Pillar
Recommendation
AIB’s risk management approach
Disclosure Location
assessing climate-related risks.
t (a) Processes for identifying and
n
e
m
e
g
a
n
a
M
k
s
R
(b) Processes for managing
climate-related risks.
i
(c) Integration of processes for
identifying, assessing and
managing climate-related risks
into overall risk management.
Recommendation
climate-related risks and
opportunities in line with
strategy and risk management.
TCFD
Pillar
s (a) Metrics used to assess
t
e
g
r
a
T
d
n
a
s
c
i
r
t
e
M
(b) Disclose Scope 1, Scope 2
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions and the related risks
• The Group’s material risk assessment identified Climate and
Environmental as a new principal risk for the Group and this was
approved by the Board in the second half of the year.
• The material risk assessment is an annual top-down process,
identifying the Group’s material risks in line with the Group’s Risk
Management Framework, taking into account the Group’s strategic
objectives, in addition to internal and external risk sources including
climate related and environmental factors
• Climate & Environmental risk is also assessed within other risk
management tools including the Physical Risk and ESG Sectoral
Risk heatmaps.
• The ESG Questionnaire has been incorporated into the credit
application process for customers in high risk transition sectors on
new lending over €/£300k. These have been identified as carrying
increased transitional environmental, social and governance related
risk.
• The impact of Climate risk is incorporated in the Group’s stress testing
framework by conducting a comprehensive scenario analysis to
evaluate the potential impact of various climate-related events on the
Group’s portfolios, operations and overall financial position.
• The ESG Framework ensures that the Group’s approach to the
management of ESG is clearly defined and well understood, from the
Board and down through all operations. The ESG Framework will be
retired over the course of 2024 and Climate risk will be primarily
managed through the Board-approved Climate & Environmental Risk
Framework. This Framework (and associated policy) is a key means
by which climate related risks are shown to be fully integrated into the
overall Risk Framework of the Group.
Please see Risk
Management: Climate
and Environmental
Risk at p.193-195
Please see Risk
Management: Climate
and Environmental
Risk at 193-194, and
Detailed Sustainability
Report, at p.31
Please see Risk
Management: Climate
and Environmental
Risk at p.193-195
Please see Risk
Management: Climate
and Environmental
Risk at p.195
AIB’s metrics and targets approach
Disclosure Location
•
In 2022, Financed Emission Targets were set for c. 75% of our group
lending portfolio.
Please see Metrics
and Targets at p.56
and Detailed
Sustainability Report
at p.22-23
• We continue to focus on flood risk as the most significant physical risk. Please see Metrics
and Targets at p.57
• We report key metrics to track and monitor sustainable finance lending
and activity.
• Scope 1, 2 and 3 greenhouse gas (GHG) emissions are disclosed in
Metrics and Targets.
•
In 2023 the Group undertook a review of concentration of credit by
industry sector and geography for loans and advances to customers.
(c) Targets used to manage
climate-related risks and
opportunities and performance
against targets
• AIB committed to Net Zero in our own operations by 2030.
•
In FY2023 reporting we report on our progress against our emissions
targets and further outline our plans to achieve them.
Please see Detailed
Sustainability Report,
at p.25-26
Please see Metrics
and Targets at p.58
and Detailed
Sustainability Report,
at p.100-102
Please see Risk
Management: Credit
Risk at p.160 and
Detailed Sustainability
Report, at p.106
Please see Metrics
and Targets at p.58
and Detailed
Sustainability Report,
at p.19-21
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ESG Disclosures – TCFD continued
Metrics and targets
TCFD recommendation:
Actual and potential impacts of climate-related risks and opportunities on business, strategy and financial planning where such
information is material.
(a) Metrics used to assess climate-related risks and opportunities in line with strategy and risk management process
Our publicly communicated ambitions to achieve net zero and increase the proportion of sustainable lending in our customer lending portfolio are
key metrics to assess climate related risks and opportunities. In this section we provide further details on four key groups of metrics which are
expanded further in the Detailed Sustainability Report. These groups of metrics are:
1. Financed Emissions;
2. Transition and Physical Risk;
3. Sustainable Finance; and
4. Performance Management.
1. Financed Emissions
In 2022, taking a baseline position as at 31 December 2021, AIB set Financed Emission Targets for three sectors using a sector decarbonisation
approach (SDA) – (i) Residential Mortgages; (ii) Commercial Real Estate; and (iii) Electricity Generation and (iv) Corporate Portfolio Coverage
target (including fossil fuels) which have been validated by the SBTi. To set Financed Emission Targets, there are several key steps involved, which
together form the overall target setting methodology. These steps combine actual AIB and wider market data with a set of assumptions and
decarbonisation levers to provide a baseline financed emissions position and associated Financed Emission Targets. The approach to setting
Financed Emissions Targets and associated data collection is still evolving and is subject to change over time. As such, the figures disclosed may
evolve in line with industry best practice. In addition, we will validate our Science Based Targets in 2024 to determine the impact of the acquisitions
of inorganic loans onto our balance sheet. The steps undertaken included:
• Calculation of each lending portfolio’s baseline emissions in line with Partnership for Carbon Account Financials (PCAF) GHG guidance;
• Calculation of absolute and intensity requirement based on standardised industry International Energy Agency (IEA) decarbonisation 1.5°C
aligned pathways;
• Determination of AIB and national decarbonisation levers to reduce emissions e.g., Decarbonisation of the electricity system as a national lever
and a competitive green mortgage market proposition as a specific AIB lever;
• Quantification of the impact of each lever on emissions across counterparty Scope 1, 2 and 3 emissions;
• Financed Emissions Targets were governed and approved, including the relevant business actions and metrics; and,
• Short-term (annual) portfolio level Financed Emissions Targets set in line with medium-term Net Zero ambitions regularly monitored.
The performance tracking against Financed Emission Targets is monitored and reported though internal governance and an overview of our
progress is included in the ‘Financed Emissions’ section of the Detailed Sustainability Report.
Financed Emissions – AIB Group Lending Portfolio
Residential Mortgages
Commercial Real Estate
Electricity Generation
Corporate Portfolio Coverage
(incl. fossil fuels)
% of Loans
31.12.2021
50%
10%
3%
12%
Decarbonisation Scenario
IEA 2021 NZE2050
(1.5°C)
Maintenance Target
Emissions Targets
coverage
Total Loan Portfolio Covered
75%
2021 Baseline Financed
Emissions
1.3 mtCO2e
1.2 mtCO2e
0.07 mtCO2e
n/a
2.57 mtCo2e
2021 Baseline Emission
Intensity/Emissions Targets
Coverage
40 kgCO²e/M²
% Reduction in Emissions/
Emissions Targets coverage
required by 2030
(58)%
135 kgCO²e/M²
21 gCO²e/kWh
12% loan volume
covered by
emissions targets
(67)%
Maintain
54% loan value covered
by emissions targets
Notes:
• The % reduction required by 2030 is the % reduction in intensity required to meet the targets. The Corporate Portfolio Coverage target relates to counterparties with >500 employees, that have
set validated science based targets. From a baseline of 12% , AIB have set a target to increase this to 54% by 2030.
• An intensity measure is a normalised metric that expresses emissions relative to economic output or size; such as emissions per unit of electricity generated (KWH’s) in the case of electricity
generation or size of a property (metres squared) in the case of Residential Mortgages/Commercial Real Estate. This allows emissions reduction targets to be set while accounting for economic
growth.
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2. Transition and Physical Risk
We continue to focus on flood risk as the most significant acute and chronic physical risk and have developed initial metrics to better understand this
risk for our property-related exposure. These metrics support the tracking of physical risk for our key property portfolios. Our approach is subject to
further evolution based on industry developments and supervisory and regulatory expectations which continue to evolve over time. On the transition
risk side, we currently require all new lending over £/€300k in high transition risk sectors to complete our ESG Questionnaire.
Non Financial Corporate (NFC) exposures sensitive to Flood risk secured on immovable property*
3.2% (€0.28bn)
3.2% (€0.27bn)
% of new lending to sectors with higher transition risk - flow
% of lending to sectors with higher transition risk - stock
Exclusions/Assets Excluded from EU Paris-aligned Benchmarks (% lending to non-financial
corporates)
8 %
5 %
<1%
8%**
6%
<1%
2023
2022
Notes:
•
*Physical flood risk shown above is aligned with our CRR449a Pillar 3 disclosure showing “sensitivity” to physical risk for NFC’s secured by immovable property under an adverse climate
scenario. Adverse climate scenario is defined as: RCP 8.5 to 2035, and a 1:100 risk of a flood event. The threshold of risk for “sensitive” is set at a 1% flooding risk (1:100) and the adverse
climate change scenario to 2035. This approach aligns to the EBA 2021 ESG Risk Management guidance in so far as there is prescriptive guidance.
• Lending to sectors with high transition risk includes term & revolver lending; **2022 figure is shown on a consistent basis to 2023 i.e. all term and revolver lending to high transition risk sectors.
• Non-Paris Agreement aligned assets relate primarily to non-financial corporate lending to counterparties with revenue from fossil fuel activities.
3. Sustainable Finance
We are committed to supporting our customers to transition to a low-carbon economy by providing them with appropriate sustainable finance
products and services including green mortgages and finance for green buildings and renewable energy. During 2023, we continued to deploy our
Climate Action Fund. The table below shows the key metrics used by AIB to track and monitor sustainable finance lending and activity.
New green and transition lending (Climate Action Fund)
New green lending as % total new lending
Green Bond issuances
CDP rating
2023
€3.7bn
30%
€0.75bn
A-
2022
€3.3bn
26%
€1.50bn
A-
Notes:
•
In H2 2023, our new green lending definition was expanded to include new mortgage lending to energy efficient homes (BER A1-B2 / EPC A-B), aligned to our Sustainable Lending Framework
(SLF). Our green mortgage products may include lending to homes with a B3 BER rating. The SLF is an internal AIB Framework that outlines the key parameters on which a transaction can be
classified as green. This expanded definition has been applied to all relevant lending activity for the full year.
• The Green Bond issuances are aligned with the Green Bond Framework and associated governance, including a Second Party Opinion (SPO) review.
• The Carbon Disclosure Project (CDP) rating is externally collated and benchmarked by CDP and is based on a survey completed by AIB management
4. Performance Management
In 2023, AIB established a variable remuneration scheme which is based on company performance.
Three of the six measures within this scheme flow from ESG targets and measurements in the Group Balanced Scorecard. 40% of the outturn of the
variable remuneration is linked to these ESG measures.
Our performance against our Group Balanced Scorecard is reviewed and challenged quarterly by ExCo and regularly by the Board. In addition,
since 2021, senior executives have an ESG related performance goal, and a mandatory sustainability goal has been included in all employee
performance reviews since 2022.
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ESG Disclosures – TCFD continued
(b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
Scope 1, 2 and 3 greenhouse gas (GHG) emissions are disclosed below. Our approach continues to evolve in line with industry developments and
numbers may change with time.
Further detail on our GHG Emissions is out in the Detailed Sustainability Report with particular reference to the ESG Supporting Data section of that
report.
Absolute GHG Emissions (tCO2e)
Scope 1: Direct emissions
Scope 2: Indirect emissions
Total Absolute Scope 1 and 2 GHG emissions
Scope 3: Category 1 – Purchased goods & service
Category 2 – Capital goods
Category 3 – Fuel & energy-related activities
Category 5 – Waste generated in operations
Category 7 – Business travel
Category 8 – Employee commuting
Category 15 – Investments (Financed Emissions, see Financed Emissions
Target table on page 26 of our Sustainability Report for more detail)
2023
2,670
4,909
7,579
2022
3,200
5,963
9,163
2,584
1,045
3,342
35
1,556
5,346
2021
3,978
5,945
9,923
2,319
926
3,906
39
342
2,008
Baseline
Emissions
4,784
10,025
14,808
488
129
5,512
199
3,845
4,287
2,200,000 2,570,000 2,570,000
Baseline
Year
2019
2019
2019
2019
2019
2019
2019
2019
2019
2021
Notes:
• Scope 1 Direct emissions are from sources that are owned by AIB. AIB’s direct (Scope 1) emissions include combustion fuels, biomass (CH4 and N20), fleet and fugitive emissions. it does not
include gross biogenic emissions which are emissions of CO² from the combustion of biodegradation of biomass.
• Scope 2 figures reflect gross location-based absolute emissions.
• Scope 3 emissions are reported one year in arrears. AIB reports on categories 1, 2, 3, 5, 7, 8 and 15. We do not report on categories 4, 6 and 9-14, which are not material for AIB and for which
there is currently limited data available.
• 2023 verified figures include nine months actual data and three months estimations.
• 2022 scope 1 and 2 figures have been updated as per last re-statement, issued in 2023.
(c) Targets used to manage climate-related risks and opportunities and performance against targets
In addition to our financed emission targets outlined previously, AIB has committed to Net Zero in our own operations by 2030. The emissions
targets we have set and validated for our own operations are outlined further in the Detailed Sustainability Report 2023 with an overview provided
below:
(a) reducing absolute Scope 1 GHG emissions by 34% by 2027, from a 2019 base year* (as neither 2020 or 2021 reflected a standard year’s
operation due to pandemic related reductions);
Absolute Scope 1 GHG emissions target*
Reduction (versus Baseline)
2023
2,706
2022
3,231
2021
3,991
(44)%
(33)%
(17)%
Baseline
2019
4,800
• Metrics cover the Group.
• 2023 figures: are based on verification exercise completed in February 2024 and include nine months actual data and three months estimations.
• 2022 figures have been updated as per last re-statement, issued in 2023. This exercise was completed in accordance with the GHG Protocol guidance and allowed the incorporation of 12 months
•
of actual data.
*The target figures include gross biogenic emissions which are emissions of CO2 from the combustion of biodegradable of biomass as required under SBTi. For further detail refer to Section 5 of
the Detailed Sustainability Report 2023.
(b) increasing annual sourcing of renewable electricity to 100% by 2030.
We took action in 2022 to create two new solar farms in Co. Wexford, to be owned by NTR plc. Construction began swiftly, and the first solar farm
commenced energisation in February 2024.
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ESG Disclosures – NFI statement
Our non-financial
information statement
Our Non-Financial Information Statement is intended to comply with the
European Union (Disclosure of Non-Financial and Diversity Information
by certain large undertakings and groups) Regulations 2017.
This Non-Financial Information Statement
offers some high-level information to provide
an understanding of the development,
performance, position and impact of our
activities in the four non-financial matters.
We have provided references to supplemental
information in this report and in our Detailed
Sustainability Report 2023, which is reported
with reference to the Global Reporting
Initiative (GRI) Standards. For information on
our business model, see page 6.
In AIB codes, frameworks and policies
are in place to enable us to operate our
business in a responsible and sustainable
way. We have set out some of the key codes,
frameworks and policies related to Non-
Financial Reporting Directive
(NFRD) requirements, and provided links to
the associated Principal Risks and key
performance indicators (KPIs) for each matter.
For more information see our Detailed
Sustainability Report 2023
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ESG Disclosures – NFI statement continued
Environmental matters
Environmental Policy
Energy Policy
Green Bond Framework
Our Environmental Policy enables us to carry out activities in our own operations taking environmental
protection into account, to manage the direct and indirect environmental impact of our business in a responsible
way and to achieve continual improvement in environmental performance. AIB is certified to ISO 14001:2015 for
environmental management. Our policy was approved by our then Chief Operating Officer Designate and our Chief
Strategy & Sustainability Officer. It is publicly available at www.aib.ie/sustainability
Our Energy Policy enables us carry out our business as energy efficiently as possible, reduce our carbon footprint
and to achieve continuous improvement in energy performance. AIB is certified to the international standard ISO
50001:2018 for energy management. Our policy was approved by our then Chief Operating Officer Designate and
our Chief Strategy & Sustainability Officer. It is publicly available at www.aib.ie/sustainability
The purpose of our Green Bond Framework is to enable AIB, or its subsidiaries, to issue green bond instruments,
which may include covered bonds, senior bonds (preferred or non-preferred), subordinated bonds and medium term
notes, to finance and/or refinance green eligible loans with a positive environmental benefit. Our Framework is
based on the ICMA Green Bond Principles 2021, including the updated Appendix I of June 2022, and defines the
portfolio of loans eligible to be funded by the proceeds of Green Bonds issued by AIB. Our Framework is approved
by both the Group Sustainability Committee and Treasury Management Risk Board and is publicly available at
https://aib.ie/investorrelations/debt-investor
Group Credit Risk Policy Our Group Credit Risk Policy includes a list of excluded business activities that are considered to be incompatible
with Group strategy due to, amongst other things, negative environmental impacts associated with deforestation,
nuclear power generation, natural gas fracking and the exploration, extraction or refining of oil or coal. The policy
rule prohibits providing new money for any term lending facilities to businesses, or any of their subsidiaries, involved
in the excluded business activities. This rule applies to all business customers with a Gross Connected Exposure of
> €/£300k and who are relationship managed. Our policy was approved by our Board. The list of excluded activities
is publicly available at www.aib.ie/sustainability
Group Project Finance
Policy
Stress Testing Policy
Sustainable Lending
Framework
Our Group Project Finance Policy guides our renewable energy lending assessments and decisions for long-term
infrastructure, industrial projects and public services. Within credit assessment due diligence, assets that are likely
to have significant effects on the environment by virtue of their size, nature or location must undergo an
environmental impact assessment (EIA), which will have to be submitted to competent authorities when applying for
project development. AIB may rely on analyses provided by external parties to support our assessment. Our policy
was approved by our Group Credit Committee.
The Business Model and Capital Adequacy Framework and the Stress Testing Policy were updated in 2023 to
reflect the work of the Climate Stress Testing project regarding Climate Stress Testing models, roles and
responsibilities and governance requirements relating to climate stress testing across the Group. The climate stress
testing approach and associated models consider the impact of physical and transition risks across a number of
scenarios on the Group’s exposures.
The initial scope of climate stress testing activities and climate modelling in the Group is primarily focused on the
credit risk implications for our loan portfolio via both transitional and physical risk. This is where the most material
impact of climate stresses impacts the Group with the approach covering all customer loans and advances on the
balance sheet. Our Policy was approved by the Group Risk Committee.
Our Sustainable Lending Framework (SLF) enables the classification of new customer loans as green, transition or
social. The SLF was developed to provide transparency on the criteria that AIB employs in classifying and reporting
on green and transition lending to help us achieve our ambition that 70% of new lending should be green or
transition by 2030. It is based on industry best practice and is aligned, where applicable, to the EU Taxonomy
regulation and will evolve as required to amend or add additional qualifying activities and/or criteria. Our framework
was approved and is periodically reviewed by our Group Sustainability Committee.
KPIs
Our main key performance indicators for environmental matters are:
• Reduction in emissions – in 2023 we achieved a (17)% reduction in our Scope 1 & 2 GHG emissions (yoy); and,
• New Green Lending (Climate Action Fund) – in 2023 we advanced €3.7bn in new green lending.
Principal Risks
Operational Risk (see page 189 and 190)
Financial Risk (see pages 184 to 188)
Liquidity & Funding Risk (see pages 177 to 183)
Business Model Risk (see page 189)
Model Risk (see page 193)
Credit Risk (see pages 126 to 176)
Climate & Environmental Risk (see pages 193 to 196)
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Social and employee matters
Code Of Conduct
Speak Up Policy
Inclusion & Diversity
Code
Our Code of Conduct sets out clear expectations for how we behave and how we do business. The code guides
our behaviours and emphasises our commitment to acting ethically, honestly and with integrity while demonstrating
trustworthiness. It applies to anyone working in AIB. All employees are required to adhere to our code and complete
a declaration of compliance with our code annually. In addition, annual e-learning on the code is mandatory
for all employees. Our code was enhanced in 2023 to align with the requirements of the Central Bank (Individual
Accountability Framework) Act 2023. Our code was approved by our Board Audit Committee. It is publicly available at
www.aib.ie/sustainability
Our Speak Up Policy is our whistleblowing policy. It sets out how all those working in and for AIB Group, including but
not limited to, employees, agency staff, tied agents, suppliers, contractors, consultants and those providing an
outsourced service, can safely and confidentially speak up to raise a concern about suspected or actual wrongdoing
in work, without fear of penalisation. The policy outlines the channels available to raise such concerns and was
approved by our Board Audit Committee. It is publicly available at www.aib.ie/sustainability
Our Inclusion & Diversity Code is based on an ethos that respecting all our employees and developing and
harnessing their talents,creates an inclusive and supportive organisation. It enables the Group to deliver a superior
experience for all our customers, provides an inclusive place to work for our employees, and contributes to an
appropriate financial return for our shareholders and the economies within which we operate. Our code was
approved by our Executive Committee. It is publicly available at www.aib.ie/sustainability
Group Social Housing
Policy
Our Group Social Housing Policy, together with our Commercial Investment Policy, supports lending to our customers
for social housing and helps us to manage and mitigate the associated risks. Our policy was approved by our Group
Credit Committee.
Health & Safety Policy
Our Health & Safety Policy sets out our commitment to ensuring the safety of our employees, customers,
contractors, visitors and our workplace. Our policy is endorsed by our Chief Executive Officer. It is publicly available
at www.aib.ie/sustainability
Regulatory
Accountability Policy
Social Bond Framework
Socially Responsible
Investment Bond
Framework
Our Regulatory Accountability Policy sets out the requirements of all impacted staff within AIB Group entities with
respect to adherence to the Central Bank (Individual Accountability Framework) Act 2023 (‘IAF’), including the
existing and enhanced Fitness & Probity Regime. This policy applies to all Controlled Function and Pre-Approval
Controlled Function role holders who are directly employed by or contracted to AIB Group or any of its regulated
subsidiaries. Through our commitment to the standards and adherence to the requirements outlined in this Policy,
AIB will demonstrate it is satisfied on reasonable grounds that all its employees who are in relevant roles are
correctly and appropriately identified, assessed and reviewed in terms of their initial and ongoing suitability for these
roles under the required standards. Our policy was approved by our Executive Committee.
The purpose of our Social Bond Framework is to enable AIB, or its subsidiaries, to issue social bond instruments,
which may include covered bonds, senior bonds (preferred or non-preferred), subordinated bonds and medium
term notes, to finance and/or refinance social eligible loans with a positive societal benefit. Our Framework is
based on the ICMA Social Bond Principles 2021, including the updated Appendix I of June 2022, and defines the
portfolio of loans eligible to be funded by the proceeds of Social Bonds issued by AIB. Our Framework is approved
by both the Group Sustainability Committee and Treasury Management Risk Board and is publicly available at
https://aib.ie/investorrelations/debt-investor
The purpose of our Socially Responsible Investment Bond Framework is to fund domestic and international
initiatives aimed at global sustainability, carbon emission reduction, and social improvement, all under the over-
arching themes of ESG. As an established buy-to-hold bond investor, AIB can promote and support the transition to
a more sustainable global economy and contribute to positive environmental and social change via the sustainable
bond market. In order to ensure we maintain a strong presence in the sustainable bond market, and continue to
fund positive impact projects, it is our continued ambition to grow the Socially Responsible Investment Portfolio to at
least 14% of AIB’s total Investment Securities in the medium-term (AIB's total Investment Securities are detailed as
per this report.). Our framework is approved by Treasury Management Risk Board and noted at Group Sustainability
Committee. It is publicly available at www.aib.ie/sustainability
KPIs
For social and employee matters, our key performance indicators include:
• Diversity – In 2023, we maintained gender balance with 40% female representation at Board, 42% at ExCo and
42% across all management levels.
• Social housing finance – We supported social housing by providing funding of €91m in 2023. This brings the total
of social housing financed since we announced our target in 2020 to €548m.
Principal Risks
Conduct and Culture Risk (see pages 190 to 191)
Credit Risk (see pages 126 to 176)
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ESG Disclosures – NFI statement continued
Respect for human rights
Human Rights
Commitment
Code Of Conduct
Group Data Protection
Policy
Our Human Rights Commitment outlines how we respect human rights in accordance with internationally
accepted standards. Our commitment to human rights is being embedded in the culture and values that define
our company, and is reflected in our policies and actions towards our customers, employees, suppliers and the
communities and countries where we do business. It has been shaped by the United Nations Guiding Principles
on Business and Human Rights. Our Human Rights Commitment operates alongside our Code of Conduct and
Responsible Supplier Code, and our commitments are aligned with those laid out in the laws applicable to the
jurisdictions in which we operate, the European Convention on Human Rights and, for our business in Ireland,
the EU Charter of Fundamental Rights. Our commitment was approved by our Executive Committee and reviewed
by our Sustainability Business Advisory Committee and Board in February 2023. It is publicly available at
www.aib.ie/sustainability
Our Code of Conduct is our central policy for the human rights of our employees. In addition, our wider policy suite
exists to protect our employees and respect their rights. Additional supporting policies include: our Inclusion &
Diversity Code; Anti-Bullying & Harassment Policy; Domestic Abuse Handbook; Speak Up Policy; and Grievance
Policy. We ensure that we not only fulfil our legislative requirements, but that we seek to go above and beyond the
minimum standards for the jurisdictions in which we operate. Our code was approved by our Board Audit Committee.
It is publicly available at www.aib.ie/sustainability
Our Group Data Protection Policy is part of the Regulatory Compliance Risk Management Framework. It aims to
ensure that processes and controls are in place to minimise the risk of unfair or unlawful data processing and that
all employees understand the responsibilities and obligations that must be adhered to under data protection
regulation. It applies to our entire operations, including our suppliers. Our policy was approved by our Group Risk
Committee. While this policy is not publicly available, a synopsis of its key aspects is set out in our Data Protection
Statement at www.aib.ie/sustainability
Responsible Supplier
Code
Our Responsible Supplier Code sets out our expectation that our suppliers conduct their business in a fair, lawful, and
honest manner with all their stakeholders, employees, subcontractors and any other third parties.
It describes our expectations on human rights, health, safety and welfare, supply chain, and inclusion and diversity.
Suppliers are expected to adhere to it, along with all applicable laws, regulations and standards in the countries in which
their business is conducted. Our suppliers may be asked to provide a written attestation that they have read and
understood the Code, and will adhere to it. Our code was endorsed by our Chief Executive Officer. It is publicly available
on our suppliers portal at www.aib.ie/suppliers
Modern Slavery
Statement
Our Modern Slavery and Human Trafficking Statement is released annually. AIB recognises our responsibility to
comply with all relevant legislation, including the UK Modern Slavery Act 2015. Our statement was approved by our
Board It is available at https://aib.ie/group/modern-slavery-statement
KPIs
We report on these performance indicators annually in our Sustainability Report:
• Breaches of data privacy: In 2023, we received 20 complaints from the data protection supervisory authorities in
Ireland and the UK regarding breaches of data privacy.
• Personal data breaches: In 2023, we reported 522 personal data breaches to the relevant data protection
supervisory authorities in Ireland and the UK.
Principal Risks
Conduct and Culture Risk (see pages 190 to 191),
Regulatory Compliance Risk (see pages 191 to 192),
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Anti-bribery and corruption
Financial Crime Policy
Our Financial Crime policy and standards encompass Anti-Money Laundering/Countering the Financing of Terrorism,
Fraud, Anti-Bribery and Corruption and Sanctions. The policy and standards are embedded within business operating
procedures, and subject to at least an annual content verification to ensure that they are kept up to date.
All employees and Directors are made aware of our Financial Crime policy and standards. Employees must complete
mandatory e-learning annually. Our Money Laundering Reporting Officer (MLRO) provides comprehensive annual
training to the Board. Bespoke training tailored to consider the financial crime risks relevant to specific roles is also
provided to key employees. To further enhance awareness, we issue financial crime bulletins periodically to our
employees, outlining key trends and other topical items. Our policy was approved by our Board Risk Committee.
While this policy is not publicly available, a synopsis of its key aspects is set out in our Financial Crime Statement at
www.aib.ie/sustainability.
Conflicts Of Interest
Policy
Our Conflicts of Interest Policy provides a clear statement of the standards for recognising and preventing potential
conflicts of interest and for managing conflicts of interests where they cannot be avoided. Conflicts of interest
situations may arise between the interests of two or more parties (whether directly or indirectly involved) in any
situation. Our policy was approved by our Group Chief Compliance Officer. While this policy is not publicly available,
a synopsis of its key aspects is set out in our Conflicts of Interest Statement at www.aib.ie/sustainability
KPIs
Our key performance indicators for these matters include:
• Conflicts of Interests training – 98% completion rate in 2023. We target a completion rate of 90% annually, to
allow for those who are on leave during the training period. On returning from leave, they are expected to
complete the training.
Incidents of corruption* – In 2023, there were two incidents, both cases were internal fraud and were not material
in value.
•
Principal Risks
Regulatory Compliance Risk (see pages 191 to 192),
Conduct and Culture Risk (see pages 190 to 191),
*Per GRI definition of Corruption https://globalreporting.org/publications/documents/english/gri-standards-glossary-2022/
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ESG Disclosures – EU Taxonomy
EU Taxonomy
As part of our commitment to transparency and responsible banking, we are disclosing
our Green Asset Ratio to demonstrate our alignment with the EU Taxonomy criteria.
The EU Taxonomy is a sustainability classification system that translates
the EU’s climate and environmental objectives into criteria for specific
economic activities for investment purposes.
The EU Taxonomy aims to redirect capital flows to support the transition
and help generate sustainable and inclusive growth.The EU Taxonomy
Regulation (Regulation (EU) 2020/852) specifies that financial
undertakings shall disclose how and to what extent the undertaking’s
activities are associated with economic activities that qualify as
environmentally sustainable. To qualify as EU Taxonomy aligned, an
economic activity must substantially contribute to one or more of the
six EU environmental objectives under the technical screening criteria,
whilst doing no significant harm (DNSH) to the other five objectives and
complying with minimum social safeguards.
For the last two years AIB have published its EU Taxonomy eligibility
disclosures in line with requirements. This is the first year AIB is
disclosing on the alignment of the portfolio to EU Taxonomy via the
Green Asset Ratio (GAR), which quantifies EU Taxonomy-aligned
assets as a percentage of total covered assets.
As part of AIB commitments to provide Green and Transition lending, the
Bank has developed a Sustainable Lending Framework (SLF) to provide
transparency on the types of activities to be considered as Green,
Transition or social activities. EU Taxonomy aligned lending is a subset
of the green lending categorisation as determined by the SLF. As at
31 December 2023, the green asset ratio is 5.94% which equates to
total taxonomy aligned exposure of €5.49bn over total covered assets
of €92.4bn as outlined in the Balance sheet summary below.
The criteria for EU Taxonomy are strict with many lending activities
that contribute to the transition of a greener economy excluded as
the activities do not meet the criteria. For AIB, EU Taxonomy aligned
exposure identified materially comprises 1) lending to residential
mortgages where the underlying assets meet the technical screening
criteria for Climate Change Mitigation including an assessment of DNSH
to Climate Change Adaptation and to a much less extent 2) lending to
counterparties subject to the Non-Financial Reporting Directive
(representing a small portion of total lending activity c.1%).
In determining alignment for residential mortgages we have utilised the
BER or EPC of the property to identify assets contained in the Top 15%
of national stock (constructed pre 2020) or aligned to the Nearly Zero
Energy Building Standard – 10% (constructed post 2020). As in previous
years, a screening exercise was performed to identify counterparties
subject to the Non-Financial Reporting Directive and reporting for
this cohort has been undertaken using 2023 published data by
counterparties which relates to 2022 year end information. The EU
Taxonomy regulation is subject to ongoing updates and refinements in
taxonomy criteria may influence the calculation of the GAR over time.
AIB acknowledge the importance of ESG data to inform reporting,
support decision-making and enhance product development and is
committed to evolving data capture and storage infrastructure to
improve accessibility, meet regulatory obligations and integrate ESG
data into existing business processes. This evolution will also ensure
that the additional data made available through the adoption of
Corporate Sustainability Reporting Directive (CSRD) disclosures
can be leveraged across strategy, systems and processes.
Balance Sheet Overview as at 31 December 2023
Loans and advances, debt securities and equity instruments eligible
for GAR calculation
Total Gross
Carrying Amount
(€m)
Taxonomy
Eligible
Exposure (€m)
Taxonomy Aligned
Exposurea
(€m)
Green Asset
Ratioa/b
58,943
36,822
5,487
5.94 %
Financial undertakings
Non-financial undertakings (Subject to NFRD)
Households
Local governments financing
Collateral obtained by taking possession
17,990
900
—
62
—
—
40,028
36,760
5,487
22
2
—
—
—
—
Assets excluded from the numerator for GAR calculation (covered in
denominator)
Non-financial undertakings (not subject to NFRD)
Derivatives
On demand interbank loans
Cash and cash-related assets
Other categories of assets (e.g. Goodwill, commodities etc.)
Total GAR assets (for denominator)b
Assets not covered for GAR calculation
Total Assets
33,466
25,811
1,920
328
598
4,809
92,409
45,451
137,860
Notes:
• Taxonomy eligible exposure is lending to an eligible economic activity that has been classified under an environmental objective within the EU Taxonomy Regulation
• Taxonomy aligned exposure is lending to an eligible economic activity that qualifies as environmentally sustainable in line with the technical criteria specified within the EU Taxonomy Regulation
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ESG Disclosures – EU Taxonomy
Our 2023 disclosure
Our total environmentally sustainable assets amounts to 5.487 bn resulting in a Green Asset Ratio of 5.94%
The table below outlines a summary of our KPIs namely the Green Asset Ratio Stock and Flow. Please refer to pages 325 to 328 for the full
disclosure templates required under EU Taxonomy.
Main KPI
Green asset ratio (GAR)
stock
Total environmentally
sustainable assets
€m
5,487
KPI(2)
5.94
KPI(3)
5.94
% coverage
(over total
assets)(1)
% of assets
excluded from the
numerator of the
GAR
% of assets
excluded from the
denominator of the
GAR
67.03
24.28
32.97
Total environmentally
sustainable assets
€m
Additional KPIs GAR (flow)
Financial guarantees
Assets under management
398
—
—
KPI
1.68
— %
— %
KPI
1.68
— %
— %
% coverage
(over total
assets)
100.00
% of assets
excluded from the
numerator of the
GAR
% of assets
excluded from the
denominator of the
GAR
N/A
N/A
(1) % of assets covered by the KPI over banks´ total assets
(2) based on the Turnover KPI that the underlying counterparty has disclosed for each environmental objective in accordance with this Regulation
(3) based on the CapEx KPI that the underlying counterparty has disclosed for each environmental objective in accordance with this Regulation
Notes:
•
•
•
• Total environmentally sustainable assets refers to the amount of exposure deemed aligned to EU Taxonomy criteria
• GAR stock KPIs are the total environmentally sustainable assets (split by turnover and CapEx) as a proportion of total covered assets
• GAR flow KPIs are based on the gross carrying amount of exposures originated in 2023 (split by turnover and CapEx) as a proportion of total covered assets originated in 2023
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Governance and
Oversight Report
Principles of the Code
1. Board Leadership and Company Purpose
Governance in AIB
Governance in Action (Strategy & Culture)
Board Focus
Section 172 Statement and Stakeholder Management
Relationship with the Irish State
2. Division of Responsibilities
Governance Structure
Our Board of Directors
Our Executive Committee
Corporate Governance Framework
Advisory Committee Reports
• Technology and Data Advisory Committee
• Sustainable Business Advisory Committee
Board and Committee Meeting Attendance
3. Composition, Succession and Evaluation
Report of the Nomination and Corporate Governance
Committee
Board Effectiveness
Composition & Succession
Board Skills
Diversity and Inclusion
4. Audit, Risk and Internal Control
Report of the Board Audit Committee
Report of the Board Risk Committee
Internal Controls
Supervision and Regulation
Statement of Directors’ Responsibilities
Viability Statement
Risk Management
5. Remuneration
Remuneration Committee
Remuneration Statement
76
67
68
80
81
79
77
69
70
74
67
109
110
78
95
93
78
95
97
96
79
85
90
111
120
199
113
121
98
98
101
Chair’s Introduction
Dear Shareholder,
On behalf of the Board, I am pleased to introduce the Governance and
Oversight Report for 2023.
This report, which is aligned to the requirements of the UK Corporate
Governance Code 2018 (the UK Code), documents the Group’s
approach to compliance with the UK Code, as set out in the adjacent
table. Further information on governance practices in place in the Group
are available on the Group’s website at www.aib.ie/investorrelations.
This report provides an overview of the key responsibilities of the Board
and its Committees and gives further insight into the work of the
Directors, the Board and its Committees as a collective. It also sets out
how the Directors have discharged their duties and responsibilities
throughout 2023.
The Board is committed to ensuring that the highest standards
of corporate governance are adhered to across the Group and see
it as fundamental to our culture and achieving our strategy.
We recognise that a robust governance structure with an effective
risk management framework is integral to delivering long term
sustainable growth and shareholder returns.
Jim Pettigrew
Chair
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Governance in AIB
Statements of Compliance for 2023
This report, in conjunction with the Statement of Directors’ Responsibilities, Corporate Governance Remuneration Statement, Risk
Governance section of the Risk Management Framework report and the Statement on Internal Control, sets out the Group’s approach
to governance in practice, the work of the Board and its Committees, and explains how the Group applied the principles of the Central
Bank of Ireland’s Corporate Governance Requirements for Credit Institutions 2015 (the “2015 Requirements”), European Union (Capital
Requirements) Regulations 2014 (S.I. 158/2014) (“CRD”) and UK Corporate Governance Code 2018 (the “UK Code”) during 2023 under
the headings prescribed by the UK Code.
Corporate Governance Framework
The following outlines the Group’s Corporate Governance Framework,
which is anchored in the requirements of the UK Code, Central Bank of
Ireland Corporate Governance Requirements and the Irish Corporate
Governance Annex.
UK Corporate Governance Code 2018
AIB Group plc, by virtue of its primary listing on the Main Securities
Market of the Euronext Dublin Stock Exchange and its premium listing
on the Main Market of the London Stock Exchange, is subject to the
provisions of the UK Code (which is publicly available on www.frc.org.uk).
Throughout the year, the Group applied the principles and complied with
all provisions of the UK Code other than in instances related to Section 5:
Remuneration, in particular Principles R and Provisions 36, 37 and 38,
and the rationale is set out in the table opposite.
Irish Corporate Governance Annex
Additional obligations apply to the Group under the Irish Corporate
Governance Annex (publicly available on www.ise.ie), which applies
to relevant Irish companies with a primary listing on the Main Securities
Market of the Euronext Dublin Stock Exchange. The Group is fully
compliant with the Irish Corporate Governance Annex.
Central Bank of Ireland’s Corporate Governance Requirements for
Credit Institutions 2015 and European Union (Capital Requirements)
Regulations 2014
AIB Group plc is authorised as a financial holding company and is not
directly required to comply with the 2015 Requirements (which are
publicly available on www.centralbank.ie). However, Allied Irish Banks,
p.l.c., the principal subsidiary of AIB Group plc, is a credit institution
and is subject to the 2015 Requirements, including compliance with
requirements specifically relating to “high impact institutions” and
additional corporate governance obligations on credit institutions
deemed significant for the purposes of the CRD (which is publicly
available on www.irishstatutebook.ie).
As the governance structures of AIB Group plc and Allied Irish Banks,
p.l.c. are mirrored, and acknowledging the importance of adherence to
the 2015 Requirements, the compliance status of Allied Irish Banks,
p.l.c. is noted herein.
During 2023, Allied Irish Banks, p.l.c. was materially compliant with all
of the 2015 Requirements and with the relevant corporate governance
aspects of CRD.
Provisions required to “Explain” under the Code
“Comply or Explain” process
Principle R: Exercise of independent judgement and discretion when
authorising remuneration outcomes.
Provision 36: Remuneration schemes should promote long term
shareholdings by executive directors that support alignment with
long term shareholder interests.
Provision 37: Remuneration schemes and policies should enable
the use of discretion to override formulaic outcomes.
Provision 38: The pension contribution rates for executive directors,
or payments in lieu, should be aligned with those available to
the workforce.
Rationale
In 2022 the Irish Government lifted the restriction on variable pay,
allowing for awards to be made to individuals up to a value of
€20,000. However, the cap still restricts the Group’s ability to
structure variable remuneration. As such, both decisions relating
to Principle R and certain associated provisions (particularly
Provisions 36 and 37) and the timing of when the remuneration
restrictions may change are outside of the Board’s sphere of
influence or control. Further detail on the background to these
restrictions can be found in the Corporate Governance
Remuneration Statement on pages 101 to 108.
In relation to Provision 38, the current pension arrangements
are considered to be fair due to the remuneration restrictions
in place at this time. The rates of contribution for Executive
Directors and all employees are fully transparent and are set out
in the Corporate Governance Remuneration Statement on pages
101 to 108.
Corporate governance headlines at a glance
Dividend
FCA Board Diversity Target Achieved
26.6 cent per share 40% Female
Shareholder Approval for 2023 AGM
Resolution on Remuneration
99% in Favour
dividend per ordinary share in 2022/2023 an
increase on prior year
the percentage of females on the Board stood at
40% and one Director was from a minority ethnic
group as at 31 December 2023. FCA Listing
Rule target at least 40% women.
99% Shareholder Approval for 2023 AGM
resolution on the Group Remuneration Policy
and Directors’ Remuneration Report
99% in Favour1% Against/WithheldFemale (6)Male (9)26.66.220232022 Annual
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Governance in action
Culture and Speak Up
The Board continues to place significant importance on ensuring that
a values led culture is in place in the Group. Further details on culture
are included on page 76.
The journey to strengthen the culture of Speak Up within the Group
continued in 2023. Throughout the year, the Board Audit Committee
(BAC), received regular updates on Speak Up developments, which
included high level details of all whistleblowing reports as well as trends
and thematic analysis.The BAC Chair, Sandy Kinney Pritchard, is the
Whistleblowing Champion for the Group, and continues to drive this
agenda through her regular engagement and support to the Executive
teams this year.
The Board considered the findings of the Irish Banking Culture Board
(IBCB) employee culture survey, which informed their oversight of the
design and implementation of the Culture Programme. Further detail is
available on page 76. Additionally, the Board will continued to oversee
the evolution of a culture of accountability across the Group, aligned to
the ongoing Culture Programme, and to the requirements of the
Individual Accountability Framework.
Governance Structure
The AIB Group Board governance structure, Board of Directors and
Executive Committees biographies are set out in the following pages.
Continued Board oversight of the execution
of the 2020-2023 Strategy in an uncertain
geopolitical and macro economic
environment during 2023.
The Board is acutely aware of the importance of its role in driving
sustainable value for shareholders in the long-term, with due
consideration for all stakeholder groups, and is committed to ensuring
that the highest standards of corporate governance are adhered to
across the Group. Please refer to Section 172 on page 81 which sets
out how the Board considers its stakeholders in its decision making.
Set out below are a number of key areas of focus and development for
the Board from a governance perspective over the course of 2023.
Oversight of strategic delivery
During 2023, the Board continued its dedicated oversight of the
implementation and delivery of the 2020-2023 Group Strategy and
the execution of the transformation plan initiatives, including inorganic
growth opportunities such as the acquisition of the Ulster Bank
portfolios. The capacity of the Group to execute these inorganic
growth opportunities in a controlled way, whilst still delivering for our
existing customers on a day-to-day basis, was paramount to Board
considerations throughout the year. The Board received regular updates
from management on the impact and associated risks across each of the
Group’s strategic pillars for each of the transactions while ensuring
a strong risk and control framework across the three lines of defence was
in place. Following the execution of the transactions, the Board received
post implementation reviews from management from an operational,
resource, financial and a regulatory perspective.
In developing the 2024-2026 Strategy, central to Board considerations
were our customers. Having onboarded a significant number of new
customers and enhanced the existing product suite over the 2020-2023
strategy cycle, an area of focus for the Board was ensuring that the
Group’s Customer First ambition was reflected in the overall customer
experience. This is considered crucial to the long term sustainability
of the Group,
In 2024, the Board will continue to focus on the delivery of the targets
and ambitions set out in 2024-2026 Group Strategy.
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AIB Group Board Governance Structure
AIB Group Board
Board Audit Committee
Board Risk Committee
Remuneration Committee
Independently oversees the quality
and integrity of the Group’s accounting
policies, financial and narrative reporting,
non-financial disclosures and disclosure
practices, internal control framework and
audit, as well as the mechanisms through
which employees and contractors may
raise concerns.
Fosters sound risk governance across the
Group’s operations, overseeing the risk
management framework and compliance
function to include the risk appetite profile
and the overall risk awareness across
the Group.
Oversees the design and implementation
of the Group’s Remuneration Policy and
the operation of remuneration policies
and practices with particular reference to
certain senior management, ensuring that
the Remuneration Policy is designed to
support the long-term business strategy,
values and culture of the Group as well
as to promote effective risk management.
Nomination and Corporate
Governance Committee
Sustainable Business
Advisory Committee
Technology and Data
Advisory Committee
Oversees Board and Executive
Committee succession planning
and keeps the Board’s governance
arrangements and corporate governance
compliance under review.
Supports the Board in overseeing the
Group’s performance as a sustainable
business and delivery of AIB’s
sustainability strategy in accordance
with the approved Group Strategy and
Financial Plan and maintaining and
safeguarding the Group’s social licence
to operate. It is the overarching Board
Advisory Committee responsible for the
guidance of our sustainability agenda.
Reviews and challenges the strategy,
governance and execution of matters
relating to technology, data including
cybersecurity and data and analytics,
as well as business enablement activities.
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Board of Directors
JIM PETTIGREW
Chair
Non-Executive Director
ANIK CHAUMARTIN
Independent
Non-Executive Director
BASIL GEOGHEGAN
Independent
Non-Executive Director
TANYA HORGAN
Independent
Non-Executive Director
DATE OF APPOINTMENT
28 October 2021
DATE OF APPOINTMENT
1 July 2021
DATE OF APPOINTMENT
4 September 2019
DATE OF APPOINTMENT
14 September 2021
NATIONALITY
British
NATIONALITY
French
NATIONALITY
Irish
NATIONALITY
Irish
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
2y 2y
2.5y 1y
4.5y
2.5y 2y
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Extensive financial services
experience, retail banking, customer
and conduct, governance, strategy
and culture development.
Background & Experience:
Jim has over 35 years’ experience
in UK and international financial
services leadership in public listed
and private company environments,
including at board level, as CEO and
as Chair. He was Chair of Scottish
Financial Services, the Scottish
financial services trade body.
He also served as Co-Chair of
Scotland’s Financial Services
Advisory Board and is a former
President of the Institute of
Chartered Accountants of Scotland.
He retired as Chair of Virgin Money
and CYBG plc in 2020. He has built
considerable non-executive
experience over the past 13 years
across retail, wholesale and
investment banking, asset and
wealth management and the
insurance sectors. Jim is a
Chartered Accountant and Fellow
of the Association of Corporate
Treasurers. He has a LLB from
Aberdeen University and a DipACC
from Glasgow University.
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director of RBC
Global Asset Management (UK)
Limited
Chair of Scottish Ballet
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Deep technical accountancy and
audit expertise in financial services,
talent and culture development, and
stakeholder management.
Background & Experience:
Anik has over 38 years' international
experience in professional services
experience. She was a partner in
PwC in Paris for 27 years, and held
various leadership positions in the
firm for 15 of those years. During her
time in PwC she has acted in the
roles of Global Client Relationship
Partner and Lead Audit Partner for
a number of major banking and
financial services organisations.
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
In-depth knowledge of international
finance, corporate banking, strategy
and risk management.
Background & Experience:
Basil is a partner in the Strategic
Advisory Group at PJT Partners
in London. Previously, Basil was
a Managing Director at Goldman
Sachs, Deutsche Bank and
Citigroup in London and New York.
He has broad M&A, corporate
finance and strategic advisory
experience in the US, UK, Ireland
and internationally. He qualified as
a solicitor with Slaughter and May.
Basil is Chair of daa plc and is
a Patron of The Ireland Fund of
Great Britain. He holds an LLB
from Trinity College, Dublin and
an LLM from the European
University Institute.
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Extensive risk management,
compliance, finance, accounting
and audit, customer and conduct,
and technology skills.
Background & Experience:
Tanya is a Chartered Accountant
with extensive industry-based
experience in the areas of
compliance, internal audit and risk
management and has over twenty
years’ experience in publicly listed
companies. Tanya trained and
qualified with PwC. She has since
held roles in a number of
organisations including Tesco,
Mercury Engineering, Paddy Power
Betfair plc and, most recently, was
the Group Chief Risk Officer of
Flutter Entertainment plc. Tanya
currently serves as the Chief Risk
Officer of Primark. She has
a B.Comm in Accounting from
University College Cork.
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director of
ALD Automotive
Non-Executive Director of
La Banque Postale
Non-Executive Director of Saol
Assurance DAC and Saol Assurance
KEY EXTERNAL
APPOINTMENTS
Chair of daa plc
Partner at PJT Partners
Patron of the Ireland Fund of Great
Britain
KEY EXTERNAL
APPOINTMENTS
Chief Risk Officer of Primark,
Non-Executive Director and Chair of
Audit Committee of Mercury
Engineering Limited*
* Appointed 1 January 2024
Board Committees
Remuneration
Nomination
& Corporate
Governance
Board Audit
Board Risk
Sustainable
Business
Advisory
Technology
& Data
Advisory
Committee chair
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AIB DIRECTORS
BOARD
GENDER
SANDY KINNEY PRITCHARD
Independent
Non-Executive Director
ELAINE MACLEAN
Independent
Non-Executive Director
ANDY MAGUIRE
Independent
Non-Executive Director
DATE OF APPOINTMENT
22 March 2019
DATE OF APPOINTMENT
4 September 2019
DATE OF APPOINTMENT
15 March 2021
NATIONALITY
Irish
NATIONALITY
British
NATIONALITY
Irish
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
5y 5y
4.5y 3y
3y 3y
AGE
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Significant experience in
remuneration and governance,
organisational structures, and
people and culture development.
Background & Experience:
Elaine is a highly experienced
human resources director
specialising in financial services
and retail. Following her early retail
career with roles at Harrods,
Windsmoor and later as Retail
Operations Director and Human
Resources Director with Arcadia,
Elaine moved to financial services
culminating in her appointment as
Group Human Resources Director
for Legal and General plc in 2006.
Elaine holds an MA in English
Literature and Psychology from the
University of Glasgow. She is the
Designated Non-Executive Director
for workforce engagement.
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Extensive retail banking, technology
and digital, transformation, and risk
management skills.
Background & Experience:
Andy has extensive financial
services experience spanning 35
years, including 16 years with the
Boston Consulting Group where he
rose to become Managing Partner of
the London office covering the UK
and Ireland, prior to which he held
several global roles including Global
Head of Retail Banking. From 2014
to 2020, Andy was the Group Chief
Operating Officer for HSBC Holdings
plc with responsibility for operations,
technology, real estate, change and
transformation and operational
resilience. Andy previously held
Chair positions with Napier
Technologies Limited and CX
Holdings (Cennox Group). He holds
a BA and a BAI from Trinity College,
Dublin.
KEY EXTERNAL
APPOINTMENTS
None
KEY EXTERNAL
APPOINTMENTS
Chair of Thought Machine Group
TENURE
NATIONALITIES
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Expertise in finance, accounting
and audit, governance, regulation,
customer and conduct, risk
management, wealth management,
retail and investment banking.
Background & Experience:
Sandy is a University College Dublin
graduate, with a distinguished
career across the financial services
industry. She is an accountant who
previously was a senior partner at
PricewaterhouseCoopers LLP and
has held a number of Non-Executive
Directorship roles, including at Irish
Life and Permanent TSB plc,
Skipton Building Society, the FSCS,
TSB Bank plc and MBNA Ltd.
KEY EXTERNAL
APPOINTMENTS
Credit Suisse (UK) Ltd *
Charles Stanley & Co Ltd**
Raymond James Wealth
Management Limited**
*Resigned 12 February 2024
**Appointed 13 February 2024
Board Committees
Remuneration
Nomination
& Corporate
Governance
Board Audit
Board Risk
Sustainable
Business
Advisory
Technology
& Data
Advisory
Committee chair
Exec: 2 - 13%NED: 13 - 87%Female: 6 - 40%Male: 9 - 60%46-55: 4 - 27%56-64: 7 - 46%65-70: 4 - 27%0-3 yrs: 5 - 33%3-6 yrs: 8 - 54%6-9 yrs: 2 - 13%Irish: 10 - 66%British: 2 - 13%French: 1 - 7%Dutch: 1 - 7%USA: 1 - 7%
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72
Board of Directors continued
BRENDAN MCDONAGH
Independent Non-Executive
Director and Deputy Chair
HELEN NORMOYLE
Senior Independent
Non-Executive Director
ANN O’BRIEN
Independent
Non-Executive Director
FERGAL O’DWYER
Independent
Non-Executive Director
DATE OF APPOINTMENT
27 October 2016
DATE OF APPOINTMENT
17 December 2015
DATE OF APPOINTMENT
25 April 2019
DATE OF APPOINTMENT
22 January 2021
NATIONALITY
Irish
NATIONALITY
Irish
NATIONALITY
Irish
NATIONALITY
Irish
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
5.5y 4y 6y 7y
7.5y 3.5y 3y
3.5y 4.5y 3y
3y
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Significant global financial services
experience in retail and commercial
banking, strategy, governance,
regulation, and risk management.
Background & Experience:
Brendan started his banking career
with HSBC in 1979, working across
Asia, Europe, North America, and
the Middle East, where he held
various roles such as Group
Managing Director for HSBC
Holdings plc, membership of the
HSBC Group Management Board,
and CEO of HSBC North America
Holdings Inc. Brendan is a former
Director of Ireland’s National
Treasury Management Agency
(NTMA). He was previously the
Executive Chair of Bank of N.T.
Butterfield & Son Limited. Brendan
was appointed Deputy Chair with
effect from 24 October 2019.
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director and Chair of
Audit & Risk Committees of Bradford
& Bingley Limited and NRAM Limited
Chair of PEAL Capital Group Limited
Serves on the Board of The Ireland
Funds, Ireland Chapter
Council Member of Global Advisory
Council, Impact Ireland Fund
Chair of Trinity Business School
Advisory Board
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Significant technology and digital
expertise, and highly-skilled in the
areas of sustainability, strategy
and leadership.
Background & Experience:
Ann has over 30 years’ experience
in the financial services industry.
A graduate of UCD and later Trinity
College Dublin, Ann has led
complex management consulting
engagements at many of the world's
largest global banking and
securities organisations. Her most
recent role was as a Principal with
Deloitte in New York where she was
based for 10 years. Ann was
appointed to the Board, on the
nomination of the Irish Minister for
Finance, under the Relationship
Framework between the Minister for
Finance and AIB Group. Ann serves
on the Board of EBS d.a.c.
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Extensive experience in finance and
accounting, treasury and liquidity
management, strategy, and
capital markets.
Background & Experience:
Fergal is a Chartered Accountant
with significant experience in
financial management, treasury,
strategy, capital deployment and
development. Fergal retired in
2020 from DCC plc, the Irish
headquartered international sales,
marketing and business support
services group, which is a FTSE100
constituent company, where he
began as an Associate Director,
later progressing to Chief Financial
Officer in 1992, and Executive
Director in 2000. Prior to joining
DCC, Fergal worked in PwC
and KPMG.Fergal serves on the
Board of Goodbody Stockbrokers u.c.
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Deep knowledge and experience of
sustainability, customer and conduct,
digital, stakeholder management, and
culture development.
Background & Experience:
Helen is a highly experienced
marketeer with 30 years’ experience in
consumer marketing and market
research across a range of sectors
and geographies. A graduate of the
University of Limerick, she started her
career with Infratest+GfK. From there
she moved to Motorola, where she
held a range of roles including Director
of Global Consumer Insights and
Product Marketing and Director of
Marketing. After working in broadcast
and telecoms regulation at Ofcom as
the Director of Market Research, she
held Marketing Director and Chief
Marketing Officer roles at the BBC,
DFS, Countrywide and Boots, where
she was also the Chair and Director of
the Boots Charitable Trust. Helen also
serves on the Board of AIB Group
(UK) p.l.c. Helen was appointed
Senior Independent Director with
effect from 1 July 2022.
KEY EXTERNAL
APPOINTMENTS
Co-founder and Executive Director
of My Menopause Centre
Non-Executive Director of Thames
and London Limited
KEY EXTERNAL
APPOINTMENTS
Independent Non-Executive
Director of Euroclear UK &
International
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director of ABP Food
Group Unlimited
Director of Blackrock Healthcare
Group Unlimited
Board member of Focus Ireland and
Focus Housing Association
Board Committees
Remuneration
Nomination
& Corporate
Governance
Board Audit
Board Risk
Sustainable
Business
Advisory
Technology
& Data
Advisory
Committee chair
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Annual Financial Report 2023
73
Board of Directors continued
JAN SIJBRAND
Independent
Non-Executive Director
RAJ SINGH
Independent
Non-Executive Director
COLIN HUNT
Chief Executive Officer &
Executive Director
DONAL GALVIN
Chief Financial Officer &
Executive Director
DATE OF APPOINTMENT
14 September 2021
DATE OF APPOINTMENT
25 April 2019
DATE OF APPOINTMENT
8 March 2019
DATE OF APPOINTMENT
28 May 2021
NATIONALITY
Dutch
NATIONALITY
United States
NATIONALITY
Irish
NATIONALITY
Irish
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
COMMITTEE MEMBERSHIP
AND TENURE
2.5y 1.5y
4.5y 4.5y
5y
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Highly skilled in the areas of risk
management, retail and commercial
banking, governance, financial
regulation and oversight.
Background & Experience:
Jan has had an extensive executive
career including roles in Royal Dutch
Shell plc, Rabobank Nederland,
ABN AMRO Holding N.V. and NIBC
Bank N.V. and was a member of the
Executive Board and Chair for
Supervision at De Nederlandsche
Bank N.V. (the central bank of the
Netherlands). Jan is currently
a member of the Supervisory Board
and Chair of the Public Interest
Committee of PwC Nederland and
served on the Global Board of PwC
up until June 2022. Jan has an MSc
in Applied Mathematics and a PhD
in Mathematics, both from the
University of Utrecht.
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director of
PwC Netherlands
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Significant international experience
in risk management, governance,
retail and corporate banking,
insurance, wealth and asset
management and sustainability.
Background & Experience:
Raj has 36 years’ business, risk and
governance experience gained in
large and complex global listed
financial services organisations
including Citibank, Allianz, Swiss Re,
Standard Life Aberdeen and EFG
International with the last 20 years
at the executive committee level as
Group Chief Risk Officer. He has
served as a Non-Executive Director
of a national credit bureau and two
listed financial institutions as well as
many of the banking, insurance,
reinsurance and asset management
subsidiaries of those firms. Raj was
appointed by the Board, on the
nomination of the Irish Minister for
Finance, under the Relationship
Framework between the Minister for
Finance and AIB Group.
KEY EXTERNAL
APPOINTMENTS
Non-Executive Director of
The Co-operative Bank plc
Non-Executive Director of Vanguard
Ireland Limited, Vanguard Funds
PLC, Vanguard Investment Series
PLC, Non-Executive Director of AXA
Insurance UK plc, AXA UK plc and
AXA PPP Healthcare Limited
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Strategic leadership, extensive
executive experience covering risk,
treasury, research, capital markets,
customer focus and sustainability.
Background & Experience:
In March 2019, Colin was appointed
Chief Executive Officer of AIB
Group. He joined AIB in August
2016 as Managing Director of
Wholesale, Institutional & Corporate
Banking. Prior to joining AIB, he
was Managing Director at
Macquarie Capital in Ireland.
Previously, he was a Policy Adviser
at the Departments of Transport and
Finance, Research Director at
Goodbody Stockbrokers, Head of
Trading Research at Bank of Ireland
Group Treasury and a country risk
analyst at NatWest. He has a PhD
in Economics from Trinity College,
Dublin, BComm and MEconSc
degrees from University College
Cork, and is a Chartered Bank
Director and Fellow of the Institute
of Bankers
SKILLS, EXPERTISE
AND EXPERIENCE
Key Skills:
Significant international retail and
wholesale banking, capital, liquidity,
treasury, investor relations, and risk
management skills
Background & Experience:
Donal joined AIB as Group
Treasurer in September 2013 and
was appointed to the role of Chief
Financial Officer in March 2019 and
to the Board in May 2021. Donal
has gained significant experience
working in domestic and
international financial markets over
the last 25 years. Prior to joining
AIB, Donal held a number of senior
executive roles including Global
Head of Asian Fixed Income &
Equities at Mizuho Securities in
Hong Kong and a number of senior
Global Financial Market Roles
across Europe and Asia Pacific for
Rabobank. He serves as a Non-
Executive Director of Goodbody u.c .
KEY EXTERNAL
APPOINTMENTS
Serves on the Board of The Ireland
Funds, Ireland Chapter
Ibec clg Board Member
KEY EXTERNAL
APPOINTMENTS
None
Board Committees
Remuneration
Nomination
& Corporate
Governance
Board Audit
Board Risk
Sustainable
Business
Advisory
Technology
& Data
Advisory
Committee chair
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Our Executive Committee
SAJID
ARSHAD*
Chief Customer Officer
(Interim)
*Appointed 1 March 2024
CATHY
BRYCE
Managing Director
of Capital Markets
GERALDINE
CASEY
Managing Director
of Retail Banking
HELEN
DOOLEY
Group General Counsel
SKILLS, EXPERTISE AND EXPERIENCE
Sajid joined AIB as Chief Customer Officer (interim) in March 2024. With over
35 years of experience in senior customer, marketing, product, and digital roles
across healthcare, mobile telecommunications, consumer, retail, and financial
services, Sajid’s expertise spans both global and domestic markets. Most
recently, Sajid held Chief Commercial Officer positions at Helping Hands and
Interactive Investor and served as the Chief Customer Officer at Santander UK.
Sajid holds a BA (Hons) Marketing Degree from the University of Stirling, is a
Fellow of the Marketing Society, and currently serves as the President of the
Market Research Society.
Cathy started her career in investment banking with Morgan Stanley and
subsequently ABN AMRO. She joined AIB in 1996, holding a range of
leadership positions in lending roles across both international and Irish
portfolios. In 2018 she joined the National Treasury Management Agency as
Director of the National Development Finance Agency and NewERA. In 2019
she returned to AIB joining the Executive Management team of the Bank as
Managing Director of Capital Markets, her current position. In this role, she
leads the corporate and business areas of the Bank with teams that account
for about one third of AIB’s assets and banking activities, including Goodbody
Stockbrokers. She is a business graduate of Trinity College Dublin and holds
an MBA from INSEAD Business School and completed the General
Management Program in Harvard Business School. Cathy is a member of the
Finance Committee of Trinity College and the Advisory Board of Trinity
Business School. She is also a member of the Diversity Committee for Leinster
Rugby. Cathy was recently appointed (September 2023) as the first female
President of the Banking & Payments Federation Ireland (BPFI).
Geraldine was appointed Managing Director of Retail Banking in October
2023, having previously held the role of Chief People Officer since she joined
AIB in January 2020. She has significant experience in leading large teams
through culture, process and organisational change, and has driven the Bank’s
inclusion, future of work and culture agendas. Prior to joining AIB, she held a
number of senior roles at Tesco Ireland, as a member of the Executive working
across operations, IT, communications and people management positions.
Geraldine holds a Bachelor’s Degree in Commerce from University College
Cork and is a Certified Bank Director, Institute of Bankers. Geraldine also
serves as a Non-Executive Director on the Board of AIB Group (UK) p.l.c.
Helen was appointed Group General Counsel in 2012. She had previously
worked in private practice in the City of London, Hong Kong and Dublin, before
taking up an in-house role as Head of Legal in EBS Building Society in 2005,
which became part of AIB Group in 2011. Over the last 19 years, in addition to
her legal role, Helen has also held the Company Secretary position and
managed the customer care, regulatory compliance and HR functions. Helen is
currently responsible for the Legal and Corporate Governance function.
GRAHAM
FAGAN
Chief Technology
Officer
Graham has held a number of senior management roles in AIB over the last
seven years, most recently as Director of Technology Transformation. He is an
experienced technology leader, having worked across a range of senior roles
in banking and multinational organisations over the last 25 years. He has
extensive experience leading large-scale, skilled teams across all aspects of
technology management, including application development, technology
infrastructure, cyber security and digital transformation. During his time in AIB
he has been instrumental in leading the Group's technology response to Covid,
modernising our data centres and transforming technology operations.
BARRY
FIELD*
Corporate Affairs Director
*Appointed 1 February 2024
Barry was appointed Corporate Affairs Director in February 2024 to lead the
bank’s engagement with internal and external stakeholders, a key role given
the bank’s changing ownership structure and growing customer base. Barry,
who joined AIB’s graduate programme in 2008, has over 15 years’ experience
at the Group spanning financial, regulatory, management accounting and
treasury. As Head of AIB’s Customer Treasury Services in New York, he
delivered AIB’s customer treasury offering across the US. He returned to
Ireland in 2021 as Chief of Staff in the Office of the CEO working directly with
the CEO and Executive Committee to ensure the smooth delivery of the
Group’s overall strategy and the execution of the day-to-day banking agenda.
Barry holds a BA in Business Studies from Griffith College.
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MICHAEL
FRAWLEY
Chief Risk Officer
HILARY
GORMLEY
Managing Director
of AIB Group (UK) plc
ANDREW
MCFARLANE
Chief Operating Officer
DAVID
MCCORMACK
Chief People Officer
SKILLS, EXPERTISE AND EXPERIENCE
Michael joined AIB as Chief Risk Officer in July 2022. A senior risk professional
with a 26 year banking career spanning retail, commercial, wholesale, asset
management, trade finance, strategy implementation and risk management
experience, he also has extensive international experience from his previous
roles at HSBC in the UK, Asia and the Americas. His most recent role prior to
AIB was as Chief Risk Officer of Permanent TSB. Michael holds an MBA from
Columbia Business School, New York, a B.Comm from University
College, Cork and is a CFA holder.
Hilary has been Managing Director of AIB UK since June 2022. She has
worked at the bank for over 30 years in a range of senior leadership positions
which include Group Head of Business Banking and Head of FSG Strategy
Implementation. Hilary has a deep understanding of the bank and the market
more broadly. She brings a wealth of experience having worked across various
sectors including retail, commercial and institutional banking to lead the
expansion of our UK business.
Hilary holds a Bachelor’s degree in Financial Services from University College
Dublin, has completed the Harvard General Management Programme, and is
a member of the Institute of Bankers.
Andrew joined AIB in July 2022 and has over 25 years’ experience working
primarily in the financial services sector, in banks and management consulting
firms. His international career has spanned Canada, Australia, England and
Ireland and he has held posts such as Managing Director, Accenture Financial
Services, Canada and more recently Executive Director of Modernisation &
Corporate Strategy, and Chief External Relations Officer at Payments Canada.
Andrew holds a Bachelor of Business (Banking & Finance) from Monash
University, Melbourne, and a Graduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia..
David has over 20 years' experience in human resources, most recently as
Deputy Chief People Officer at AIB and prior to that held the role of Head of HR
in AIB UK for a number of years. He has been responsible for overseeing the
design and implementation of many significant programmes aligning
employees to the strategic and cultural ambition of the Group. David holds
a Bachelor’s Degree in Business Studies, specialising in HR, from South
East Technological University and has completed the IESE Advanced
Management Programme.
PAUL
TRAVERS*
Managing Director
Climate Capital
*Appointed 19 February 2024
MARY
WHITELAW
Chief Strategy &
Sustainability
Officer
Paul joined AIB as the Head of Energy, Climate Action and Infrastructure six
years ago and was appointed to AIB's Executive Committee as Head of
Climate Capital in February 2024. His primary role is to drive the group's green
lending activities with a focus on renewable energy companies and projects,
and critical infrastructure with a strong ESG element across Ireland, the UK,
Europe and North America. Climate Capital will play a key role in underpinning
the banks various green bond offerings and delivering AIB’s €30bn climate
action lending fund. Prior to AIB, Paul was previously the Head of Macquarie
Capital Ireland, which is an infrastructure and renewables specialist investor
and one of the world’s largest infrastructure asset managers. Paul was also
a Director for numerous investments, He is a qualified accountant.
Mary joined AIB in 2007 and her experience has spanned the retail, corporate
and treasury businesses. She has held a number of senior leadership roles
across the Group including Group Chief of Staff, Head of Strategy & Business
Performance for Corporate and Institutional Banking and Head of Corporate
Treasury Sales. Prior to joining AIB, Mary trained as a Chartered Accountant
and Chartered Tax Advisor with PwC. She is a graduate of University College
Dublin. Mary is also a Non-Executive Director of Goodbody Stockbrokers u.c.
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Board Leadership, Company Purpose,
Culture and Division of Responsibilities
Board Leadership
Purpose, Culture and Values
Role of the Board
The Group is headed by an effective Board which is collectively
responsible for the long term, sustainable success of the Group,
generating value for shareholders and contributing to wider society.
The Board has delegated the day-to-day running of the business to the
Chief Executive Officer ("CEO"), who is supported by the Executive
Committee ("ExCo"), being the most senior management committee of
the Group. The CEO and ExCo have primary responsibility for the day-
to-day operations of, and the development of strategy for the Group.
The Board supports, and strives to operate in accordance with, the
Group’s purpose and values at all times and challenges management as
to whether the purpose, values and strategic direction of the Group align
with its desired culture, or if they do not, whether there are options to
mitigate any potential negative stakeholder impacts.
The Board ensures there is a clear division of responsibilities between the
Chair, who is responsible for the overall leadership of the Board and for
ensuring its effectiveness, and the CEO, who manages and leads the
business. The governance framework and organisational structure is
sufficient to ensure that no one individual has unfettered powers of
decision or exercises excessive influence. Key roles and responsibilities
are clearly defined, documented and communicated to key stakeholders
via the Group’s website (www.aib.ie/investorrelations). The Board is
supported in discharging its duties by a number of Board and
Advisory Committees.
Whilst arrangements have been made by the Directors for the
delegation of the management, organisation and administration of the
Group’s affairs, certain matters are reserved specifically for decision by
the Board. These matters are kept under review to ensure that they
remain relevant and are available on the Group’s website (www.aib.ie/
investorrelations).
Conflicts of Interest
The Board approved Code of Conduct and Conflicts of Interest Policy for
Directors sets out how actual, potential or perceived conflicts of interest
are to be evaluated, reported and managed to ensure that Directors act
at all times in the best interests of the Group and its stakeholders.
Executive Directors, as employees of the Group, are also subject to the
Group’s Code of Conduct and Conflicts of Interests Policy for
employees.
Stakeholder Engagement
The six principal stakeholder groups in AIB are Customers, Employees,
Investors, Society, Suppliers and the Group’s Regulators. In order for
the Group to meet its responsibilities to its stakeholders and to ensure
that stakeholder views are taken into consideration in its decision
making, the Board ensures that effective engagement is maintained with
these groups on a regular basis.
The Group engages with stakeholders through various means such as
face-to-face meetings including regular and structured engagement and
also out of course meetings on specific topics, research, focus groups
and surveys, media engagement, direct partnerships and collaboration,
sponsorship and community initiatives, participation in expert forums
and events, and through the Group’s in-house experts liaising directly
with associated business, public or charitable groups.
The Annual General Meeting (“AGM”) is an opportunity for shareholders
to hear directly from the Board on the Group’s performance and
strategic direction and, importantly, to ask questions. Shareholders are
encouraged to attend and participate in the AGM. Details in relation to
the 2024 AGM along with other shareholder-related information can be
found on page 329 and on the Group’s website at www.aib.ie/
investorrelations.
There is a Designated Non-Executive Director for workforce
engagement whose role is described under "Key Roles &
Responsibilities” below.
Further detail on how the Board engages with each of these groups can
be found on page 81 in the Section 172 Statement.
Culture in AIB
The Board has overarching responsibility for fostering a positive culture
and ensuring that a values led culture is in place throughout the Group
at all times. The Board remains steadfast in its commitment to
continually embed a culture that champions customers’ interests
underpinned by values and behaviours that support the delivery of high-
quality service and fair customer outcomes.
Culture is the key enabler of our strategy and is based on three themes:
embedding customer-centricity, empowering our people, and promoting
innovative approaches to challenges and opportunities. Each of these
underpins the AIB Group strategy. The Group’s Purpose, Ambition and
Culture amplify the commitment to our customers.
How the Board monitors Culture
Culture is embedded in the Governance framework of the Bank Since
the initiation of the Culture Evolution Programme in 2018, AIB has
implemented a three-phased suite of actions including a diagnostic
definition of cultural ambition, and the development and roll-out of
purpose, values and behaviours across the Group.
The Board assesses and monitors culture through regular updates on
the Culture Evolution Programme, People Metrics, Employee
Engagement Approach (internal and external surveys and listening
session) and the AIB Culture Index.Progress on the Culture agenda is
measured across four key areas (i) Accountability and Performance, (ii)
Engagement with employees (iii) Inclusion and Diversity and (i) Talent
Development.The Group Balanced Scorecard reports on key culture
index metrics which align to the Group’s Risk Appetite Statement.
Conduct and Culture Risk is one of the Group’s material risks.
In December 2021, the Board appointed Elaine MacLean as Designated
Non-Executive Director with responsibility for Workforce Engagement.
A number of listening sessions on a range of topics were conducted in
2022 and 2023 with a group of AIB staff, with broad representation
across business areas and regions and these sessions will continue
into 2024.
In 2023, the Board engaged an external culture agency to facilitate
listening sessions with employees across the group to provide insights
on AIB’s culture journey and inform the refreshed purpose statement for
the Group. The results of the listening session provided the Board with
insights that underpin the priority areas for culture and represent the
mindset shifts required to evolve the culture in AIB and support the
strategy for 2024 – 2026.
The monitoring of Conduct risk is fundamental to establishing the right
culture. There is a Board approved Code of Conduct (the “Code”) in place
that supports the Group’s values and helps deliver on the Purpose. The
Code sets out clear expectations for behaviour and how employees and
contractors conduct business. The Code guides behaviours and
emphasises the Group’s commitment to acting ethically, honestly and
with integrity while demonstrating trustworthiness.There is a Board
approved Code of Conduct in place for Independent Non-Executive
Directors. The Group Conduct Risk Framework which is approved by the
Board Risk Committee sets out how the Group manages and governs
Conduct Risk in line with the AIB Group Risk Appetite Statement.
The Three Lines of Defence Model is used to monitor and govern
compliance with the policies that underpin the Group Conduct Risk
Framework.The Code is periodically reviewed by the AIB Group Board
and annually by the Group Conduct Committee and by the Board Audit
Committee. An annual report is provided to the AIB Group Board on the
awareness levels of the Code amongst employees and contractors,
aspects for review, and any breaches which have been identified and
action taken.
The transition to a new strategy period at the end of 2023 presents a
timely opportunity to assess progress on culture, evolve from the current
programme, and embed a target culture that enables AIB’s new strategy
and serves the Group’s customers, communities and colleagues.
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Company Secretary and Head of Corporate Governance
The Directors have access to the advice and services of Mr Conor
Gouldson, the Company Secretary, and Ms Aeilish McGovern, Head of
Corporate Governance, who advise the Board and Board Committees
on all governance matters, and Corporate Governance best practise,
ensuring that Board procedures are followed and that the Group is in
compliance with applicable rules and regulations. Both the appointment
and removal of the Company Secretary is a matter for the Board as
a whole.
Board and Advisory Committees
The Board is assisted in the discharge of its duties by a number of
Board Committees, whose purpose is to consider, in greater depth than
would be practicable at Board meetings, matters for which the Board
retains responsibility. Each Committee operates under terms of
reference approved by the Board and their terms of reference are
available on the Group’s website at www.aib.ie/investorrelations.
The Board governance structure is available on page 69 and reports
from the Board Audit Committee, the Board Risk Committee, the
Nomination and Corporate Governance Committee and the
Remuneration Committee are presented later in the Annual Financial
Report.
In addition to the four main Board Committees, the Board also has
a Sustainable Business Advisory Committee and a Technology and Data
Advisory Committee. Each of the Advisory Committees are comprised of
Non-Executive Directors and members of senior management from
relevant business areas. Overviews of the role and areas of focus of
both the Technology and Data Advisory Committee and the Sustainable
Business Advisory Committee are available on pages 109 to 110.
Additionally, a Chairman’s Committee is established by the Group to
act on behalf of the Board between its scheduled meetings to deal with
matters of an administrative nature, and take decisions on urgent
matters in accordance with the authority delegated to it by the Board, or
as specifically set out in its Terms of Reference. These responsibilities
include consideration of individual cases in line with the requirements
of the Central Bank of Ireland Code of Practice on Lending to Related
Parties. The Executive Directors or any impacted Directors are excluded
from the decision making process for these individual cases.
Division of Responsibilities
Key Roles & Responsibilities
Chair
The Chair leads the Board, setting its agenda, ensuring Directors
receive adequate and timely information, facilitating the effective
contribution of Non-Executive Directors, ensuring the ongoing training
and development of all Directors, and reviewing the performance of
individual Directors. Mr Jim Pettigrew was appointed as Chair on
28 October 2021. His biographical details are available on page 70.
Deputy Chair
The Deputy Chair, Mr Brendan McDonagh, deputises for the Chair as
may be required from time to time and is available to the Directors for
consultation and advice. Mr McDonagh’s biographical details are
available on page 72.
Senior Independent Director
Ms Helen Normoyle is the Board’s Senior Independent Director (“SID”).
Ms Normoyle acts as a conduit for the views of shareholders and is
available as an alternate point of contact to address any concerns or
issues they feel have not been adequately dealt with through the usual
channels of communication. The SID also leads the annual review of the
Chair’s performance and succession planning for the Chair role.
Ms Normoyle’s biographical details are available on page 72.
Designated Non-Executive Director for Workforce Engagement
Ms Elaine MacLean was appointed as the Group’s Designated Non-
Executive Director for workforce engagement in 2020 in order to
enhance the Group’s existing workforce engagement mechanisms.
The purpose of this role is to engage directly with employees, facilitate
two way communication between employees and the Board, and
enhance the Board’s understanding of workforce views. Ms MacLean’s
biographical details are available on page 71.
Independent Non-Executive Directors
Independent Non-Executive Directors provide a key layer of oversight,
scrutinising the performance of management in meeting agreed
objectives and monitoring reporting against performance. They bring an
independent viewpoint to the deliberations of the Board that is objective
and independent of the activities of the management and of the Group.
They constructively challenge and help develop proposals on strategy
and other key matters. Biographical details for each Independent Non-
Executive Director are available on pages 70 to 73.
Chief Executive Officer (CEO)
Dr Colin Hunt manages the Group on a day-to-day basis and makes
decisions on matters affecting the Group. The ExCo assists and advises
him in reaching decisions on the Group’s strategy, governance, internal
controls, performance and risk management. Dr Hunt was appointed
with effect from 8 March 2019 and his biographical details are available
on page 73.
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Board Leadership, Company Purpose, Culture and Division of Responsibilities
continued
Board and Committee Meetings and Attendance
Board
Board Audit Committee
Board Risk Committee
Nomination and Corporate
Governance Committee
Remuneration
Committee
Eligible to
attend
13
Attended
12
Eligible to
attend
14
Attended
14
Eligible to
attend
Attended
Eligible to
attend
Attended
Eligible to
attend
Attended
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
14
14
14
14
14
13
13
13
11
11
11
11
11
11
11
11
11
11
11
11
11
10
11
11
11
11
11
10
11
11
8
8
8
8
8
7
7
8
Anik Chaumartin
Donal Galvin
Basil Geoghegan
Tanya Horgan
Colin Hunt
Sandy Kinney Pritchard
Elaine MacLean
Andy Maguire
Brendan McDonagh
Helen Normoyle
Ann O’Brien
Fergal O’Dwyer
Jim Pettigrew
Jan Sijbrand
Raj Singh
The Board met on 13 occasions during 2023. The Chair and the
Chairs of each Committee ensure Board and Committee meetings are
structured to facilitate open discussion, constructive challenge and
debate. The Board receives a comprehensive executive management
report on a regular basis. The remainder of its agenda is built from the
indicative annual work programme, and includes strategic items for
consideration, any activities out of the ordinary course of business,
requested in depth reviews and scheduled updates on key projects.
There is a set escalation process in place through Executive and
Board Committees which ensures the Board receives the necessary
information at the appropriate time to enable the right decisions to be
taken. The Chair leads the agenda setting process, supported by the
CEO and Group Company Secretary.
In its work, the Board is supported by its Committees which make
recommendations where appropriate on matters delegated to them
under their respective terms of reference. Each Committee Chair
provides an update to the Board on matters considered at the preceding
Committee meeting. The agenda, papers and minutes of Committee
meetings are generally available to all Directors.
Attendance at the Board and Board Committee meetings is outlined
in the table above. Attendance at the Advisory Committees is captured
within their respective Committee overviews. The Non-Executive
Directors also met throughout the year in the absence of the Executive
Directors or other members of management.
Board Effectiveness
Each year the Board evaluates its effectiveness including that of its
Committees, Directors and Chair. As required by the Code, the Board
effectiveness evaluation is externally facilitated at least once every three
years. In 2022, the evaluation was externally facilitated by Praesta
Ireland Limited (“Praesta Ireland”). In 2023, as agreed by the Board on
the recommendation of its Nomination and Corporate Governance
Committee (“NomCo”), the review was internally facilitated by the Office
of the Group Company Secretary.
Board Evaluation Cycle Summary
2023
Internal
Evaluation
2022
External
evaluation
(Praesta
Ireland)
2021
Internal
Evaluation
2020
External
evaluation
(Praesta
Ireland)
The process for the 2023 Board Evaluation consisted of:
1
2
3
4
5
A confidential questionnaire completed by the
Directors, including narrative responses.
Committee-specific confidential questionnaires
completed by the members of each Committee,
including narrative responses.
Feedback from the Chair from his meetings with
each member of the Board.
Feedback from the Senior Independent Director who
met with each member of the Board to review the
performance of the Chair.
Agreement of areas of focus for 2024 relative to the
findings of the evaluation.
In summary, the evaluation confirmed that the Board maintains a clear
understanding of its role and responsibilities and the strategic purpose
of the Group; the Chair continued to perform effectively; there had been
continued progress with the enhancement of meeting papers; the Board
maintains the necessary competencies; there was positive engagement
and communication with management; there was good visibility on
stakeholder engagement; the Board engaged in genuine discussion and
debate and differing views and opinions are welcomed and respected.In
addition, the evaluation confirmed that the Board and Advisory
Committees continued to operate effectively.
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Audit, Risk and Internal Control
The Board has delegated responsibility for the consideration and
approval of certain items pertaining to audit, risk and internal control to
the Board Audit Committee and Board Risk Committee. Where required,
topics are referred onward to the Board as a whole for further discussion
or approval.
Information on the activities of the Board Audit Committee and Board
Risk Committee in 2023 can be found in their respective reports on
pages 85 to 92.
Remuneration
The Board has delegated responsibility for the consideration
and approval of the remuneration arrangements of the Chair, Executive
Directors, ExCo members, the Company Secretary and certain other
senior executives to the Remuneration Committee. A group of senior
management is responsible for recommending to the Board the fees to
be paid to Non-Executive Directors within the limits set by shareholders
in accordance with the Articles of Association.
Information on the activities of the Remuneration Committee in 2023 can
be found in the Report of the Remuneration Committee on pages 98
to 100.
Relationship with the Irish State
The Group received significant support from the Irish State (the "State")
in the context of the financial crisis due to its systemic importance to the
Irish financial system. Following a reduction in its shareholding during
2017, and further reductions to date, the State currently holds 40.77%
of the issued ordinary shares of AIB Group plc.
The relationship between the Group and the State is governed
by a Relationship Framework which is available on the Group’s website
at www.aib.ie/investorrelations.
Within the Relationship Framework, with the exception of a number of
items requiring advance consultation with or consent by the State, the
Board retains responsibility and authority for all of the operations and
business of the Group in accordance with its legal and fiduciary duties
and retains responsibility and authority for ensuring compliance with the
Group’s regulatory and legal obligations.
The matters requiring advance consultation with, or consent from, the
Minister for Finance, are outlined in the Relationship Framework.
The Board is satisfied that the Group has complied with the relevant
provisions set out in the Relationship Framework. The Board is also
satisfied, as far as it is aware, that the Minister for Finance has complied
with the relevant independence provisions set out within
the Relationship Framework.
The findings of the 2023 evaluation were considered by the Board when
updating the Board’s Priorities, which are aligned with the new Strategic
cycle (2024 – 2026). Additionally, the findings of the 2023 evaluation
were considered by NomCo as part of its annual assessment of the
suitability of the composition of the Board and its Committees. The
findings were also considered as part of the process to set the Board’s
Continuous Education Programme.
There was consensus around the priorities for the forthcoming year, and
the key actions agreed by the Board as a result of the evaluation are set
out below:
Overview of Areas of Focus 2024
• Board Papers and Reporting - continue to evolve and improve
meeting papers and presentations by management.
• Board composition and Competence - continue the evolution
of the succession planning process.
• Strategic Focus - increase the Board’s strategic focus on the
Customer in line with the Customer First strategic priority under
the new Strategic cycle (2024 - 2026).
• Strategic Focus - increase the visibility of stakeholder
engagement in regular updates to the Board.
• Culture - evolve the Board’s engagement in the oversight of the
development of the Group’s culture.
Following a review process led by the Senior Independent Director,
there was unanimous agreement by the Non-Executive Directors that
the Chair leads the Board in an effective manner, fulfilling Principle F of
the Code. It was agreed that he demonstrates objective judgement,
promotes a culture of openness and debate, and facilitates constructive
Board relations and the effective contribution of all Non-Executive
Directors. This in turn supports Non-Executive Directors in fulfilling the
requirements of Principle H of the Code in providing constructive
challenge, strategic guidance and holding management to account.
Alongside this process, the Chair conducted evaluations of
individual performance of each of the Directors. The outcome of these
evaluations was positive, noting that each Director continues to
contribute effectively.
The principal outcomes of the overall evaluation will be reviewed and
reassessed as part of the Board’s 2024 performance review. During the
year the Board also monitored progress on the recommendations from
the 2022 external evaluation carried out by Praesta Ireland and noted
that each action had been satisfactorily progressed with some actions
rolling into the agreed actions for 2024.
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Board Focus
Key focus areas
A key focus of the Board in 2023 was on ensuring the delivery of the strategy set in 2020, closing out legacy issues, increasing
operational efficiency and delivering on the organic and inorganic growth agendas. The Board executed its business as usual duties
in line with its work programme, and also focused on a number of additional matters that arose during the year. The following is
a high level overview of material matters considered by the Board throughout the year:
Stakeholder key
Customers
Employees
Suppliers
Investors
Regulators
Society and
Community
Key focus areas for 2023
Topic Considered
Most Impacted
Financial
Culture and
Values
Strategy
Regulatory
Governance
AIB Group plc 2022 Annual Financial Report and related Stock Exchange Announcements and
analyst presentations; Capital Distributions; Macroeconomic Environment; Capital Adequacy
Statement & Liquidity Adequacy Statement; Quarterly Trading Updates; 2023 Half Yearly
Financial Report; 2024-2026 Financial Plan; Consideration of Going Concern and Associated
Matters; Pillar 3 Policy; Recovery Planning and Resolvability Plan; Inorganic Transactions
Financial Update and legacy matters.
Culture Evolution Programme Updates; Risk Culture; People Updates; HR Engagement Strategy
Update; Balanced Scorecard Updates; ESG Transformation Programme Roadmap Update;
Modern Slavery Act Statement; Workforce Engagement; Health & Safety Annual Update,
Speak Up; Code of Conduct.
, Spe
Annual Group Strategy Review; Mortgage Market Strategy; Outsourcing Strategy; Transformation
Plan Implementation; Sustainability Strategy and Conference; Cyber Strategy; NPE Strategy and
Loan Portfolio Sales; Stakeholder Perspectives; Customer First Programme Updates; Corporate
Development Opportunities; External Environment in a Strategic Context; Group Strategy
Development and Approval 2024-2026; Sustainability objectives and strategy; TCFD
recommended disclosures.
Regulatory engagement updates; JST Discussion on Supervisory Review Evaluation Process;
Anti-Money Laundering and Criminal Terrorist Financing Updates; Companies Act, Directors
Compliance Statement; Annual Compliance Statement with CBI Requirements 2015;
Consideration of Regulatory Directive Programmes; CRD IV Compliance Statement; Related
Party Lending (Chairman’s Committee).
Board and Committee Effectiveness Evaluation, Outcomes and Actions; Board Committee Terms
of Reference; Board Succession; Annual General Meeting; Board and Committee Composition
and Appointments; Board Diversity Policy and Targets; Annual Review of Non-Executive Director
Independence; Review of Directors & Officers Insurance; Renewal of Non-Executive Director
Terms; Annual Reappointment of Chair.
Risk Management Group Risk Appetite Statement; Material Risk Assessments; Risk Frameworks and Policies;
Control Effectiveness Review; Annual Review of Group Connected Customers & Large Exposure
Credit Policy; Second Line Opinion Papers on Material Decisions e.g. Strategy, Financial and
Investment Plan.
Regular Updates
Executive Management Updates; Business and Financial Performance; Chair Activities; Board
Committee Updates.
Matters considered by the Board Committees, which in certain cases were also considered by the Board as a whole, are detailed in individual Board
Committee and Board Advisory Committee reports which follow over pages 85 to 110.
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Section 172 Statement and
Stakeholder Management
Section 172
statement
In their discussions and decisions during
2023, the Directors have acted in the way that
they consider, is in good faith, would most
likely promote the success of the Group for
the benefit of its members as a whole, having
regard to stakeholders and the matters set
out in sub-sections 172(1) (a)–(f) of the 2006
UK Companies Act (the Act).
Our Board’s approach to stakeholder engagement is aligned to the UK
Corporate Governance Code 2018, which applies to the Group by virtue
of its premium listing on the London Stock Exchange. Whilst not directly
applicable to the Group given it is referenced in the UK Corporate
Governance Code 2018, the Board continues to recognise the
importance and benefits of considering the spirit intended by Section
172 of the Act as part of it’s decision making process.
A balance of stakeholder interests is deemed to be critical to any
decision taken by the Board. The relevance of each of the stakeholders
defined in Section 172 to the decision-making process, and the method
of engagement, may vary depending on the deliberations being
undertaken by the Board. During 2023, The Group’s key stakeholders
was added to, to include suppliers as a separate category. See further
detail on key stakeholder interaction within “Stakeholder Engagement”
on page 83-84.
The Board considers the matters set out in Section 172 of the 2006 Act
in its discussions and decision-making, including:
(a) The likely consequence of any decision in the long term: The
Board is cognisant of their responsibility to run the Company for the
long-term sustainable benefit of the shareholders and to contribute
to wider society and in doing so, the Directors consider the impact of
their decisions on our key stakeholders. All executive proposals
tabled for decision require clear articulation of the potential impacts
of those decisions under each of the strategic pillars, which drives
consideration of the interests of stakeholder groups within decision
making processes.
(b) the interests of the company's employees: The Board is fully
aware that our people are the key resource and enabler for the
Group to deliver the overall ambition and strategy in a manner
underpinned by the Group’s values. Accordingly, the Board and its
committees ensure that when it is making decisions it has due
regard for its employees.
(c) the need to foster the company's business relationships with
its suppliers, customers, and others: The Board recognises that
our customers are at the core of our strategy and ambition. The
Board considers the impact of all relevant decisions on customers
and suppliers ensuring that the Group strives to meet the full range
of their financial needs conveniently and responsibly.
(d) the impact of the company's operations on the community and
the environment: The Board considers the impact of its decision
making on the community and the environment pursuant to the
Group strategy to deliver a more sustainable future for all. As
a recognised leader of sustainability in Ireland and through our
Pledge to Do More, the Board is committed to building long-term
resilience and sustainability for our business, economy, and society.
(e) the desirability of the company maintaining a reputation for
high standards of business conduct: The Board Risk Committee
approves the Group Conduct Risk Framework which is aligned with
the Group’s Purpose, Strategy and Values. The Board Risk
Committee monitors key updates on conduct risk from management.
The Board Audit Committee has oversight responsibility for the
Code of Conduct, which sets out the core conduct standards which
are applicable to all employees and contractors. The Board always
maintains an open and constructive engagement with its regulators
with respect to business conduct matters.
(f)
the need to act fairly as between Members of the Company: The
Group has a diverse range of institutional and individual investors
and at all times endeavours to act fairly between all members of the
Company. During 2023, the Board represented by the Chair, CEO
and CFO engaged in an ongoing investor relations engagement
programme which allowed the Board to gain feedback and views
from investors. The outcomes of such engagements are
communicated to the other Directors to ensure that the views of all
shareholders and the investment community are considered by the
Board in their decision making.
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Section 172 Statement and Stakeholder Management continued
Decisions Made
Decisions made during the year
The following are some of the decisions made by the Board this year which demonstrate how Section 172 matters have been taken into account as
part of Board discussions and decision-making. In arriving at its decisions during the year, the Board assessed and challenged the implications of
decisions in accordance with the Group’s Strategic pillars which broadly aligned to our stakeholder groups:
Decision
Group Strategy 2024-2026
Refreshed Purpose
Statement
What happened
In December 2023, following extensive review and challenge by the Board during the year and in line with the
Group’s strategic planning process, the Board approved the Group’s Strategy for 2024 – 2026. The Strategy
focuses on three core priority areas: Customer Experience, Operational Efficiency and Greening the Loan
Book and is built on commitments to deliver for all stakeholders.
As part of the strategy formulation, the Board considered several matters which informed the direction of the
strategy and included our (i) Purpose, ambition, and culture, and (ii) drivers, challenges and opportunities while
considering all stakeholder groups in the process.The Board also considered regular updates on progress
against the development of the Strategy. Central to the decision making process was the outcome of a review
and challenge by the Risk function, which overall was supportive of the Strategy and concluded that it
considered the various perspectives of all stakeholders, including whether:
• The Strategy aligned to the Group’s societal and sustainability perspective.
• There was capability to strengthen the employee value propositions through the Strategy initiatives.
• That customer needs and conduct considerations were clearly considered as part of the ‘Customer First‘
programme, driving customer advocacy through enhanced decision making.
• The Group had the ability to execute and monitor the execution and prioritisation of resources.
• The Strategy aligned to investor expectations.
In June 2023, the revised purpose ‘Empowering people to build a sustainable future’, was approved by the
Board following a series of engagements with customers and employees. The purpose was communicated to
employees in October 2023.
In its deliberations, the Board:
• Reviewed the outputs of focus group research and in-depth interviews on the purpose statement, which
were conducted with personal banking, SME customers and colleagues in order to gain a customer
perspective and employee perspective.
• Considered whether the evolved purpose aligned with the strategic direction of the Group and would drive
decision making in the Group towards a more sustainable future.
In 2023, the Board approved the expansion of the AIB Climate Action fund from €10bn to €30bn by 2030 as
part of the Group Strategy 2024-2026. This increase is intended to provide additional sustainable finance to
support customers in the transition to a low carbon economy by 2030, to lend responsibly and to steer our
portfolios towards net zero by 2040 (Agriculture by 2050).
Sustainability – Climate
Action Fund /Climate Capital
Segment
In addition and to ensure real, transformative action, the Board also approved, as part of the Group Strategy
2024-2026, the establishment of a dedicated green financing division, creating a Climate Capital segment to
complement the Group’s other segments - Retail Banking, Capital Markets and AIB UK.
Stakeholder key
Customers
Employees
Suppliers
Investors
Regulators
Society and
Community
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Stakeholder engagement:
The manner in which the Board and wider Group interact with our stakeholders continued to evolve in 2023, with a focus on active engagement to
ensure the interests of all stakeholder groups were taken into consideration in our decision making asset out in the Section 172 Statement.The way
the Board engages with its stakeholders varies and ranges from direct engagement to receiving management reports and updates on relevant
matters which assist the Board in understanding the impacts of the Group’s operations on its key stakeholders.
Our stakeholders
Customers
Our purpose is to empower people to build a sustainable future while remaining at the heart of our customers’ financial lives. The customer
first approach is a core pillar of AIB’s strategy.
How we engaged in 2023:
• Regular updates on KPI’s (Net Promoter Scores, customer journeys and complaints metrics).
• Applied our ‘Customer First’ approach to all decision making on inorganic transactions to ensure customers were safely onboarded to
the Group.
• Refreshed customer centric purpose statement and new customer value approved by the Board.
• Customer segments featured at internal (AlB Alll Employee update) and external events (AIB Sustainability Conference) attended by Board
members setting out the positive sustainability actions taken by customers which are supported by AIB.
• Engagement with customers as part of the AIB Sustainability Conference regional events during Climate Finance week.
Employees
The Group employed 10,049 people across Ireland, the United Kingdom and the United States of America. We aim to ensure that all
employees are engaged and empowered in their roles.Ensuring the Group has an engaged and motivated workforce is critical to delivery for all
our stakeholder groups.
How we engaged in 2023:
• Monitored performance against key metrics (Employee Engagement, Wellbeing, Inclusion and Diversity, Talent Development).
• Held interactive sessions with employees as part of the ‘Risk in Conversation’ and internal events.
• Recognition of employee contributions to AIB through the annual ‘Employee Value Awards’ and the ‘Long Service Recognition Awards’.
• Executive members of the Board participated in the ‘AIB All Employee Event’ which was held in Lynch’s Castle in Galway and South Mall
in Cork.
• Members of the Board visited the Cork City branch at 66 South Mall where they engaged with teams across the branch.
• The Designated Non-Executive Director (DNED) for workforce engagement engaged directly with employees on two occasions in 2023
to facilitate two way communication between employees and the Board, and enhance the Board’s understanding of workforce views.
• Regular Speak Up updates, Ms Sandy Kinney Pritchard, Chair of the Board Audit Committee is the Group’s Whistleblower’s Champion.
• Approved a variable remuneration scheme and introduced health care benefits effective 1 January 2024.
Suppliers
The Group is committed to conducting all its business activities to the expected standard of professionalism and ethical conduct and to support
and improve the communities where we operate from an environmental, social and economic perspective. We expect our suppliers to do the
same through adherence to the Group Responsible Supplier Code. It reflects our values, and it sets out the minimum standards to which we
hold ourselves to, and to which we expect of our suppliers to also adopt.
How we engaged in 2023:
• Group wide third party management programme (TPM)Third Party Management.
• Annual attestation to the Group’s Responsible Supplier Code for larger suppliers.
•
Information requests, direct approaches and campaigns.
xx
Stakeholder key
Customers
Employees
Suppliers
Investors
Regulators
Society and
Community
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Section 172 Statement and Stakeholder Management continued
Our stakeholders
Investors
The Group has a diverse range of individual and institutional investors.
How we engaged in 2023:
• Chair, Chief Executive Officer, and Chief Financial Officer participated in a comprehensive investor relations programme and schedule
of investor engagements throughout the year.
• Annual General Meeting held in May 2023 was attended by all Board members.
• Members of the Board engaged in investor meetings, fireside chats and attendance at various conferences post full year
results announcement.
Regulators
The Board maintains an open relationship with the regulatory authorities which includes the Central Bank of Ireland (CBI), Bank of England,
European Central Bank (ECB), European Commission, Single Resolution Board, Prudential Regulatory Authority (PRA), Financial Conduct
Authority (FCA), and Federal Reserve Bank of New York. The Board strives to ensure that the Group supports financial stability, consumer
protection and market integrity across the jurisdictions in which we operate. Continued strong engagement with our regulators ensures the
Group is set up to meet regulatory requirements and expectations.
How we engaged in 2023:
• Constructive engagement with all supervisors on themes of common interest across consumer, business strategy, capital, liquidity and
risk management.
• Supervisory engagement through regulatory on-site inspections and thematic reviews.
• Regular engagement between the Board and the Joint Supervisory Team (“JST”) through one-to-one interactions with Committee Chairs
and Executive Directors as well as the annual meeting on the Supervisory Review and Evaluation Process.
• Regular updates from the Group Regulatory Relations team.
• The Chair attended the Joint European Central Bank and European University Institute Banking Governance Seminar on ‘Diverse and
effective board and committees in a changing and competitive landscape’.
Society and Community
Our communities, and society as a whole, are to the forefront of all of our stakeholder considerations and are also central to our sustainability
strategy.
How we engaged in 2023:
• Considered stakeholder views in relation to the Group’s sustainability strategy
• Maintained a dedicated focus on the social agenda through updates from the Sustainable Business Advisory Committee on various matters
including vulnerable customers.
• Participated in regional events in Ireland and the UK during Climate Finance Week.
• Engaged with business customers.to hear directly from our customers about how sustainability drives their business strategy and the role of
AIB in supporting their journey.
• Considered the wider impact of decisions taken by the Group on society as part of the governance framework in operation in the Group.
• Chief Executive Officer attended the Conference of the Parties 28 (COP28).
• Approved the Modern Slavery statement for the Group which sets out our Human Rights Commitment and demonstrates how we use the
opportunities available to us to mitigate against Human Rights breaches in business and through our supply chain of almost 4,000 suppliers
and our Responsible Supplier Code.
Stakeholder key
Customers
Employees
Suppliers
Investors
Regulators
Society and
Community
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Report of the Board Audit Committee
“Given the continuing uncertainties
externally, as well as the Group’s
strategic growth ambitions, the
Committee played a critical role
in ensuring the effectiveness of the
control environment.”
Sandy Kinney Pritchard
Committee Chair
Chair Overview
On behalf of the Board Audit Committee (‘the
Committee’), I am pleased to report on the
activities undertaken by the Committee, and
how it has discharged its duties over the
course of 2023.
In line with its Terms of Reference, which can
be found on the Group’s website at www.aib.ie/
investorrelations, the Committee ensured that
it supported the Board in its independent
oversight responsibilities as they relate to the
monitoring of the quality and integrity of the
Group’s financial statements, with reference to
financial and narrative reporting, Non-Financial
Disclosures and disclosure practices. The
Committee is also tasked with reviewing and
monitoring the effectiveness of risk
management and internal control systems. It
also oversees the Group’s Internal Audit
function, ensuring appropriate whistleblowing
arrangements are in place and advising the
Board on the appointment and independence
of the External Auditor on an ongoing basis.
Committee Membership
The Committee currently comprises five Non-
Executive Directors, all of whom are
considered by the Board to be independent
and whom the Board have determined have
the relevant mix of skills, competence and
capability as required under the applicable
regulatory requirements. This includes the
need for recent and relevant financial
experience and competence in accounting or
audit. There were no changes to Committee
composition in the period, with members
further building on their deep understanding
and knowledge of the key judgements and
issues facing the Group in what has been quite
a stable year for the Committee.
To ensure co-ordination of the work of the
Committee with the Board Risk Committee,
two members of the Committee are also
Members of the Board Risk Committee, with
this common membership providing ongoing
oversight of risk and finance issues and
collaborative governance of internal control.
One Member of the Committee is also a
Member of the Sustainable Business Advisory
Committee, and this has been supportive in
ensuring alignment with the work of that
Committee in the area of ESG Disclosure
requirements. To ensure co-ordination with the
work of the Committee and that of the
Technology and Data Advisory Committee, Ms
Ann O’Brien is a member of both Committees.
A number of joint meetings of the Committee
and the Board Risk Committee were also held
during the year to allow discussion on matters
of common interest. The biographies of
Committee Members are set out on pages 70
to 73, with details of the Committee’s
Membership and attendance at meetings
outlined on page 78.
The Chief Financial Officer, Chief Risk Officer,
Group Head of Internal Audit and the Lead
External Audit Partner normally attend all
scheduled Committee meetings. The
Committee also held closed sessions with
these key individuals over the course of the
year, in order to ensure continued open
dialogue.
This year, following consideration by the
shareholders at the Annual General Meeting in
May 2023, PwC were appointed as the
Group’s External Auditor. Throughout the audit
transition period, the Committee has
developed a positive working relationship with
the Lead Audit Partner, Mr Ronan Doyle, which
I look forward to continuing over the years
ahead.
Central to our focus again this year has been
assessing the appropriateness of the
judgements, assumptions and estimates made
by management within the financial reporting
process, as set out in this annual report. The
related Committee deliberations and
conclusions are set out on the following pages.
The matter of Expected Credit Losses (“ECLs”)
is one which the Committee has continued to
pay close attention to in the period, with the
overall outturn of a net charge of €172m
considered to be a suitably conservative
outcome given the higher interest rate
environment. A key element of consideration in
assessing the suitability of the ECL outturn is
asset quality within the Group, a matter which
both the Committee and the Board Risk
Committee have assessed over the course of
the year. The area of Post Model Adjustments
and IFRS 9 model enhancements are items
which will be to the forefront of considerations
by the Committee over the coming years.
Looking to 2024, a key role for the Audit
Committee will be the appointment of a new
Group Head of Internal Audit, and providing
support to ensure the continued effectiveness
of the Internal Audit function when Ms Maria
Rogers departs from the Group in H1. Maria
has delivered significant enhancements to the
Internal Audit function over the past four years,
and on behalf of the Committee, I thank her
and wish her well in her future career.
I would like to take the opportunity to thank my
fellow Committee Members for their
contribution and support over the course of
2023.
Sandy Kinney Pritchard
Committee Chair
Q&A
Q. How has the Committee responded
to evolving ESG Reporting
requirements this year?
A. As external expectations and
requirements continue to evolve, the
Committee has considered the manner in
which the integrity of the ESG disclosures
in this annual report can be assured. The
Committee has received reports from
management regarding the continued
development of a basis of preparation for
the key non financial performance
indicators, which considers, inter alia, a
clear definition of the relevant metrics, the
underlying assumptions, judgements and
estimates applied and data quality and
maturity. This has assisted the Committee
in assessing the consistency and quality of
disclosure practises for ESG metrics.
Integration of the assurance approach for
ESG metrics has also been considered,
with management leveraging and adapting
the existing Group control framework for
financial reporting.
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Report of the Board Audit Committee continued
Key areas of focus
Financial reporting
A key activity for the Committee is the consideration of significant matters relating to the Annual Financial Report, with critical accounting judgements
and estimates and the related disclosures subject to in depth review with management and the External Auditor. A summary of these judgements
and estimates is set out below. Further detail on items i) to v) is available within note 2 “Critical accounting judgements and estimates” on page 235.
COMMITTEE CONCLUSION
In light of the evidence presented by
management, the Committee provided
their continued support of the recognition
policy in place for deferred tax assets.
The Committee also agreed that the
management judgements applied were
appropriately supported by the Group’s
long term financial and strategic plans.
CRITICAL ACCOUNTING ISSUES AND JUDGEMENTS - COMMITTEE ASSESSMENT
KEY ISSUES
COMMITTEE CONSIDERATIONS
i) DEFERRED
TAXATION
The Group have recognised deferred tax assets for unutilised losses of
€2,474 million (€2,742 million in 2022).
The recognition of deferred tax assets is reliant on the assessment of
future profitability and the sufficiency of those profits to absorb losses
carried forward. In assessing the recognition of the deferred tax assets,
significant judgements are made as to the projection of long term future
profitability of the Group, given the period over which recovery extends.
Through its deliberations, the Committee considered a range of positive
and negative evidence presented by management, which is further
detailed on page 235. Based on the Group’s 2024-2026 Strategy and
Financial Plan as the baseline, and the application of a profit growth rate of
2% from 2027, the Committee noted that it will take less than 13 years for
the Irish Deferred Tax Asset to be utilised. The Committee further noted
that c.80% of the Deferred Tax Asset will be utilised within 10 years.
In considering the utilisation period, the Committee noted that there are
inherent uncertainties in the long term financial assumptions and
projections applied, given the range of macroeconomic effects that may
impact the Group’s long term profitability. For the UK, 15 years is the
period that taxable profits are considered more likely than not, with 65%
expected to be utilised in 10 years.
ii) IFRS 9 AND
THE IMPAIRMENT
OF FINANCIAL
ASSETS
The process for undertaking the assessment of the appropriateness of
ECL requires use of a number of accounting judgements and estimates,
some of which are highly subjective and very sensitive to risk factors,
including:
• Changes to the macroeconomic environment;
• The estimation and methodology for post-model adjustments (‘PMAs’);
• The determination of the criteria for a significant increase in credit risk
and
• The application of the definition of default policy for classifying financial
instruments as credit impaired.
In assessing these key judgements and estimates, the Committee
reviewed and approved, as required, updates regarding the ECL outcome
provided by management. Through this assessment, the Committee also
considered inputs from the Risk function on the outcome of assurance
activities relating to ECL levels and the strength of the underlying
governance processes in place to support the ECL calculation.
The Committee is satisfied that the
classification and measurement
of financial assets, stage allocations,
model scenarios inputs, impairment loss
allowances and the net impairment
loss for the year, have been appropriately
determined in accordance
with the Group’s policy, aligned to IFRS
9.
Following detailed assessment of the
conclusions made by management, the
Committee is satisfied that the
judgements and assumptions utilised in
determining the total ECL provision stock
of €1,525 million, and year end charge of
€172 million, are appropriate.
In conjunction with the Board Risk Committee, the Committee assessed
and challenged the inputs and outcome of the review of macroeconomic
scenarios for use in the ECL models, as well as the weightings applied to
those scenarios, in advance of onward recommendation of the scenarios
to the Board for approval.
PMAs, whereby modelled outcomes are adjusted for management
judgements, totalling €534 million were also applied, with the 2023 year
end position assessed as appropriate in the context of emerging
headwinds from inflation and higher interest rates, the execution of the
Group’s Non Performing Exposure resolution strategy and challenges in
model sensitivity.
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COMMITTEE CONCLUSION
Based on the assessments undertaken,
the Committee is satisfied that the
provision for liabilities and commitments
is reasonable, and reflective of the
related uncertainties and the judgemental
nature of key assumptions.
CRITICAL ACCOUNTING ISSUES AND JUDGEMENTS - COMMITTEE ASSESSMENT
KEY ISSUES
COMMITTEE CONSIDERATIONS
iii) PROVISIONS
FOR LIABILITIES
AND
COMMITMENTS
The Group recognises provisions where it has a present legal or
constructive obligations as a result of past events and it is more likely than
not that these obligations will result in an outflow of resources to settle the
obligations. A degree of judgement is applied based on a range of
information available at the time. Judgement is required in determining
whether the Group has a present obligation and whether it is probable that
an outflow of economic benefits will be required to settle this obligation.
This judgement is applied to information available at the time of
determining the provision including, but not limited to, judgements around
interpretations of legislation, regulations and case law depending on the
nature of the provision.
It is accepted that a range of outcomes are possible, however, the
provision in place at 31 December 2023 reflects management’s best
estimate of provision amounts based on the available information.
Further details of the Group’s overall provision for liabilities and
commitments are shown in note 34 to the financial statements. The
individual provisions, set out in note 34, are not considered to have a
significant risk of a material adjustment in the next financial year.
iv) RETIREMENT
BENEFIT
OBLIGATIONS
There is a significant degree of judgement and estimation in the calculation
of retirement benefit liabilities.
The Committee gave due consideration to the reasonableness of defined
benefit obligations and of the underlying actuarial assumptions in use,
including the discount rate, inflation rates and pensions in payment increases,
and approved these assumptions as inputs in the calculation of the IAS 19
pensions position for the AIB Group Irish pension scheme.
Based on the work performed, the
Committee is satisfied that the
assumptions supporting the retirement
benefit obligations are reasonable.
v) INVESTMENT IN
SUBSIDIARY IN
THE SEPARATE
FINANCIAL
STATEMENTS
In the separate financial statements of AIB Group plc the investment in
subsidiary, Allied Irish Banks, p.l.c., is reviewed for impairment when there
are indications that impairment losses may have occurred. An impairment
review is undertaken by comparing the carrying value of the investment in
the subsidiary with its estimated recoverable amount with any shortfall
being reported as an impairment charge in the standalone financial
statements. The estimated recoverable amount is based on a value-in-use
calculation.
Based on the work undertaken, a
reversal of the previous impairment of
€588m due to the impact of the
improvement in the economic
environment on the Group’s three-year
plan is recognised at 31 December 2023.
The Committee considered a number of estimates and assumptions used
in assessing the value in use, including an estimation of expected future
profitability of the subsidiary and the appropriate discount rate to apply.
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Report of the Board Audit Committee continued
CRITICAL ACCOUNTING ISSUES AND JUDGEMENTS - COMMITTEE ASSESSMENT
KEY ISSUES
COMMITTEE CONSIDERATIONS
COMMITTEE CONCLUSION
vi) GOING
CONCERN AND
LONG TERM
VIABILITY
The Directors are required to make an assessment and subsequently
confirm that they have a reasonable expectation that the Group will be able
to continue to operate and meet its liabilities as they fall due for a specified
period. The viability statement must also disclose the rationale for the
Directors’ conclusions and explain why the period chosen is appropriate.
In line with the requirements of the UK Corporate Governance Code, the
Committee also considered whether it had a reasonable expectation that
the Group would be able to continue in operation and meet its liabilities as
they fall due over a set period of assessment, and made a
recommendation to the Board in that regard.
In assessing the Group as a going concern and in support of the viability
statement, the Committee considered a range of factors, including the
Group’s detailed financial planning forecasts, the outcome of which are
reflected in the 2024 - 2026 Strategy and Financial Plan, as well as the
robust capital and liquidity position of the Group, having considered the
potential impact of stress events, including a challenging macroeconomic
global environment.
The Committee also assessed a number of activities undertaken over the
course of the year relating to the risk profile, capital, liquidity and funding
positions, and recovery and resolution planning.
In the absence of any material uncertainties
or doubts as to the Group’s ability to
continue as a going concern, the
Committee recommended to the Board that
the financial statements be prepared on a
going concern basis.
Based on the assessment undertaken, the
Committee was satisfied that three years
was a suitable timeframe for the Viability
Statement, and recommended the Viability
Statement to the Board for approval.
The Viability Statement is available for
review on page 113.
Key areas of focus
External Reporting
During the course of the year, the Committee considered each of the areas above and the significant matters pertaining to this Annual Financial
Report and the Group’s Half-Yearly Financial Report for the six months ended 30 June 2023. The Committee concluded that it could
recommend to the Board for approval on the basis that the annual report and accounts, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. To
enable this detailed assessment be undertaken, five of the 14 Committee meetings held in 2023 specifically related to financial reporting
matters, with a comprehensive governance pathway put in place for all significant matters for Committee review as part of the year end and half
year processes.
In addition, as integral to that review of both this Annual Financial Report and the Half-Yearly Financial Report, the Committee considered the
minutes of the Group Disclosure Committee, an Executive level Committee which is tasked with providing oversight of material Group
disclosures, in advance of making any recommendations to the Board. Periodic Pillar 3 reporting is also subject to robust governance and
review processes, and the Committee reviewed and approved the annual and Half-Yearly Pillar 3 disclosures.
In 2023, the Committee spent a significant amount of time through standalone education sessions and in Committee upskilling on ESG/Non-
Financial reporting requirements, given the enhanced role of the Audit Committee in this regard.
Internal Audit
The Committee is responsible for considering and approving the remit of the Internal Audit function, approving the internal audit plan, reviewing
the three year audit plan and ensuring it has adequate resources and appropriate access to information to enable it to perform its function
effectively and in accordance with the relevant professional standards. It also receives the function’s reports and evaluates the adequacy and
timeliness of the Group’s responses to them. The Committee ensures that the Internal Audit function has adequate standing and is free from
oversight or other restrictions which may impair its independence.
Following approval of the annual audit plan, the Committee receives updates on a regular basis regarding audit plan delivery, and any revisions
to the annual plan, which are considered with due regard for the overall risk profile of the Group. Significant findings of internal audit reports
and management’s responses were discussed at meetings of the Committee throughout the year. Any overdue actions were reviewed and
challenged by the Committee.
In 2023, the revised operating model for GIA continued to embed and mature, building on the work undertaken by the Internal Audit function
over the course of 2022. The primary focus of the operating model work has been to enable the function adapt to the dynamic environment in
which the Group operates, whilst supporting a robust control environment in which audit teams are well placed to provide deep assurance and
valuable insights to the Audit Committee and Group as whole. The Group Head of Internal Audit provides the Committee with regular
assessments of the skills and resources required to deliver the audit plan and whether the internal audit budget is sufficient to recruit and retain
staff, or to procure subject matter expert resources with relevant experience.
The Committee also considered the annual and half-year internal audit opinion in relation to the overall control environment, as well as
enhancements to the methodology utilised to arrive at that assessment. Additionally, the Committee considered GIA’s approach for ensuring
adherence to Article 191 of the Capital Requirements Regulation including the output of the Annual General Risk Assessment relating to
Internal Models and the related annual work plan as detailed in the 2023–2025 Audit Plan. During the year, the Chair of the Committee met
regularly with the Group Head of Internal Audit between scheduled meetings of the Committee to discuss audit issues arising and insights into
the control environment. The Group Head of Internal Audit has unrestricted access to the Chair of the Board Audit Committee.
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Key areas of focus continued
External Audit
Following an external audit tender in 2021, PricewaterhouseCoopers (“PwC”) were appointed as Auditor of the Group with effect for financial year
end 2023. The Committee has primary responsibility for overseeing the relationship with, and performance of, PwC, including a review of the
Auditor’s internal policies and procedures for maintaining independence and objectivity and consideration of their approach to audit quality and
materiality. The Audit Committee reviewed the terms of engagement and monitored the independence and effectiveness of the Auditor, facilitated
by ongoing observation and the consideration of submissions from PwC over the reporting period. The remuneration of the Auditor for the year
2023 was also considered by the Committee and recommended to the Board for approval.
The Committee carefully considered the half-year review report and audit plan as presented by PwC to the Committee, as well as the final
report on the 2023 audit and the year end audit opinion, including key audit matters. The Committee assessed the qualifications and expertise
of their resources as well as considering the Auditor’s findings, conclusions and recommendations arising from their work. In line with
monitoring the objectivity, independence and effectiveness of the Auditor and in accordance with the EU Audit Regulations 537/2014 and
Directive 2014/56/EU, which was transposed into Irish law on 25 July 2018, an update was received in relation to the Group’s policy on the
hiring of former employees of the Auditor. The Group’s policy is that the Auditor and its affiliates may be used for non-audit services that are not
in conflict with the Auditor’s independence and where sound commercial reasons exist. This policy, which outlines the types of non-audit fees
for which the use of the Auditor is pre-approved or requires specific approval, was reviewed and approved by the Committee at its last annual
review cycle, and all non-audit services and fees were approved in accordance with Group policy. Further details on the approach can be found
at the Group’s website at: https://aib.ie/investorrelations. Details of fees paid for audit and non-audit services are outlined in note 13.
Speak Up and Code of Conduct
The Group is committed to providing a safe, respectful and inclusive environment for all staff. The Committee reviews the arrangements in
place that allow employees and contractors to raise any concerns, in confidence, about possible wrongdoings in financial reporting or other
matters. Given this important role in relation to whistleblowing and protected disclosures, the Committee Chair met with the Group Head of
Speak Up to discuss material cases and enhancements to Speak Up arrangements over the course of the year. In 2024, the Group will
continue to enhance and evolve its approach to the management of protected disclosures in line with the definitions sets out in relevant
legislative regimes across the jurisdictions in which AIB has a presence, whilst ensuring the appropriate channels remain in place for all other
concerns which may be raised which are outside the remit of the legislation specifically related to Protected Disclosures The Group has a
Speak Up Policy, which allows employees and contractors to report concerns safely and confidentially about suspected wrongdoing related to
the Group through designated channels, including through a dedicated Speak Up channel and to nominated senior leaders. Annual training on
the Speak Up policy is available, with 99% of the workforce undertaking this training in 2023. The Committee also received updates from
management on the effectiveness of the Group’s Speak Up procedures, supports and policies in place. The Committee further considered
reports on the operation of the Code of Conduct.
The Committee also undertook their annual review of the Code of Conduct Framework. Significant enhancements were made to the Code of
Conduct in order to fully align the Code of Conduct to the new Conduct Standards as set out in within the Individual Accountability Framework
(‘IAF’), as well as further integration of the standards required under the UK Senior Managers and Certification Regime (‘SMCR’).
Internal Controls
The Group’s internal control and risk management systems are embedded within the organisation structure and it is the Committee’s
responsibility to review the adequacy and effectiveness of the control environment on behalf of the Board. Throughout the year the Committee:
• Received updates from the Chief Financial Officer, aligned to the half-year and year end reporting timelines, regarding the testing, operation
and effectiveness of the system of controls over financial reporting and mandatory non-financial disclosures.
• Reviewed and advised the Board on the appropriateness of the Directors’ statements in this Annual Financial Report relating to the Group’s
systems of internal controls.
• Reviewed the outcomes of half-year and year end overall assessments of the control environment undertaken by Group Internal Audit.
• Reviewed quarterly reports from the Group Chief Risk Officer regarding the credit control environment.
• Received updates regarding the evolution of the approach to aligned assurance across the three lines of defence, with progress updates on
delivery of the aligned assurance plan, as well as the key themes arising from the work undertaken across the three lines of defence.
• Received updates from management regarding oversight of internal fraud risk, as well as the internal and external fraud environment. During
the year, accountability for internal fraud at an Executive level was discussed by the Committee, with confirmation provided by the COO
regarding centralised accountability.
The Committee, having assessed the above information over the year, is satisfied that the internal control and risk management framework is
operating effectively.
Subsidiary Oversight
Over the course of the year, the Committee Chair met with a number of the material subsidiary audit committee Chairs outside of the regular
scheduled Committee meetings in order to discuss audit committee priorities and to gain a full understanding of matters of relevance or
concern for the individual subsidiaries. In his role as Chair of the Goodbody Audit Committee, Committee Member Fergal O’Dwyer also
provides a strong link from the Committee to that entity. The Committee Chair also attended a number of material subsidiary audit committee
meetings throughout the Group. The Committee received an annual report from the audit committees of each of AIB Group (UK) p.l.c., EBS
d.a.c., AIB Mortgage Bank u.c., and Goodbody and also regularly reviewed the minutes of those audit committees to ensure effective oversight
and awareness of any issues and discussion themes.
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Report of the Board Risk Committee
“Against the backdrop of a challenging
interest rate risk and inflationary
environment, the Committee
maintained oversight of our key risks,
including those related to borrower
repayment capacity.”
Chair Overview
On behalf of the Board Risk Committee
(‘the Committee’), I am pleased to report on
the Committee’s activities and how it has
discharged its duties during 2023. The purpose
of this report is to provide an insight into the
workings of, and the key matters considered
by, the Committee over the course of the year.
The primary purpose of the Committee is to
assist and advise the Board in fulfilling its risk
governance and oversight role. In addition to
fulfilling its comprehensive responsibilities as
set out in the Committee’s Terms of Reference,
detailed consideration was given to a broad
range of existing risks including the migration
of the performing tracker mortgage loan book
from Ulster Bank, the continued integration of
Goodbody Stockbrokers, emerging risks such
as geopolitical risk and the continued
uncertainty posed by the changing economic
environment including rising interest rates,
inflation and monetary tightening, along with
the impact of these events on the Group’s risk
profile. The Committee also maintained risk
oversight of the Group Operational Resilience
Strategy, reviewing a number of key artefacts
in considerable detail and recommending them
to the Board for approval.
Committee Membership
The Committee currently consists of seven
Non- Executive Directors, all considered by the
Board to be independent. There was no
change to Committee membership during the
year.
To ensure co-ordination between the work
of the Committee and that of the Board Audit
Committee, Ms Sandy Kinney Pritchard,
Chair of the Board Audit Committee, and I are
members of both Committees. This approach
assists with providing effective oversight of risk
and audit and finance matters. To ensure co-
ordination between the work of the Committee
with that of the Sustainable Business Advisory
Committee, Mr Raj Singh and Mr Jan Sijbrand
are members of both of these Committees. To
ensure co-ordination with the work of the
Committee and that of the Technology and
Data Advisory Committee, Ms Tanya Horgan
and Mr Andy Maguire are members of both
Committees. To ensure the Group’s
remuneration policies and practices are
consistent with and promote sound and
Brendan McDonagh
Committee Chair
effective risk management, I also sit on the
Remuneration Committee.
The Group Chief Risk Officer has unrestricted
access to the Committee and attends all
Committee meetings. The Chief Financial
Officer, Group Head of Internal Audit, the lead
External Audit partner and the Chair of AIB
Group (UK) p.l.c. are also invited to attend all
Committee meetings.
Looking ahead to 2024, the Committee’s focus
will continue to be on ensuring appropriate
oversight of the Group’s risk appetite, risk
management structure, frameworks and
policies to ensure safe delivery of the Group
Strategy in an appropriately risk controlled
manner. There will also be continued emphasis
on management of emerging risks including
Change Execution and Transformation Risk as
well as the threats posed from the external
cyber landscape and macroeconomic risk
issues such as interest rate, inflation and cost
of living.
People risk and the ability to retain key senior
talent will likely be a focus for the Committee
given the current remuneration restrictions in
place. Such risk areas will continue to be
monitored through the ongoing reporting
provided to the Committee. The Remuneration
Committee and the Nomination and Corporate
Governance Committee have a key role in the
management and mitigation of these risks on
behalf of the Board and I endorse completely
the words of my colleague Elaine MacLean
who chairs both of these committees in her
overview and Q&A sections of those
committees’ reports. While the talent retention
risk presented by the remuneration restrictions
sits with the Board in the first instance, as
things stand, the ability to meaningfully
mitigate this risk sits outside of the Board’s
direct control.
The oversight of the delivery of the Group’s
IRB Enterprise Programme will also continue
to be a key focus area of the Committee during
2024.
In what has been another busy year for the
Committee, I would like to thank my fellow
Committee Members and Executive colleagues
for their significant contributions over the past
twelve months.
Q&A
What do you foresee as the key
emerging risks likely to face the
Committee in the next 3 years?
A. Over the next 3 years, the risks
associated with the external cyber
landscape, geopolitical risks and the ability
to retain key talent are all likely to become
more prominent on the Committee’s
agenda.
How is the Board Risk Committee
overseeing the risks associated with
climate change?
A. As part of the Material Risk
Assessment process, the Committee
reviewed Climate & Environmental Risk
in detail, and recommended to the Board
that it be considered as a material risk,
reflecting its importance as a key strategic
pillar, its pervasiveness to other risks,
regulatory developments, shareholder
and societal expectations and its potential
significant impact over time on the Group
and wider society. The Committee also
reviewed in detail and approved the
Climate & Environmental Risk framework,
a foundational step in an evolving journey
for Climate & Environmental Risk
management in the Group.
Brendan McDonagh
Committee Chair
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Key areas of focus
PRINCIPAL RISK CONSIDERATIONS
Operational Risk
The Committee reviewed the ongoing operational risk profile throughout 2023. Given the level of change in the Group, the Committee
remained focused on Execution Risk, Change Risk and People Risk, recognising the challenges associated with delivering the business as
usual agenda alongside additional business demands arising from the delivery of key change initiatives. These included regulatory
programmes, responding to global financial events and integration following delivery of the Group’s inorganic growth strategy in a customer
focussed, safe and controlled manner. As part of the Group Material Risk Assessment approved by the Board in July 2023, upon the
recommendation of the Committee, People risk was approved to be a sub risk of Operational risk as it was primarily deemed material through
its interconnectedness with operational risk. Aside from the operational aspect, ongoing remuneration restrictions, which continue to put the
Group at a significant disadvantage to its domestic and non-domestic competitors in the retention and attraction of key talent, increase the risk
of losing senior talent in the organisation, damaging market credibility and adversely affecting strategy execution.
The Committee maintained risk oversight of the delivery of the Group’s refreshed Operational Resilience Strategy including reviewing a number
of key operational resilience related items in considerable detail and recommending them to the Board for approval.
Periodic updates were received with respect to third party risk management, providing oversight of key outsourcing and critical arrangements
across the Group. The Committee also reviewed in detail and recommended the Group Outsourcing Strategy to the Board for approval,
ensuring that an appropriate framework is in place so that outsourcing decisions are made in a risk-controlled manner and in line with the
Group’s Business Strategy.
During 2023 the Committee maintained risk oversight of Cyber Risk and IT Risk, with ongoing review of the Cyber and IT risk profiles
throughout the year. The Committee also continued to receive regular updates on Cyber Security covering the main internal and external cyber
threats facing the Group, and including updates on the findings from cyber simulation exercises run during the year.
Credit Risk
The Committee continued to regularly consider the overall asset quality and credit risk profile of the Group, with a particular focus in 2023 on
credit performance given the challenging interest rate risk and inflationary environment. The Credit Risk profile was reported to the Committee
as remaining stable throughout 2023 and the Committee remained alert to any potential emerging signs of deterioration through regular
monitoring of the credit risk profile and overall business performance, as well as considering deep dives on the property loan book. There was
also continued focus on the Group’s credit control environment. In conjunction with the Board Audit Committee, the Committee reviewed,
challenged, and approved the macroeconomic scenarios for use in the Group’s Expected Credit Loss models.
Financial
The Committee received regular updates with respect to financial risk throughout 2023 including the impact of financial market volatility on the
Group’s overall risk profile as a result of inflation, interest rate rises and the collapse of Silicon Valley Bank and Credit Suisse. The Committee
also had an enhanced oversight of the integrated management of the Group’s balance sheet from a risk perspective and considered financial
risk deep-dives on Interest Rate Risk in the Banking Book, the Structural Hedging Programme and Securities Financing.
Climate and Environmental Risk
Climate Risk continued to be a key area of focus for the Committee in 2023. Recognising its importance as a key strategic pillar, its
pervasiveness to other risks, regulatory developments, shareholder and societal expectations and its potential significant impact over time on
the Group and wider society, the Committee reviewed Climate & Environmental Risk in detail, and recommended to the Board that it be
considered as a material risk. The Committee also reviewed in detail and approved the Climate & Environmental Risk framework,
a foundational step in an evolving journey for Climate & Environmental Risk management in the Group.
Conduct Risk and Culture Risk
The management of Conduct Risk and ensuring fair outcomes for customers continued to be a core focus for the Group. The Committee
received regular reporting throughout the year regarding the status of the Conduct Risk profile, including updates on open restitutions,
customer complaints metrics and the onboarding of Ulster Bank customers. The Committee also received updates on the status of the Culture
Risk profile during the year. As part of the material risk assessment process, the Committee approved and recommended to the Board that
Culture Risk be maintained as a material risk but moved from Operational Risk to Conduct Risk. The amalgamation of Culture Risk within
Conduct Risk commenced and further integration through frameworks, policies, procedures and metrics is planned for 2024.
Regulatory Compliance Risk
The Committee continued to maintain oversight of the Group’s adherence to and delivery of regulatory compliance commitments. Throughout
the year, the Committee received regular updates from the Chief Risk Officer and the Group Chief Compliance Officer regarding the status of
the regulatory compliance risk profile including updates on prudential regulation, conduct of business regulation, Financial Crime and Data
Protection. The Committee also received updates regarding the delivery of specific regulatory change programmes, including the Operational
Resilience programme and the European Banking Authority Loan Origination and Monitoring programme.
Financial Crime risk was considered throughout the year, through ongoing reporting as well as standalone updates provided by the Money
Laundering Reporting Officer. The Committee received reports regarding the outcome of the 2023 Group Financial Crime Business Risk
Assessment, which reviewed the Anti-Money Laundering/Counter Terrorist Financing and Financial Sanctions control environment across
the Group.
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Report of the Board Risk Committee
Key areas of focus continued
Capital Adequacy Risk, and Liquidity and Funding Risk
The Committee received regular updates throughout 2023 with respect to the status of the Capital Adequacy Risk profile and the Liquidity
and Funding Risk profile. The Committee assessed reports from management to ensure that the Group had appropriate buffers in place in
excess of the Group’s own minimum capital and liquidity targets, as well as regulatory capital and liquidity requirements. The Committee
also reviewed capital, funding and liquidity planning, including consideration of Group ICAAP and ILAAP reports, with particular reference to
the contingent capital and the related Group wide stress test scenarios, including climate stress testing. Following an in-depth review in
conjunction with the Board Audit Committee, the Committee recommended macroeconomic scenarios for use within the ICAAP to the Board
for approval. The Committee was satisfied that the capital and liquidity adequacy of the Group has been well demonstrated in a range
of scenarios.
Business Model Risk
The Committee received regular reports regarding the status of Business Model risk in the context of delivery of the Financial Plan and
medium-term targets throughout 2023. The Committee continued to focus on strategic execution risk and the potential risks arising from
the delivery of the Group’s inorganic growth initiatives, both in terms of the business model risk profile and the operational risk profile.
In providing oversight of the risks associated with these key change initiatives, the Committee received updates on the onboarding of the
portfolios and the manner in which they were being integrated into the overall risk management framework of the Group. The Committee
remains cognisant of the potential risks arising from any deterioration of the economic environment, and how this might impact Business
Model Risk and so this will remain an area of continued focus in 2024.
Model Risk
The Committee continued to receive regular reports on the Model Risk profile and model capabilities across the Group, as well as progress
against key regulatory deliverables. The Committee maintained risk oversight of the delivery against the IRB programme receiving regular
programme updates throughout the year. Regular Model Risk Reports for all model types were also considered, with an assessment of
model risk improvements and progress against deadlines undertaken. The status of the quality and adequacy of models were assessed
through independent validation, the outcome of which was also reported to the Committee.
OTHER RISK CONSIDERATIONS
Risk Appetite, Risk Profile & Risk Strategy
The Committee reviewed and recommended the 2024 Group Risk Appetite Statement (‘RAS’) to the Board for approval during the year and
also exercised oversight of performance against the 2023 Group RAS, making recommendations to the Board as appropriate. Performance
against the 2023 Group RAS was overseen through the ongoing monitoring of the risk profile against agreed Group RAS metrics whilst
ensuring alignment to the Group’s strategic objectives. The Committee also reviewed regular reports from the Chief Risk Officer which
provided an overview of the status, profile and trajectory of the Group’s key material risks and considered and recommended the
assessment of the material risks facing the Group to the Board for approval.
Regulatory Engagement
Throughout the year, the Committee considered regular updates regarding the status of Risk Mitigation Programme action plans including
BCBS 239, as well as the upstream regulatory horizon. The Committee also considered and recommended, as appropriate, management
action plans put in place to address findings identified as part of regulatory inspections.
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Report of the Nomination and
Corporate Governance Committee
“The focus of the Committee in 2024
remains on ensuring that the Board,
its Committees and the Executive
are equipped with the necessary skills
and diversity to effectively guide the
Group towards sustained success.”
Chair Overview
This report provides an overview of the
Nomination and Corporate Governance
Committee’s key areas of focus for the year
ended 31 December 2023 and its priorities for
the year ahead. The focus of the Committee in
2024 remains on ensuring that the Board, its
Committees and the Executive are equipped
with the necessary skills and diversity
to effectively guide the Group towards
sustained success.
In 2023, the Nomination and Corporate
Governance Committee completed its annual
assessment of the independence of the Non-
Executive Directors.
On the recommendation of the Committee,
the Board reappointed Mr Fergal O’Dwyer for
a second three-year term, and Mr Brendan
McDonagh and Ms Helen Normoyle for an
additional term of one-year each.
The Committee has also continued its focus on
the development of the succession plans and
processes for the members of the Group’s
Executive Committee and Heads of Control
Functions as they are critical to the delivery
of the Group’s strategy. Central to such
considerations are diversity, gender balance
and the tailored development of core
competencies that reflect a changing business
and regulatory environment.
In addition to its review of the Corporate
Governance Frameworks, the Committee also
reviewed the Policy for the Assessment of
Suitability of Members of the Board and the
Code of Conduct & Conflicts of Interest
Policy for Directors and there were no
material changes.
Committee Membership
The Nomination and Corporate Governance
Committee consists of four members: three
Independent Non-Executive Directors, namely
myself, Mr Brendan McDonagh and Ms Helen
Normoyle, Senior Independent Director, and
the Chair of the Board, Mr Jim Pettigrew.
In addition to being a Committee member,
Mr Brendan McDonagh is also the Chair of
the Board Risk Committee and this cross-
membership supports information flow and
Elaine MacLean
Committee Chair
Q&A
Q. How mature are your Executive
succession plans?
A. One key focus area for the Committee
in 2023 was in the area of Executive
succession. A number of Executive
Committee positions became available,
and the Group was fortunate to be able to
make three appointments of “ready now”
candidates from its internal talent pool.
This was the result of deliberate investment
in development and progression initiatives
in prior years.
The Committee considers Executive
succession arrangements regularly and
for Executive Committee and Key Control
Function roles reviews the emergency
cover arrangements and the internal talent
bank, across males and females from those
who are considered “ready now” to those
ready over longer periods (up to 3 years) for
whom development plans are put in place.
The Committee also considers external
mapping of talent and has, for many of the
foregoing roles, identified potential external
candidates, although our success is limited
in attracting this talent to the Group or to
enter a process.
co-ordination between the work of the
two Committees. The biographies of the
Committee Members and a record of
attendance at meetings are set out on pages
70 to 73 and page 78.
Meeting Participation
The Chief Executive Officer and Chief People
Officer attended Nomination and Corporate
Governance Committee meetings except
where the business of the meeting related
to their successors. The Committee also met
with no management present during 2023.
A summary of the other key areas of focus
for the Committee throughout 2023 is set
out below.
Q. Do the remuneration restrictions have
any impact on succession?
A. The market for talent in our core markets
in Ireland and the UK, which are at full
employment, is very intense. This has
implications for all competing employers
in attracting new talent and retaining the
valued talent they have. AIB, which
remains subject to the Irish government
remuneration restrictions, is at a material
disadvantage to domestic and international
competitors in the market for talent. This
becomes very apparent during succession
planning and identifying potential
candidates for Executive Committee and
other senior management positions.
The remuneration restrictions have
directly resulted in the withdrawal of
most candidates at a very early stage in
these processes.
The Group is fortunate to have the talent
pool which it has in making a number of
confirmed and pending appointments to
ExCo during 2023 from internal resources.
This is not sustainable long term however,
as every well governed business which
places value on diversity needs to
continually inject new talent, fresh ideas and
external perspectives into its leadership.
I would like to thank my fellow Committee
Members for their continued commitment
through another busy year.
Elaine MacLean
Committee Chair
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Report of the Nomination and Corporate Governance Committee continued
Key areas of focus
Board Succession Planning, Renewals and Board Committee Composition
The size, structure, composition and succession plan of the Board, Board Committees and Executive Committee was a standing item on the
agenda of scheduled Committee meetings in 2023.
Chair Reappointment
In line with the CBI Corporate Governance Requirements for Credit Institutions 2015, the Board approved the reappointment of Mr Jim
Pettigrew as Chair of the Board on the recommendation of the Committee.
Executive Succession Planning & Appointments
Review of the Executive Committee composition and succession planning was considered on an ongoing basis by the Committee during the
year. In addition to broader succession planning activities, the Committee considered specific proposals regarding Heads of Control Function
and Executive Committee member appointments. The Committee approved the appointment of preferred candidates for the roles, of the
Chief People Officer, Chief Technology Officer and Managing Director, Retail Banking.
Induction and development of the new Executive Committee leaders will be a key priority for 2024 with robust personal development plans in
place to meet specific individual needs including Executive Committee Buddies, Board Mentors and External Coaches to ensure
accountability for personal development goals.
Diversity
The Board recognises the importance of gender, social and ethnic diversity, and the strengths diversity brings to Board effectiveness.
Diversity is taken into account in its broadest sense when considering succession plans and appointments at both Board and the Executive
Committee, as well as more broadly across the Group. Over the past 12 months, there has been significant focus on diversity at Board and
management level as a result of the updated guidance and targets issued by the UK Listing Authority. The Board Diversity Policy was
updated in 2023 to include a target that a woman holds at least one of the senior Board positions of Chair, Chief Executive, Senior
Independent Director or Chief Financial Officer. Our gender diversity statistics for the Board can be found on pages 71 and 96. Executive
management, which for this purpose is considered to be the Chief Executive Officer, his direct reports, and the Group Company Secretary
was 38.46% female and 61.54% male.
Board Evaluation
In accordance with the CBI Corporate Governance Requirements and the UK Corporate Governance Code the Board is required to complete
an annual evaluation of its performance, which should be externally facilitated at least every three-years.
Having successfully concluded a comprehensive external evaluation in 2022 facilitated by Praesta Ireland, the 2023 process was internally
facilitated by the Company Secretary and Corporate Governance Teams. The key findings of the evaluation review are described on
page 78.
Corporate Governance
The Committee oversees and monitors corporate governance arrangements and makes recommendations to the Board to ensure that the
standards and arrangements across the Group are consistent with existing corporate governance standards and emerging best practice.
The Committee undertook its annual schedule of work in relation to the Group’s governance arrangements, corporate governance
compliance, and related policies including:
• a review of the internal policies on the assessment of suitability of members of the Board and key function holders;
• a review of the Board’s Code of Conduct and Conflicts of Interest Policy for Directors;
• a review of the Board Diversity Policy and diversity targets;
• oversight of compliance with applicable corporate governance requirements and guidelines;
• oversight of upstream regulatory developments in corporate governance and best practice;
• oversight of the internal Board Effectiveness Evaluation 2023; and
• consideration of workforce engagement processes via the Designated Non-Executive Director, who is also Chair of the Committee.
Further details on a number of these matters are available in the Corporate Governance Report.
Subsidiary Board and Committee Composition
The Committee considered a number of executive and non-executive appointments to the Group’s material subsidiary Boards and the
respective Board Committee membership, including for AIB Group (UK) p.l.c., AIB Mortgage Bank u.c., EBS d.a.c. and Goodbody
Stockbrokers u.c. Such appointments included the recommended appointment of independent Non-Executive and Executive Director
members of the Group Board to the subsidiary Boards and Committees, where established, to ensure appropriate information flow, oversight,
consistency and alignment between the Group and its subsidiaries.
The Committee also considered Non-Executive Director term anniversaries and made recommendations for re-appointment to the subsidiary
Boards where relevant, taking account of ongoing suitability considerations.
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Board Composition and Succession
Professional Development and Continuous Education Programme
The Board’s professional development and continuous education
programme continued throughout 2023 and was designed in conjunction
with the indicative work programme to ensure that training was delivered
at a time when it would be of most benefit or relevance to the Board.
The sessions were delivered by a mix of internal and external subject
matter experts and the topics included sustainability, climate related
disclosures, director duties, cybersecurity, operational resilience
(including vital business services), financial crime (including AML, ABC
& CFT), CBI fit and proper requirements, CBI Individual Accountability
Framework and Senior Executive Accountability Regime, credit risk
models and Market Abuse Regulation. Directors also have access to an
online Corporate Governance Library and a suite of AIB Group specific
online training courses. Additional training and individual sessions with
subject matter experts on areas of interest to the Directors are facilitated
upon request.
A structured induction programme is ready to be delivered to any
incoming Director and includes a series of meetings with senior
management, relevant briefings, together with any specific training
identified during the course of the appointment of the individual.
Access to Advice
There is a procedure in place to enable the Directors to take
independent professional advice, at the Group’s expense, on matters
concerning their role as Directors. The Group holds insurance to protect
Directors and Officers against liability arising from legal actions brought
against them in the course of their duties.
Board Composition
At 31 December 2023, the Board consisted of the Chair, who was
deemed independent on appointment, twelve Independent Non-
Executive Directors and two Executive Directors, being the Chief
Executive Officer and the Chief Financial Officer.
A number of Board Advisory Committee changes occurred in 2023, see
table below.
Time commitment
Non-Executive Directors are required to devote such time as is
necessary for the effective discharge of their duties. The expected time
commitment of the Chair and Non-Executive Directors is agreed and set
out in writing in a letter of appointment. This is issued following
confirmation of an individual’s capacity to take on the role and involves
an assessment of existing external commitments and demands on time.
Any changes, such as additional external appointments which could
impair the ability to meet the above, can only be accepted following
approval of the Chair and Group Company Secretary and in certain
cases the approval of the Board as a whole and/or the Central Bank of
Ireland, must also be sought.
Board Advisory Committee Changes in 2023
2023 Changes
Committee Roles
There is a procedure in place to assess and seek Board approval for
any additional external roles proposed by Directors to ensure that there
will be no impact on their ongoing suitability or ability to continue to
dedicate sufficient time to their Group roles.
The estimated minimum time commitment set out in the letters of
appointment is 30 to 60 days per annum for Non-Executive Directors
and 100 days per annum for the Chair, including attendance at
Committee meetings.
Balance and Independence
Responsibility has been delegated by the Board to the Committee for
ensuring an appropriate balance of experience, skills and independence
on the Board. Non-Executive Directors are appointed so as to provide
strong and effective leadership and appropriate challenge to
management. The independence of each Non-Executive Director is
considered by the Committee prior to appointment and reviewed
annually thereafter. It was determined that the following Non-Executive
Directors in office during 2023, namely Ms Anik Chaumartin, Mr Basil
Geoghegan, Ms Tanya Horgan, Ms Elaine MacLean, Mr Andy Maguire,
Mr Brendan McDonagh, Ms Helen Normoyle, Ms Ann O’Brien, Mr Fergal
O’Dwyer, Ms Sandy Kinney Pritchard, Mr Jan Sijbrand, and Mr Raj
Singh were independent in character and judgement and free from any
business or other relationship with the Group that could affect their
judgement. This conclusion was reached after consideration of all
relevant circumstances that are likely to impair, or could appear to
impair, independence.
In determining independence, the Board had particular regard to the fact
that Ms O’Brien and Mr Singh were appointed in 2019 following their
nomination by the Minister for Finance in Ireland, who at 31 December
2023 controlled 40.77% of the Group’s issued share capital. In
determining that they should properly be considered to be independent,
the Board gave due regard to the following matters: the nature and
history of the shareholding and the alignment of the Irish State’s
interests with other shareholders, the nature of the individuals
nominated and the process followed in identifying them for nomination,
their performance and nature of their contribution to the business of and
matters discussed at the Board, and the Relationship Framework with
the State. The Board is satisfied that in carrying out their duties as
Directors, Ms O’Brien and Mr Singh are able to exercise independent
and objective judgement without external influence.
The Chair, Mr Jim Pettigrew, was determined as independent on
appointment.
Joined/Stepped Down/
Appointed/Resigned
When
Graham Fagan
Member of the Technology and Data Advisory Committee
Joined
18 October 2023
David McCormack
Member of the Sustainable Business Advisory Committee
Joined
18 October 2023
Geraldine Casey
Member of the Sustainable Business Advisory Committee
Stepped Down
18 October 2023
Fergal Coburn
Member of the Technology and Data Advisory Committee
Resigned
20 March 2023
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Report of the Nomination and Corporate Governance Committee continued
Inclusion and Diversity
Employee inclusion and diversity in the Group is addressed through
policy, practices and values which recognise that a productive workforce
comprises of diverse backgrounds, cultures, experiences,
characteristics and work styles. The Group has implemented a Diversity
and Inclusion Code and opposes all forms of discrimination. The efficacy
of related policy and practices and the embedding of the Group’s values
is overseen by the Board which, in 2023, endorsed the Group’s inclusion
and diversity strategy supported by short-term activities and targets as
one of the key focus areas of the Culture Programme. The Board also
considers inclusion and diversity within the context of the Group’s
People strategy and Future of Work strategy.
The Board is supported in its oversight by its Committees, specifically by
the Nomination and Corporate Governance Committee which considers
diversity as a key element within the context of succession planning for
the Executive Committee and its succession pipeline within the Group.
In addition, the Sustainable Business Advisory Committee considers
inclusion and diversity in the Group as it relates to that Committee’s role
in overseeing the Group’s efforts to promote economic and social
inclusion as part of the sustainability agenda.
With regard to diversity among Directors, there is a Board Diversity
Policy in place which sets out our commitment to, and also details our
approach to achieving, our diversity ambitions. This policy is available
on the Group’s website at www.aib.ie/investorrelations.
The Committee is responsible for developing measurable objectives to
effect the implementation of this Policy and for monitoring progress
towards achievement of the objectives. The Policy and performance
relative to the target is reviewed annually by the Committee, in
conjunction with Board succession and skills planning, and any
proposed changes to the Policy are presented to the Board for approval.
The Board’s target, as set out in its Diversity Policy, is that it shall
maintain at least 40% female representation. In addition, at least one
Board member shall be from a minority ethnic group and at least one
senior Board position shall be held by a female.
The Board recognises that diversity in its widest sense is important,
is inclusive of all individuals and is focused on ensuring a truly diverse
Board. The Board embraces the benefits of diversity among its
members and through its succession planning, is committed to
achieving the most appropriate blend and balance of diversity possible
over time.
In terms of implementation of the Board Diversity Policy, the
Committee reviews and assesses the Group Board composition and has
responsibility for leading the process for identifying and nominating,
for approval by the Board, candidates for appointment as Directors.
In reviewing the Board composition, balance and appointments, the
Committee considers candidates on merit against objective criteria and
with due regard for the benefits of diversity, in order to maintain an
appropriate range and balance of skills, experience and background
on the Board and in consideration of the Group’s future strategic plans.
Where external search firms are engaged to assist in a candidate
search, they are requested to aim for a fair representation of both
genders to be included in the initial list of potential candidates, so the
Committee has a balanced list from which to select candidates
for interview.
At 31 December 2023, the percentage of females on the Board stood
at 40% and one Director was from a minority ethnic group, thereby
meeting the Board’s Diversity Policy targets as well as regulatory
requirements on gender diversity and ethnicity. Additionally, in
compliance with the UK Listing Rule Requirements, at least one senior
Board position, that of the senior independent director, was held by
a female.
Gender and Ethnic Diversity
This tables below outline the current gender and ethnic diversity of the Board and Executive Management as at 31 December 2023 reflecting data
gathered through self-identification.
Gender
Men
Women
Number of
Board members
9
6
Percentage of
the Board1
60 %
40 %
Number of senior positions
on the Board2
3
1
Number in
Executive
management3
8
5
Percentage of
Executive
management3
61.54 %
38.46 %
1. The Board comprises the Non-Executive and Executive Directors.
2. Senior positions on the Board comprises the Group Chair, Chief Executive Officer, Chief Financial Officer and Senior Independent Non-Executive Director.
3. Executive management comprises the Chief Executive Officer, their direct reports, and the Group Company Secretary.
Ethnic Diversity
White Irish or other white
(including minority-white groups)
Mixed/multiple ethnic groups
Asian/Asian Irish
Black/African/Caribbean/ Black Irish
Other ethnic group, including Arab
Number of
Board members
Percentage of
the Board1
Number of senior
positions on the Board2
Number in
Executive management3
Percentage of
Executive management3
14
0
1
0
0
93 %
— %
7 %
— %
— %
4
0
0
0
0
13
0
0
0
0
100 %
— %
— %
— %
— %
1. The Board comprises the Non-Executive and Executive Directors.
2. Senior positions on the Board comprises the Group Chair, Chief Executive Officer, Chief Financial Officer and Senior Independent Non-Executive Director.
3. Executive management comprises the Chief Executive Officer, his direct reports, and the Group Company Secretary.
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Board Succession Planning and Appointments
The review of the appropriateness of the composition of the Board and
Board Committees is a continuous process, and recommendations for
appointment are made based on merit and objective criteria, having
regard to the collective skills, experience, independence and knowledge
of the Board along with its diversity requirements. The Board
Succession Plan is reviewed by the Committee alongside the Board
Skills Matrix at each scheduled meeting to allow for proactive
and continuous succession planning and, in turn, the timely
commencement of Director search processes.
The Board Succession Plan details planned Board composition as well
as Board Committee membership, the likely tenure of Non-Executive
Directors and upcoming actions to be undertaken. The skills included in
the Board Skills Matrix were identified taking into account the Group’s
strategic priorities and relevant regulatory requirements. Each Director
was selected for appointment on the basis of their knowledge, skills and
experience which enable them to effectively discharge their duties,
ensure the effective governance of the Group, and contribute to its long
term, sustainable success. The biographies on pages 70 to 73 set out
the key skills and experience which each Director brings to the Board.
In addressing appointments to the Board, a role profile for the proposed
new Directors is prepared on the basis of the criteria laid down by the
Committee, taking into account the existing skills and expertise of the
Board and the anticipated time commitment required. The services of
experienced third party professional search firms are retained for Non-
Executive Director appointments where required and deemed necessary
by the Committee. In all Director selection activity, the Group ensures a
formal and rigorous process is followed.
Prior to a recommendation for appointment of any given candidate,
a comprehensive due diligence process is undertaken, which includes
the candidate’s self-certification of probity and financial soundness as
well as external checks and enhanced due diligence. The due diligence
process enables the Committee to satisfy itself as to the candidate’s
independence, fitness and probity, and capacity to devote sufficient time
to the role. A final recommendation is made to the Board by
the Committee.
The Relationship Framework specified by the Minister for Finance (the
“Minister”), which governs the relationship between AIB and the Minister,
on behalf of the Irish State as shareholder, requires the Group to consult
with the Minister before appointing, reappointing or removing the Chair
or Chief Executive Officer and in respect of any other proposed
Board appointments.
A Board-approved Policy is in place for the assessment of the suitability
of members of the Board, which outlines the Board appointment
process, and is in compliance with applicable joint guidelines issued by
the European Securities and Markets Authority and the European
Banking Authority.
Terms of appointment
Non-Executive Directors are generally appointed for a three-year term,
with the possibility of renewal for a further three years on the
recommendation of the Committee. Any additional term beyond six-
years is subject to annual review and approval by the Board. In
accordance with practice in recent years and the provisions of the UK
Corporate Governance Code, all Directors submit themselves for re-
election at each Annual General Meeting. Details of the appointment
dates and length of tenure of each Director is available from their
appointment dates included in their biographies on pages 70 to 73.
Board skills and experience
The summary below provides an overview of the skills and experience held by the Group’s Non-Executive Directors on the Board. This is
based on the current skills matrix, which is reviewed annually by the Nomination and Corporate Governance Committee to ensure that the
Board has the skills and experience required to effectively discharge its duties and to support succession planning discussions.
Diversity of Core Skills &
Competencies
• Leadership
• Strategy
• Governance
• Risk Management
• Capital & Liquidity
• Customer & Conduct
• Stakeholder Engagement
• Finance, Accounting & Audit
Diversity of Professional
Experience
• Non-Executive Director
• Retail Banking
• Corporate, Institutional & Business
Banking
• Treasury Management
• People Management & Development
• Stakeholder Engagement
• Outsourcing & Change Management
Areas of Focus
Under 2024 Board Training Plan
Aligned with Strategy & Material Risks:
• Climate & Environmental Risk
• Sustainability
•
• Cyber & Operational Resilience
• Data & AI
Inclusion & Diversity
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Report of the Remuneration Committee
“The Group’s inability to remunerate
senior talent on par with its
competitors represents a material
risk and threat to its capacity and
capability to attract, reward and
retain the level of experienced
talent necessary for the long-term,
sustainable success of the Group.”
Elaine MacLean
Committee Chair
Chair Overview
I am pleased to present the 2023
Remuneration Report on behalf of the
Committee, which provides an overview of
our key areas of focus for the year ended
31 December 2023 and the Committee’s
priorities for 2024.
We are grateful for the continued support
of shareholders in particular their approval
(99%) of the Group Remuneration Policy
and Directors’ Remuneration Report at the
2023 AGM. As our remuneration structure
continues to evolve following the partial easing
of the Government’s remuneration restrictions
at the end of 2022, we have enhanced our
remuneration disclosures, including setting
out the policy for the remuneration of
Directors, for which the Committee is seeking
shareholder approval at the 2024 AGM. Such
enhancements are commensurate with and
reflective of the Group’s evolving remuneration
structure and are designed to align with market
practice and to ensure that our approach to
disclosure continues to be clear and
transparent. We hope the updated approach
to disclosure is welcomed by shareholders.
In 2023, while maintaining its focus on the
governance and oversight of the remuneration
structures in place across the Group, the
Committee engaged with management in
respect of the establishment of short-term
variable remuneration for employees and
Executive Directors. Central to the
Committee’s focus was the setting of
performance metrics and its consideration
of how such changes would be in the best
interests of all stakeholders, in particular,
employees, shareholders and customers.
The Committee also prioritised its review of the
Group’s risk adjustment process and the
process for the identification and oversight of
the Group’s Material Risk Takers, which are
essential for the introduction and management
of short-term variable remuneration. The
establishment of an Approved Profit Sharing
Scheme (in Republic of Ireland) and Share
Incentive Plan (in the United Kingdom) will
provide an opportunity for employees and
Executive Directors to use their short-term
variable awards to purchase AIB shares. The
short-term variable remuneration scheme will
be subject to the monetary threshold under the
Government’s continued remuneration
restrictions. The Committee also engaged
with management to ensure the satisfaction
of applicable regulatory requirements and
best practice guidance. The Committee
also oversaw management’s introduction
of healthcare for employees and
Executive Directors.
While the Committee welcomes these positive
changes, it is very concerned that it is unable
to effectively mitigate the risk arising from
the Government’s continued restrictions on
remuneration. The Group’s inability to
remunerate senior talent on par with its
competitors represents a material risk and
threat to its capacity and capability to attract,
reward and retain the level of experienced
talent necessary for the long-term, sustainable
success of the Group.
In light of the continued growth and expansion
of the Group’s business and operations, the
Committee also focused on ensuring the
consistent application of its remuneration
policies, including risk mitigation, across the
Group’s subsidiaries and operating platforms.
The Committee also continued its oversight of
the variable remuneration arrangements for
Goodbody employees, which remains a
separately regulated legal entity within the
Group and operates a variable remuneration
structure for its employees.
The Committee also considered Gender Pay,
including the publication of the Group’s Gender
Pay figures in the UK and Ireland. The
Committee, supporting the Board, will continue
to oversee management’s progress to narrow
Gender Pay gaps, including measures to
continue to further increase diversity at senior
levels across the Group.
A key area of focus for the Committee in
2024 will be its monitoring and, to the extent
possible, mitigation of the risk arising from the
Government’s retention of its remuneration
restrictions, in particular the salary cap, which
continues to impact the Group’s recruitment
and retention of senior talent. The changes we
have been able to implement during 2023
represent modest improvements in the Bank’s
ability to pay market aligned remuneration both
in terms of quantum and structure. However,
the Committee remains acutely aware of the
risk posed by not being able to award market
competitive remuneration to our senior
leadership and key talent. The Committee
remains committed to ensuring that all
remuneration outcomes remain closely
aligned with the Group’s performance, culture
and values.
Q&A
Q. How are you currently managing
talent retention risk?
A. At levels below Executive Committee we
continue to use the limited levers available
to us and to this end, the partial lifting of
the remuneration restrictions in November
2022 has been a help. For more senior
and specialised roles, including those
of the Executive Directors, the ongoing
remuneration restrictions are making the
management of this risk extremely
challenging. The mitigation of this risk
is outside of the Board’s control and we
continue to engage with the Department
of Finance in our attempts to secure
the removal of the pay cap. This would
allow the Group to reward senior
Executives at a level commensurate
with our competitors.
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99
Committee is considering the Chief Risk
Officer’s own remuneration or that of peers.
The Committee operates under the principle
that no individual shall be involved in decisions
regarding their own remuneration and no
member of management is permitted to attend
where a matter for decision relates to their
own remuneration.
The Group Remuneration Policy can be found
on our website and the Director Remuneration
Policy is set out in the Corporate Governance
Remuneration Statement which follows
this report.
The Remuneration Committee continues to be
open to feedback from our shareholders and
welcomes any conversations or comments on
our policy and its operation. On behalf of the
Committee thank you for reading this report
and we look forward to receiving your support
at the AGM on 2 May 2024 in relation to the
pay-related Resolutions.
Finally, I would like to thank my fellow
Committee members for their work
throughout 2023.
Elaine MacLean
Chair of the Remuneration Committee
Executive Director Remuneration
In line with the salary cap imposed by existing
remuneration restrictions, during 2023 the
Chief Executive Officer was paid a base salary
of €500,000 and an employer pension
contribution of 20% (€100,000), which included
an allowance in lieu of pension contribution for
part of the year. The Chief Financial Officer
received a base salary of €485,000, with
a non-pensionable allowance of €15,000 and
an employer pension contribution of 20%
(€97,000).
Variable Remuneration Outcome
The short-term variable remuneration scheme
introduced in 2023 focuses on delivery against
Group performance measures. These
measures were chosen to recognise the
collective effort towards the Group achieving
targets. The scheme comprises three financial
measures, accounting for 60% of the award
calculation and three non-financial measures
which account for 40% of the award
calculation. The financial measures, which
include underlying profit, RoTE and Costs
Targets, ensures the business is performing at
a level which enables an award to be made.
The non-financial measures included, gender
balance, green finance and customer
satisfaction, and underline the importance
place on the ESG and customer agendas and
the Group’s commitment to making continued
progress on these agendas.
The maximum award under the scheme is
aligned for all employees and Executive
Directors at 5% of base salary up to a
maximum of €12,700.
The Group exceeded the target position for
underlying profit, RoTE, green finance and
customer satisfaction and met the target for
gender balance. The costs target was not
achieved for performance year 2023.
Combined performance has resulted in
a 4.4% award.
The Committee carefully considered the
variable remuneration outcomes for the
Executive Directors in the context of business
performance (financial and non-financial) and
the wider stakeholder experience and
concluded that the outcomes were
appropriately aligned to Group performance.
Therefore, no discretion was applied to adjust
the formulaic outcome.
Healthcare for Employees
Following extensive employee engagement,
the feedback informed us that healthcare is an
important benefit for our employees and, in
October 2023, we were delighted to announce
the introduction of healthcare benefits for all
AIB employees. The introduction of healthcare
benefits aligns to our commitment to the health
and wellbeing of our employees.
Pensions
Following a review of compliance with the UK
Corporate Governance Code, the pension
arrangements of Executive Directors and
Executive Committee members were
considered by the Committee. The
arrangements, although not aligned to the
pension provision for the wider workforce were
deemed to be appropriate, taking into account
the remuneration restrictions and pensions as
an integral part of the remuneration determined
for relevant individuals within the remuneration
restrictions. This is an area that will be kept
under review and specifically considered again
if there are changes to levels of fixed
remuneration.
Supporting our Colleagues
The Committee takes an active interest in the
pay and benefits offered to employees across
the whole of our workforce, and it is against
this that the Executive Directors’ remuneration
is framed. In 2022, the Group agreed to a three
year pay deal that provided pay certainty for
our employees at Career Levels 1-3.
Employees at Career Levels 4-6 receive pay
increases that are linked to performance.
In addition to the introduction of variable
remuneration and healthcare for all employees
in 2023, a cost-of-living award to the value of
€1,000 (or local equivalent) was made to AIB
employees below Executive Committee level.
Role of the Committee
The purpose of the Committee is to ensure that
the Group Remuneration Policy is designed to
support long-term business strategy, values
and the culture of the Group, as well as to
promote effective risk management, and
reward fairly and responsibly, with a clear link
to corporate and individual performance, in
compliance with applicable legal and
regulatory requirements. The Committee
oversees the operation of Group-wide
remuneration policies and practices for all
employees, including determining individual
total remuneration packages for Executive
Directors, Executive Committee members,
Group Heads of Control Functions, the Group
Company Secretary, and Material Risk Takers.
The Committee’s governance role is outlined in
detail in its Terms of Reference, which are
published on the AIB website at www.aib.ie/
investorrelations.
Committee Membership
The Committee consists of four members:
three Independent Non-Executive Directors,
namely Ms Elaine MacLean, Chair,
Mr Brendan McDonagh and Ms Ann O’Brien,
and the Chair of the Board, Mr Jim Pettigrew.
In addition to being a Committee member,
Mr Brendan McDonagh is also the Chair of
the Board Risk Committee and this cross-
membership supports information flow and
co-ordination between the work of the two
Committees. The biographies of the
Committee members and a record of
attendance at meetings are outlined on
pages 70 to 73, and 78.
Meeting Participation
The Chief Executive Officer, the Chief People
Officer and other members of management are
invited to attend meetings at the Committee’s
request and where required for the business of
relevant meetings. The Chief Risk Officer is
a permanent attendee at meetings to provide
a risk view on any matters submitted for the
Committee’s consideration except where the
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Report of the Remuneration Committee continued
Key areas of focus
Group Remuneration Policy
The Committee conducted its annual review of the Group Remuneration Policy and noted that while the Policy has been significantly
constrained by the terms of the State Agreements following the recapitalisation of the Group in 2010 and 2011, it is operating effectively and
as intended, and within its prescribed principles and parameters. Apart from the updates to the Policy in relation to for the introduction of
short-term variable remuneration and healthcare benefits, there have been no material changes to the Group’s Remuneration Policy,
practices or structure in 2023.
The Group’s Chief Risk Officer presented to the Committee on the Risk function’s annual review of the Group Remuneration Policy and there
were no significant regulatory compliance issues. Group Internal Audit also completed an annual audit of remuneration compliance with EBA
Guidelines, Capital Requirements Directive and the State Agreements, including the process for the identification of Material Risk Takers and
no material actions were identified.
The Committee also considered how executive remuneration aligned to wider employee remuneration and confirmed that as the Group
Remuneration Policy applies to all employees and executives, all remuneration is based on the same principles.
Director Remuneration
The Committee considered all elements of the Director Remuneration Policy which is set out in more detail on page 101.
Details of the total remuneration of the Directors in office during 2023 and 2022 are provided in the Corporate Governance Remuneration
Statement on pages 101 to 108.
Goodbody Stockbrokers Remuneration Governance - Variable Remuneration
During 2023, the Committee continued its oversight of remuneration matters within Goodbody and the engagement and communication
mechanism between the Goodbody Board and the Committee on remuneration matters. The Committee considered and approved the
identification of a number of Goodbody roles as Material Risk Takers of the Group.
The Committee also approved certain variable remuneration retention payments for Goodbody employees. Such awards were subject to the
risk adjustment and clawback and malus requirements.
Remuneration of Individuals
The Committee considered a number of individual remuneration proposals for Executive Committee, Group Company Secretary and Heads
of Control Functions in accordance with its Terms of Reference.
Subsidiary Chair and Non- Executive Director Fees
The Committee considered proposals to revise the fee structure in place for the Non-Executive Directors of its material subsidiaries, AIB
Mortgage Bank UC and EBS d.a.c. These changes were recommended to and approved by the Board to ensure market alignment in the
fees offered.
Gender Pay Gap Reporting
The Committee received updates and analysis undertaken with regard to the Group’s public reporting of Gender Pay in Ireland and the UK.
The Committee, supporting the Board, will continue to oversee management’s progress to narrow Gender Pay gaps.
Compliance and Annual Reviews
The Committee conducted its programme of annual reviews including a review of the process for identifying Material Risk Takers and the
limited variable commission schemes in operation across the Group. Each review was accompanied by a view from Group Risk to support
the Committee in its oversight of same. Further details on the identification of Material Risk Takers are available in the Corporate
Governance Remuneration Statement which follows this report.
The Committee also approved the quantitative and qualitative reports required under Pillar 3 for the Group and the Investment Firms
Directive for Goodbody Stockbrokers.
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Corporate Governance
Remuneration Statement
Remuneration Policy and Governance
The Director Remuneration Policy (the “Remuneration Policy” or the “Policy”) applies to the Group’s Executive Directors. Under Section 1110M of
the Irish Companies Act 2014, AIB is required to obtain shareholder approval of the Remuneration Policy by the fourth anniversary of the previous
approval, or sooner if changes are required. UK regulations, which AIB follows as a matter of best practice to the extent practicable, require a new
policy to be brought to shareholders every three years or sooner if material changes are required.
As set out in the Chair’s statement, this Remuneration Policy does not include any material change to the way in which the Group’s Executive
Directors have been remunerated in 2023. However, noting the changes in the remuneration restrictions, the Remuneration Policy set out on the
following pages formalises arrangements into a market aligned Policy document applying to the Group’s Executive Directors only.
The Remuneration Policy will be subject to a shareholder advisory vote at the 2024 AGM.
The wider Group Remuneration Policy can be found on our website – www.aib.ie/investorrelations.
Purpose and Aims of the Remuneration Policy
The Policy sets the framework for all remuneration related policies, procedures and practices for the Executive Directors of the Group. The principal
aim of the Remuneration Policy is to support AIB in becoming a bank to believe in, recognised for outstanding customer experience and superior
financial performance. The Group’s remuneration philosophy aims to ensure that remuneration is aligned with performance and that employees are
rewarded fairly and competitively for their contribution to the Group’s success and growth. The Group is committed to a simple, transparent and
affordable reward structure, which is fair, performance based, and both externally and risk aligned.
The Remuneration Policy is aligned to the wider Group Remuneration Policy and is designed to:
(a) Foster a truly customer focussed culture;
(b) Create long term sustainable value for our customers and shareholders;
(c) Attract, develop and retain the best people; and
(d) Safeguard the bank’s capital, liquidity and risk positions.
The Remuneration Policy is governed by the Committee on behalf of the Board. The Committee is responsible for determining the Remuneration
Policy and for overseeing its implementation.
The Committee further ensures that the Remuneration Policy and practices are reviewed at least annually alongside the wider Group Remuneration
Policy, taking into account the alignment of remuneration to the Group’s culture, and market and regulatory requirements and developments. The
annual review is informed by input from Group Risk and Internal Audit to ensure that remuneration policies and practices are operating as intended,
are consistently applied across the Group and are compliant with regulatory requirements.
The Group continues to comply with the applicable requirements of the UK Corporate Governance Code (the “Code”) and the Irish Corporate
Governance Code Annex (the “Irish Annex”). The Code and Irish Annex are used to inform the Group’s decision making and disclosures. The Group
also complies with the Irish Companies Act. Due to the constraints on variable remuneration, certain requirements of the Code and disclosure
requirements are not currently applicable to the Group. The Group will continue to review these requirements alongside any future changes to the
restrictions on remuneration by the Irish Government to ensure ongoing compliance.
Regarding Provision 40 of the Code, the Policy sets the framework which underpins remuneration policies and practices for Executive Directors.
In particular:
Clarity
Remuneration arrangements have defined parameters which are clearly outlined in the Remuneration Policy.
Simplicity
The Group is committed to a simple reward structure as outlined in the Remuneration Policy.
Risk
The Group’s existing remuneration arrangements operated under strict Government remuneration constraints. The
design of the new and any future variable remuneration schemes will have a robust link between pay and performance
with safeguards in place to ensure outcomes are appropriate, including risk adjustment.
Predictability
The Group discloses specific details, including maximum opportunity levels, performance targets and worked
examples, of Executive Director remuneration.
Proportionality
The Committee may adjust formulaic variable remuneration outcomes where they are not proportionate to the financial
or non-financial performance of the Group.
Alignment to culture
The Remuneration Policy is aligned to the Group’s culture and values. Performance measures used to determine the
outcome of variable remuneration arrangements will reflect the culture and values of the Group, including its
commitment to ESG.
Consideration of employment conditions elsewhere in the Group
The Policy and AIB’s approach to wider employee population is based on the principle that it should be sufficient to attract and retain the best talent
and be competitive within our industry to deliver AIB’s strategy. Remuneration structure and quantum is driven by seniority and accountability (mindful
of restrictions), as well as market practice although the remuneration structures are broadly aligned throughout the Group.
The below provides examples of areas of alignment between the remuneration of Executive Directors and the wider workforce:
(a) The Remuneration Policy and the wider Group Remuneration Policy are based on the same principles.
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Corporate Governance Remuneration Statement continued
(b) AIB’s current remuneration structure for all employees predominantly consists of fixed pay elements, encompassing base salary, allowances,
benefits (including healthcare) and employer pension contributions. All employees, including Executive Directors, are eligible for inclusion in a
variable remuneration scheme based on company performance operating in line with remaining remuneration restrictions which include a limit on
variable remuneration of €20,000 per employee per year. Employees in the Republic of Ireland (“ROI”), subject to establishment, will be able to
participate in an Approved Profit Sharing Scheme (“APSS”) and employees in the UK will be able to participate in a Share Incentive Plan (“SIP”)
(c) While there are certain benefits that increase based on seniority, e.g. non-pensionable allowances and employer pension contributions, there
are other aspects of remuneration for more junior employees that don’t apply to higher levels, e.g. overtime, Progression, THLA (“Temporary
Higher Level Allowance”).
During 2023, engagement took place with employees in relation to a number of changes made to the Group Remuneration Policy, including
healthcare benefits and variable remuneration.
Consideration of Shareholder Views
The Committee is committed to a transparent dialogue with shareholders on key remuneration matters. The Remuneration Policy and Report
provide shareholders with a detailed understanding of the decisions that have been made during the year.
The Committee keeps up to date with proxy adviser and shareholder written guidelines which are considered when making decisions in respect of
the remuneration of the Executive Directors.
Summary of Proposed Changes
As set out in the 2022 Report, changes were made to the Remuneration Policy to permit the awarding of variable remuneration, the provision of
healthcare benefits to all employees and the Group’s Executive Directors, and to the satisfaction of applicable regulatory requirements. As disclosed
in the 2022 Report, the Group is establishing an SAYE (Save As You Earn) scheme for all employees and the Group’s Executive Directors.
Remaining Remuneration Constraints
AIB’s inability to implement market aligned remuneration practices on an equal footing with competitors, in particular, for senior leadership and key
talent, represents a key material risk to the Group. The Committee monitors and endeavours to address this risk on an ongoing basis.
In December 2022, the Irish Government partially eased a number of remuneration restrictions impacting the Group, while retaining the cap on base
salaries of €500,000 and a limit on variable remuneration of €20,000 in twelve-month period.
Should the remaining restrictions be eased, the Committee would consider the need to amend the Group and Director Remuneration Policies,
including seeking necessary shareholder approvals for any such changes.
As part of the acquisition of Goodbody in 2021, it was agreed with the Department of Finance that the remuneration restrictions that apply to AIB
would not apply to Goodbody employees, and that they could continue to remain eligible for variable remuneration.
Compliance with Relevant Regulatory Requirements
Remuneration policies, procedures and practices reflect the provisions, where applicable, of national and EU legislation, continuing Irish
Government remuneration restrictions, the Capital Requirements Directive (“CRD”), the Investment Firms Directive, corporate governance
requirements issued by the Central Bank of Ireland, and relevant guidelines issued by the European Banking Authority (“EBA”) and other regulatory
authorities. The provisions of the EBA Guidelines on sound remuneration will continue to be applied to AIB’s new variable remuneration scheme. In
particular, the Remuneration Policy incorporates the provisions of the EBA Guidelines in relation to the ongoing design, implementation and
governance of remuneration.
Key Components of the Director Remuneration Policy
The following table sets out the key components of the Director Remuneration Policy, including their application to the recruitment and departure of
Executive, Directors, which is subject to shareholder approval with a non-binding shareholder resolution at the 2024 AGM.
Pay Element Objective
Description
Base Salary
To attract, motivate and
retain the right calibre of
individuals to support
the Group’s future
success and growth.
To the extent possible within the salary cap,
the base salaries of the Executive Directors
are:
• Set according to appropriate market ranges
which reflect the size, skills and level of
responsibilities attached to the role.
• Typically reviewed annually as part of the
Performance Assessment and
Maximum Potential Value
To the extent possible within the salary cap, the base
salaries of the Executive Directors are:
• Reviewed by the Committee on behalf of the Board.
Increases in base salary may be awarded following
the outcome of the annual pay review, alternatively,
to reflect a significant increase in the scope of
responsibility of an Executive Director.
annual pay review process.
• Set out in the Directors Remuneration Report.
•
In the event of the removal of or any changes to the
salary cap, the Committee would consider the
impact of this on base salaries and other elements
of remuneration.
Non-pensionable cash allowances may be
provided to eligible Executive Directors.
The maximum non-pensionable allowance is €30,000
per annum.
Allowances
To provide a
contribution to market
aligned benefits and
allowances generally
available in the market.
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Performance Assessment and
Maximum Potential Value
Performance will typically be assessed based on
a one-year performance period, considering
a combination of financial and non-financial
performance.
A limit of €20,000 per annum on any award or
combination of awards per Executive Director
will apply.
In the event of the removal of or any changes to the
Excess Bank Remuneration Charge, the Committee
would consider the impact of the limit on variable
remuneration within the Remuneration Policy.
The award may be granted either in cash, shares,
or a combination of cash and shares. The Committee
will ensure that the form of such award comply with
applicable regulatory requirements and remaining
government remuneration restrictions.
Under the Approved Profit Sharing Scheme,
Executive Directors will have the opportunity to
acquire shares with their annual variable
remuneration award.
The Remuneration Committee has the discretion to
adjust the formulaic outcome of the award, including
the ability to apply risk adjustments. Awards are
subject to the Group's policy on malus and clawback,
including where participants leave the Group during
the year.
Executive Directors are entitled to an employer
pension contribution of up to 20% of base salary.
In the event of the removal of or any changes to the
remuneration restrictions, the Committee would
consider the impact of this on pension arrangements.
Not applicable.
Pay Element Objective
Description
Variable remuneration schemes are based on
company performance.
Variable
Remuneration
Scheme
To incentivise Executive
Directors to deliver
strong financial and
strategic performance
aligned with the
performance, risk profile
and culture of the
Group.
Variable remuneration
arrangements are
designed in a way that
promotes the interests
of our stakeholders and
to comply with
applicable regulatory
requirements.
Pension
To enable Executive
Directors to plan for an
appropriate standard of
living in retirement.
Other
Benefits
To provide affordable
benefits in accordance
with general market
practice.
Executive Directors are entitled to participate
in one of the Group’s defined contribution
schemes.
Executive Directors whose accumulated
pension benefits have exceeded or are likely
to exceed the Standard Fund Threshold (SFT)
have the option of a 20% non-pensionable
allowance in lieu of employer pension
contribution.
Benefits include healthcare, income protection,
death-in-service cover and free banking
services.
A functional car policy is in place. The Group
does not provide company cars outside of the
policy. Executive Directors may occasionally
avail of a pool car and driver.
The Committee retains the right to provide
additional benefits subject to continuing
remuneration restrictions.
AIB is also considering the introduction of an
SAYE (Save As You Earn) scheme for
employees, including Executive Directors.
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Corporate Governance Remuneration Statement continued
Recruitment and Exit Under the Remuneration Policy
Remuneration
Statement
Recruitment Policy
(subject to compliance with remuneration restrictions)1
Exit Policy
The following table provides additional detail in respect of the application of the Remuneration Policy to Executive Directors upon their
appointment to the extent permitted within the remuneration restrictions and at the end of employment. In relation to AIB employees appointed as
Executive Directors, such elements will only apply from the date of appointment (and not retrospectively), and any existing awards will be
honored and form part of ongoing remuneration arrangements.
Salary, fees,
benefits
and pension
• Base salary would be set at an appropriate level
considering the factors mentioned in the Policy
table above.
•
If notice is served by either party, the Executive Director can
continue to receive base salary, benefits and pension for the
duration of their notice period.
• Benefits and pension will also be set in line with
• The Executive Director may be asked to perform their normal
the Policy.
duties during their notice period, or they may be put on
garden leave.
• The Company may, at its sole discretion, terminate the
contract immediately, at any time after notice is served, by
making a payment in lieu of notice equivalent to salary,
benefits and pension, with any such payments being paid in
monthly instalments over the remaining notice period.
• Benefits may also be provided in connection with termination of
employment and may include, but are not limited to, statutory
payments, outplacement, legal fees and payments in respect of
accrued holiday.
Relocation
•
If an Executive Director needs to re-locate in order to
take up the role, the Company may pay to cover the
costs of relocation including (but not limited to), actual
relocation costs, temporary accommodation and travel
expenses.
Not applicable
Buy-out awards
Not applicable
• For external candidates, the Committee may (if it is
considered appropriate) provide a buy-out award
equivalent to the value of any outstanding incentive
awards that will be forfeited on cessation of
previous employment.
• To the extent possible, the buyout award will be made
on a broadly like for like basis. The award will take into
account the performance conditions attached to the
vesting of the forfeited incentives, the timing of
vesting, the likelihood of vesting and the nature of the
awards (cash or equity).
Variable
Remuneration
Scheme
• Joiners may receive a pro-rated award based on their
employment as a proportion of the financial year and
targets may be different to those set for other
Executive Directors.
• Good leavers will remain eligible to receive a vested award at
the usual time with performance measured at usual time. The
award will normally be pro-rated for service during the
financial year.
• Bad leavers will not normally be eligible to receive an award.
Notes to the Remuneration Policy Table
Minor amendments
The Committee may amend the arrangements for the Executive Directors as described in the Policy, for regulatory, exchange control, tax or
administrative purposes, or to take account of a change in legislation or regulation.
Non-Executive Director Fees
Non-Executive Directors are paid a basic, non-pensionable fee of €65,000 in respect of service as a Director and additional non-pensionable
remuneration in respect of other responsibilities, such as for serving as chair or being a members of Board Committees or performing the role of
Deputy Chair or Senior Independent Director. Current or former Directors who serve on the board of any Group Irish subsidiary company are also
paid a non-pensionable flat fee for their services as a Director, chair or membership of Board Committees. AIB will reimburse any reasonable
expenses incurred in carrying out Non-Executive Director duties (and related tax if applicable).
Legacy arrangements
For the avoidance of doubt, the Committee may approve payments to satisfy commitments agreed prior to the approval of this Remuneration Policy,
and any commitment made to a person before that person became an Executive Director.
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Discretion
The Committee operates the variable remuneration scheme according to the rules of the scheme. The Committee retains discretion as to the
operation and administration of the scheme, within the limits of its rules, including but not limited to:
• Participants;
• Timings of grant and / or payment;
• Award size and / or payment;
• Settlement of the award;
• Choice and adjustment of performance measures and targets;
• Adjustment to outcomes if they are considered to be inappropriate, taking into account any relevant factors;
• Measurement of performance in certain circumstances such as change of control or other corporate events;
• Determination of a good leaver.
Service Agreements and Letters of Appointment
All Executive Directors have a service contract whereas all Non-Executive Directors have a letter of appointment.
In respect of Executive Directors, no service contract exists between the Company and any Director which provides for a notice period from the
Company of greater than one year.
Non-Executive Directors are appointed for an initial term of three years. Terms of office for Non-Executive Directors will not be extended beyond
nine years in total unless the Board, on the recommendation of the Nomination and Corporate Governance Committee, concludes that such
extension is necessary, appropriate and in compliance with applicable regulatory requirements and approvals.
All Directors, should they choose to stand, are subject to annual re-election by shareholders.
External appointments
Subject to the advance approval of the Board, Executive Directors may accept one external appointment as a Non-Executive Director and retain the
fees. Neither Executive Director currently serves in any external paid roles.
Malus and clawback
The circumstances in which the Committee may consider it appropriate to apply clawback and/or malus to the variable remuneration scheme
include, but are not limited to those summarised below:
• Behaviour by a participant which fails to reflect AIB’s governance and business values;
• The extent to which any condition satisfied was based on an error, or on inaccurate or misleading information or assumptions which resulted
either directly or indirectly in an award being granted or vesting to a greater extent than would have been the case had that error not been made;
• Material adverse change in the financial performance of AIB or any division in which the participant works and/or worked;
• A material financial misstatement of AIB’s audited financial accounts (other than as a result of a change in accounting practice);
• Any action which results in or is reasonably likely to result in reputational damage to AIB;
• A material failure in risk management;
• Corporate failure;
• Negligence or gross misconduct of a participant; and/or
• Fraud effected by or with the knowledge of a participant.
Other elements of remuneration are not subject to malus and clawback provisions.
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AIB Group plc
Corporate Governance Remuneration Statement continued
Directors’ remuneration (audited)
The following table details the total remuneration of the Directors in office during 2023 and 2022:
Directors’
fees
(1)
€ 000
Salary
€ 000
Pension
contri-
bution(2)
€ 000
Annual
taxable
benefits(3)
€ 000
Variable
remunera
tion
€ 000
2023
Total
€ 000
Directors’
fees
(1)
€ 000
Salary
€ 000
Pension
contri-
bution(2)
€ 000
Annual
taxable
benefits(3)
€ 000
2022
Total
€ 000
500
485
100
97
—
15
13
13
613
610
500
485
100
97
—
15
600
597
985
197
15
26
1,223
985
197
15
1,197
80
75
80
95
85
110
135
—
186
119
155
365
—
80
80
1,645
—
19
1,664
75
75
80
95
85
80
135
165
91
115
365
78
80
1,519
53
80
75
80
95
85
110
135
186
119
155
365
80
80
1,645
—
19
2,887
1,572
75
75
80
95
85
80
135
165
91
115
365
78
80
1,519
53
16
2,785
Remuneration
Executive Directors
Colin Hunt
Donal Galvin
Non-Executive
Directors
Anik Chaumartin
Basil Geoghegan
Tanya Horgan
Sandy Kinney Pritchard
Elaine MacLean
Andy Maguire
Brendan McDonagh
(Deputy Chair)
Helen Normoyle
Ann O'Brien
Fergal O'Dwyer
Jim Pettigrew
(Chair)
Jan Sijbrand
Raj Singh
Former Directors
Carolan Lennon
(Resigned 30 June 2022)
Anne Maher(4)
Total
(1) All Non-Executive Directors were paid a basic, non-pensionable fee in respect of service as a Director of €65,000 and additional non-pensionable remuneration in respect of other responsibilities,
such as through the chairing or membership of Board Committees or performing the role of Deputy Chair or Senior Independent Director. Current or former Directors who serve on the board of any
Group Irish subsidiary company are also paid a non-pensionable flat fee for their services as a Director, chairing or membership of Board Committees. In that regard, Mr Fergal O’Dwyer earned fees
during 2023 of €80,000 (2022: €55,000) in his role as Director and Chair of the Audit Committee of Goodbody. Current or former Non-Executive Directors of AIB Group plc and Allied Irish Banks,
p.l.c., as applicable, who also serve as Directors of AIB Group (UK) p.l.c. (“AIB UK”) are separately paid a non-pensionable flat fee, which is independently agreed and paid by AIB UK, in respect of
their service as a Director of that company. In that regard, Ms Helen Normoyle earned fees during 2023 of €71,000 (2022: €65,000). Ms Ann O’Brien was paid €29,000 in respect of her appointment
as a Director of EBS d.a.c. and Mr Andy Maguire was paid €30,000 in respect of his appointment as a Director of AIB Mortgage Bank U.C.
(2) “Pension Contribution” represents agreed payments to a defined contribution scheme to provide post-retirement pension benefits for Executive Directors from normal retirement date or an
allowance in lieu, where Executive Directors’ accumulated pension benefits have exceeded or are likely to exceed the Standard Fund Threshold (SFT) and they have opted to receive a 20% non-
pensionable allowance. The fees of the Chair, Deputy Chair and Non-Executive Directors are non-pensionable;
(3) “Annual Taxable Benefit” represents a non-pensionable cash allowance in-lieu of company car, medical insurance and other contractual benefits; and
(4) Ms Anne Maher is a former Non-Executive Director of Allied Irish Banks, p.l.c. who was a Director of the Corporate Trustee of the AIB Defined Contribution Scheme during 2023, in respect of
which she earned fees as quoted.
The information above and the sections denoted as audited on page 107 forms an integral part of the financial statements as described in Note 1(c)
basis of preparation’ to the financial statements.
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Annual Financial Report 2023 107
AIB Group plc
Fixed Remuneration (audited)
Base salaries of the Chief Executive Officer and the Chief Financial Officer were €500,000 and €485,000 respectively and remained unchanged
from 2022. The Chief Financial Officer received a non-pensionable cash allowance of €15,000.
The Chief Executive Officer received an employer pension contribution of 20% (€100,000), which included an allowance in lieu of pension
contribution for part of the year. The Chief Financial Officer also received an employer pension contribution of 20% (€97,000).
Variable Remuneration Scheme
The table below provides a summary for the 2023 variable remuneration scheme outcome.
Variable Remuneration Scheme Outcome
Financial measures (60%)
Weighting
Threshold
Underlying Profit
RoTE
Costs
24%
24%
12%
90% Target
90% Target
Target
Target
Target
Target
Maximum
Achieved
110% Target
Exceeded Stretch
110% Target
Exceeded Stretch
Achieved/Not Achieved
Not Achieved
Non-financial measures (40%)
Green Finance
13.3%
AIB performed strongly in 2023 against its ambitious targets for Green Lending. This has
been a key tenet of the Group’s Sustainability Strategy.
I&D – Gender Balance
13.3%
AIB is committed to gender balance across the Group. AIB’s ongoing target is to maintain
gender balance (40% - 60% female) which has been achieved.
Customer Satisfaction
13.3%
Enhancing customer experience is of utmost importance. We track customer satisfaction
across a number of metrics.
Further information on Green Finance, I&D - Gender Balance and Customer Satisfaction can be found on page 3 of this Report.
The Committee considered the formulaic variable remuneration scheme and deemed it appropriate within the wider financial and non-financial
performance of the business, and the Executive Directors. As such no adjustments were applied.
Based on performance during the year, the amounts that Executives will receive are set out below.
Executive
Colin Hunt
Donal Galvin
Variable Remuneration Outcome
% of Salary
2.5
2.6
€’000
12.7
12.7
The 2023 variable remuneration scheme outcome will be paid in cash. Subject to the establishment of the APSS, Executive Directors will be able to
participate using cash paid under the 2023 variable remuneration scheme.
Directors’ shareholdings and share interests
Under the Remuneration Policy, Executive Directors are not currently subject to shareholding requirements due to the remuneration restrictions in
place. Please refer to page 115 for Directors’ shareholdings and interests.
Payments to former Directors and for loss of office
Payments made to former Directors are outlined in the table on page 106. There were no payments for loss of office during the 2023 financial year.
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Annual Financial Report 2023 108
AIB Group plc
Corporate Governance Remuneration Statement continued
Pillar 3 and Other Remuneration Disclosures
The Group publishes additional remuneration disclosures in its annual Group Pillar 3 Report. These disclosures provide further information about the
Group’s remuneration policies and practices and, more specifically, qualitative information about:
(a) The bodies that oversee remuneration;
(b) The design and structure of the remuneration system for those individuals who have been identified as Material Risk Takers.
(c) The ways in which current and future risks are considered in remuneration processes.
(d) The ratios between fixed and variable remuneration which are set in accordance with the regulatory requirements.
(e) The ways in which the Group links performance and remuneration.
(f) The adjustment of remuneration to take account of long-term performance.
(g) The main parameters and rationale for the variable remuneration schemes for which MRTs are eligible.
(h) The use of derogations in Article 94(3) of the CRD.
These disclosures also include quantitative information, in aggregate form, about the amounts and structure of the remuneration of MRTs.
The Group’s Pillar 3 Report is available on the Group website – www.aib.ie/investorrelations.
EBA remuneration benchmarking requirements require the Group to disclose remuneration data in respect of all staff, MRTs and high earners (those
earning above €1 million) to the Central Bank of Ireland. The Group continued to comply with these reporting requirements during 2023. There were
no employees whose total remuneration exceeded €1 million during 2023.
During 2023, the Group published its Gender Pay Gap Reports in relation to its UK and ROI based employees. These disclosures are available on
www.aibgb.co.uk and www.aib.ie respectively.
Material Risk Takers (“MRTs”) and Risk Oversight
The Group is required to maintain a list of employees whose professional activities have the potential to have a material impact on the Group’s risk
profile. The list of MRTs is prepared using a combination of qualitative and quantitative criteria in accordance with the relevant EU regulations and
guidelines together with additional criteria specific to the Group’s structure, business activities and risk profile. The list is prepared at Group and
subsidiary company levels.
Group Risk assesses the risks impacting the Group, including performance against the Group’s Risk Appetite Statement, to ensure that the
Remuneration Policy is aligned with the Group’s risk profile. The Chief Risk Officer reviews the list of MRTs in conjunction with Group Reward and
provides the Committee with an annual assessment of the risks facing the Group to ensure that policies and practices are consistent with and
promote sound and effective risk management.
Support for Committee
The Committee was supported in its work by the Group Reward team and by Korn Ferry, the external remuneration consultants appointed by the
Committee in October 2022. Korn Ferry is a signatory to the voluntary code of conduce in relation to remuneration consulting in the UK.
Aside from their work supporting the Committee, during 2023 Korn Ferry and its network firms provided professional services in the ordinary course
of business to AIB. The Committee is satisfied that the advice received is independent and objective.
Performance graph and table
The below chart illustrates the TSR performance of AIB since 2022
against the ISEQ All Share and FTSE 350 Banks which has been
selected as being an appropriate index for comparison purposes.
Shareholder votes on remuneration
At the 2023 AGM the shareholders passed the annual advisory vote on
the annual remuneration report and remuneration policy. The voting
results were as follows:
TSR Performance
Resolution
Votes/%
For
Against
Withheld
Directors’
Remuneration
Report
Remuneration
Policy
Shareholder
Votes
Votes as a
Percentage
Shareholder
Votes
Votes as a
Percentage
2,271,366,683 11,950,352 4,245,498
99.48 %
0.52 %
—
2,263,802,719 21,461,663 2,298,151
99.06 %
0.94 %
—
AIBISEQ All ShareFTSE 350 Banks31/12/202130/6/202231/12/202230/6/292331/12/2023020406080100120140160180200 Annual
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Annual Financial Report 2023 109
AIB Group plc
Report of the Technology and
Data Advisory Committee
“The Committee has overseen the
development of an integrated
technology roadmap that will ensure
AIB can build its digital capability in
a resilient manner to enable business
growth in line with its strategic priorities.”
Ann O’Brien
Committee Chair
Technology & Data Advisory Committee
Tanya Horgan
Andy Maguire
Helen Normoyle
Ann O’Brien
Graham Fagan
Andrew McFarlane
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director – Chair
Chief Technology Officer
Chief Operating Officer
Eligible to attend
4
4
4
4
1
4
Attended
4
4
4
4
1
4
• Technology & Data Operating Effectiveness
including the successful delivery of a
number of technology enabled customer
programmes across the Group.
• Technology & Data Governance including
oversight of AIB’s readiness for the
operationalisation of the Digital Operational
Resilient Act, and the proposed regulation of
Instant Payments in Euro as well as the
potential impacts for AIB of the proposed
regulation of AI.
Looking ahead to 2024
Into 2024, as AIB embarks on the roll out of its
new Group Strategy 2024-2026, delivering the
Technology Strategy across the Group will be
key to ensuring AIB has resilient platforms to
support the Group’s ambition to be at the heart
of its customers’ financial lives. There will be
a significant focus on building AIB’s digital
capability to support the transformation of AIB’s
digital offering to enable faster processes and
delivery of products and services in a
proactive, seamless, and innovative manner.
I would like to take this opportunity to welcome
Mr Fagan as the Chief Technology Officer
who we look forward to working with in 2024.
I would also like to thank my fellow Committee
Members and the wider Technology and Data
Teams for their ongoing commitment
throughout another busy year.
Ann O’Brien
Committee Chair
Q&A
Q. While Artificial Intelligence (AI)
is not a new concept, the emergence
of Generative AI (Gen AI) capability
is dominating the headlines in the
financial services sector and beyond.
What opportunities do you see Gen AI
presenting for AIB?
A. Developments in Gen AI have created
the potential for a broader scope of AI
application that can complement and
augment AIB’s existing usage of digital
transformation capabilities. Gen AI has the
potential to provide new opportunities to
improve productivity and reduce costs in
areas such as Customer Service,
Personalised Banking, and Fraud
Detection. These Gen AI related
developments will serve to deepen the
relationship with AIB’s customers. The
Committee looks forward to working closely
with AIB’s technology stakeholders as they
create the foundations for the adoption of
Gen AI capability in line with risk appetite
and emerging regulation.
Q. What is the Committee most looking
forward to in 2024?
A. The Committee will be focused on
overseeing the roll out of the new
Technology Strategy and the pivotal
enabling role it will play as AIB strives to
improve customer journeys across its digital
channels including the development of a
next generation Mobile App. Linked to this
will be the Committee’s oversight of the
transformation of AIB’s existing legacy digital
estate that aims to deliver on customer
financial needs and improve their banking
experience through the development of an
agile and resilient platform.
Chair Overview
On behalf of the Technology & Data Advisory
Committee (“the Committee”), I am pleased to
report on the Committee’s activities during the
financial year ended 31 December 2023 and
provide an overview of the workings of, and
key matters considered by, the Committee
during the course of 2023.
The Committee continues to fulfil its oversight
and advisory responsibilities as they relate to
the Group Technology Strategy in the areas of
Cyber, Data, Digital, Operating Model and
Sustainment & Simplification. In particular, the
Committee reviews and challenges the
strategy, governance and execution of matters
relating to technology and data, including
cybersecurity (strategy) and data and analytics,
as well as business enablement activities.
The Committee currently consists of four Non-
Executive Directors and two members of senior
management, the Chief Technology Officer, and
the Chief Operating Officer, who are both
members of the Executive Committee. There
was one change to the Committee’s
membership during 2023 when, following the
resignation of Mr Fergal Coburn in March 2023,
Mr Graham Fagan was appointed to the role of
Chief Technology Officer in October 2023. The
Head of Technology Strategy & Transformation,
the Chief Data & Analytics Officer, the Data
Protection Officer, a representative of the Risk
Function and the Group Head of Internal Audit
also attend meetings of the Committee. The
Chair of the AIB UK Technology, Data and
Resilience Committee (formerly the Technology
& Operational Resilience Advisory Committee)
can also attend if required.
2023 Highlights
During 2023, the Committee considered and
challenged a number of key areas including:
•
the Cybersecurity strategy, the Data &
Analytics and Group Technology strategies
prior to Board approval. These strategies will
play a pivotal enablement role in the delivery
of the new Group Strategy 2024-2026. The
Committee also reviewed and challenged
the Group’s multi-year technology roadmap
around the management of legacy systems
across the Group and the Target technology
workforce.
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Annual Financial Report 2023
110
Report of the Sustainable Business
Advisory Committee
“AIB’s progress on sustainability has
been built on delivery by doing and not
talking. That’s why continued monitoring
of the Bank’s progress against its
Sustainability targets – across
environmental, social and governance
(ESG) activities – will be central to the
Committee’s agenda.”
Helen Normoyle
Committee Chair
Sustainable Business Advisory Committee
Non-Executive Director – Chair
Helen Normoyle
Non-Executive Director
Anik Chaumartin
Non-Executive Director
Raj Singh
Non-Executive Director
Jan Sijbrand
Chief Executive Officer
Colin Hunt
Chief Strategy and Sustainability Officer
Mary Whitelaw
Geraldine Casey
Chief People Officer (until 18.10.2023)
David McCormack Chief People Officer (from 18.10.2023)
Paul Travers
Managing Director, Climate Capital
Key Matters Considered
The key matters considered and challenged by
the Committee in 2023 were:
Q&A
Eligible to attend Attended
6
6
4
6
4
6
3
1
6
6
6
6
6
6
6
5
1
6
• Group Sustainability Strategy and Targets
• Mobilisation of CSRD and readiness
• Materiality Exercise
• Development of the Social Agenda including
Vulnerable Customers
• ESG Products and Propositions
• AIB’s own environmental footprint
• Detailed Sustainability Report
• Regulatory Engagement and Expectations
• Employee communications on ESG matters
• Collaboration with Community partners
In 2023,the Sustainability Conference had
record in person and online attendance and
coincided with the announcement of the increase
in the Climate Action Fund to €30 billion to help
build a green infrastructure for the future.
Looking ahead to 2024
In 2024, there will be a significant focus on
the evolved Sustainability Strategy which
focuses on Climate and Environmental
Action, Societal and Workforce Progress
and Governance and Responsible Business.
The Committee will also continue to focus
on opportunities to support customers in their
transition to a low carbon economy from both
a lending and educational perspective whilst
reducing emissions from our own activities.
We will continue to focus on ensuring that
the Group maximises its societal impact
in supporting community partners and
connecting customers through the
Community Fund.
Q What do you see as the key areas
of focus for the Committee in 2024?
A. As I mentioned at the Sustainability
Conference in November, AIB's progress on
sustainability has been built on delivery by
doing and not talking. That's why continued
monitoring of the bank's progress against
its Sustainability targets – across
environmental, social and governance (ESG)
activities – will be central to the Committee's
agenda, as will the ESG products and
propositions developed and delivered in
support of the new Group Strategy and
refreshed Sustainability Strategy. This will
include progress against the recently
announced €30bn Climate Action Fund and
dedicated Climate Capital segment. ESG
transformation and reporting will continue to
be a key focus for the Committee in 2024 as
we prepare to implement the CSRD, which
will increase transparency around our
activities, as will our focus on focus on the
social agenda through regular updates on
our human rights commitment and customer
vulnerability programme.
I would like to take this opportunity to thank
Geraldine for her contribution to the Committee
and to welcome David. I would also like to take
this opportunity to thank my fellow Committee
Members and wider Sustainability Team for their
unwavering commitment to this evolving area
over what has been another challenging and
rewarding year.
Helen Normoyle
Committee Chair
Chair Overview
On behalf of the Sustainable Business Advisory
Committee (the ‘Committee’), I am pleased to
report on the Committee’s activities during the
financial year ended 31 December 2023 and
provide an insight into the workings of, and key
matters considered by, the Committee in 2023
and our intended focus in 2024.
The Committee oversees the Group’s
performance as a sustainable business and its
delivery of AIB’s sustainability strategy (the
“Strategy”). Throughout 2023, the Committee
supported the execution of the Strategy in
accordance with the approved Group Strategic
and Financial Plan and provided oversight over
the external reporting of the Strategy, the
Detailed Sustainability Report and the Group’s
regulatory obligations with respect to the
mobilisation of the Corporate Sustainability
Reporting Directive (CSRD). The Detailed
Sustainability Report (published separately) is
a measure of AIB’s unwavering commitment
and ambition to developing its ESG agenda
and embedding it as part of the overall
Group Strategy.
As at the end of December 2023, the
Committee membership consisted of three
Non-Executive Directors, one Executive
Director – the Chief Executive Officer –
and three other members of senior
management, two of whom are also
Executive Committee members.
The Chief Risk Officer is invited to attend
all meetings of the Committee. During 2023,
there were a number of changes to Committee
membership. Ms Geraldine Casey stepped
down from the Committee following her
appointment as the Managing Director of Retail
Banking and Mr David McCormack
was appointed to the Committee following his
appointment as Chief People Officer.
Recognising the importance of strong oversight
and governance of our ESG agenda, and to
ensure co-ordination with the work of our
colleagues on the Board Audit Committee
(“BAC”) and Board Risk Committee (“BRC”),
cross membership of these Committees is in
place. Ms Anik Chaumartin is also a BAC
member and Mr Jan Sijbrand and Mr Raj Singh
are also members of the BRC.
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Annual Financial Report 2023
111
Internal Controls
Directors’ Statement on risk management and internal controls
The Board of Directors is responsible for the Group’s system of internal
control, which is designed to manage the risk of failure to achieve
business objectives and can provide only reasonable and not absolute
assurance against material misstatement or loss. The Group has
implemented a framework and policy architecture covering business and
financial planning, corporate governance and risk management. The
system of internal controls is designed to ensure that there is thorough
and regular evaluation of the Group’s risks in order to react accordingly,
rather than to eliminate risk. This is done through a process of
identification, measurement, monitoring and reporting. This process
includes an assessment of the effectiveness of internal controls, which
was in place for the full year under review up to the date of approval of
the financial statements, and which accords with the Central Bank of
Ireland’s Corporate Governance requirements for Credit Institutions
2015 and the UK Corporate Governance Code 2018.
Supporting this process, the Group’s system of internal controls is based
on the following:
Board governance and oversight
• The Board has ultimate responsibility for risk appetite and reviewing
the effectiveness of the system of internal control on a continuous
basis and is supported by a number of sub-committees including
Board Audit Committee (“BAC”), Board Risk Committee (“BRC”),
Remuneration Committee, Sustainable Business Advisory Committee
(“SBAC”), Technology and Data Advisory Committee (“TDAC”), and
Nomination & Corporate Governance Committee.
• The BRC is appointed by the Board to assist the Board in fulfilling its
oversight responsibilities. It is responsible for fostering sound risk
governance across all of the Group’s finances and operations
(including all operations, legal entities and branches in ROI, the UK
and USA) taking a forward looking perspective and anticipating
changes in business conditions. The Committee discharges its
responsibilities in ensuring that risks within the Group are
appropriately identified, reported, assessed, managed and controlled
to include commission, receipt and consideration of reports on key
strategic and operational risk issues. It ensures that the Group’s
overall actual and future risk appetite statement and strategy, taking
into account all types of risks, are aligned with the business strategy,
objectives, corporate culture and values of the institution while
promoting a risk awareness culture within the Group. The BRC
oversees and challenges the risk management function, which is
managed on a day-to-day basis by the Chief Risk Officer (“CRO”) and
liaises regularly with the CRO to ensure the development and on-
going maintenance of a risk management system within the Group
that is effective and proportionate to the nature, scale and complexity
of the risks inherent in the business. The BRC provides qualitative
and quantitative input to the Remuneration Committee on the
alignment of variable remuneration to risk performance for material
risk takers. The Committee further provides advice on the ongoing
viability of the Group, taking into account the Group’s overall position
and principal risks.The committee is composed of Independent Non-
Executive Directors and operates under Board approved terms of
reference. The Chief Financial Officer (“CFO”), the Chief Risk Officer
(“CRO”), the Group Internal Auditor and the External Auditor are
involved in meetings of the BRC, where appropriate.
• The BAC is appointed by the Board to assist it in fulfilling its oversight
responsibilities in relation to the quality and integrity of the Group’s
accounting policies, financial and narrative reports, non-financial
disclosures, and disclosure practices. The Committee also ensures
the effectiveness of the Group’s internal control, risk management,
and accounting and financial reporting systems and the adequacy of
arrangements by which staff may, in confidence, raise concerns about
possible improprieties in matters of financial reporting or other
matters. It also ensures the independence and performance of the
internal and external auditors. The BAC works to ensure that this
purpose is fully aligned to the Group’s strategy and values, considers
the interests of stakeholders while operating within all applicable
regulatory and statutory requirements. The BAC is composed of
Independent Non-Executive Directors and operates under a Board
approved terms of reference. Neither the Chair of the Board nor the
CEO are permitted to be members of the BAC. The Chief Financial
Officer (“CFO”), the Chief Risk Officer (“CRO”), the Group Internal
Auditor and the External Auditor are involved in meetings of the BAC,
where appropriate.
• The Remuneration Committee is appointed by the Board and is
responsible for the design and implementation of the Group’s overall
Remuneration Policy for employees and directors, designed to
support the long term business strategy, values and culture of the
Group as well as to promote effective risk management, and reward
fairly and responsibly, with a clear link to corporate and individual
performance in compliance with applicable legal and regulatory
requirements.
• The SBAC was established by the Board to act as an Advisory
Committee, supporting the execution of the Group’s sustainable
business strategy in accordance with the approved Group Strategic
and Financial Plan. The Strategy includes the development and safe
guarding of the Group’s “social licence to operate” through
Environmental, Social and Governance activities, alignment with the
United Nations Environmental Programme Finance Initiative
(“UNEPFI”) Principles for Responsible Banking, UN Global Compact
and the Group’s Pledge to Do More.
• The TDAC is appointed by the Board to assist in fulfilling its oversight
responsibilities by reviewing and challenging the strategy, governance
and execution of matters relating to technology, data and cyber
security.
• The Nomination and Corporate Governance Committee is appointed
by the Board to support and advise it in fulfilling its oversight
responsibilities in relation to the composition of the Board. It does this
by ensuring the Board is comprised of individuals who are best able to
discharge the duties and responsibilities of Directors, by leading
the process for nominations and appointments to the Board and
Board Committees as appropriate, and making the recommendations
in this regard to the Board for its approval. It also supports and
advises the Board in fulfilling its oversight responsibilities in relation to
the composition of the Group’s Executive Committee and the
composition of the Boards of its material subsidiaries. It keeps Board
governance arrangements, corporate governance compliance
and related policies under review and makes appropriate
recommendations to the Board to ensure corporate governance
practices are consistent with best practice standards.
Executive Risk management and controls
• The Executive Committee (“ExCo”) is the most senior executive
committee of the Group. Subject to financial and risk limits set by the
Board, and excluding those matters which are reserved specifically for
the Board, the ExCo has primary authority and responsibility for the
day-to-day operations of, and the development of strategy for the
Group. The ExCo works with and advises the CEO, ensuring
a collaborative approach to decision making and collective ownership
of strategy development and implementation, including promoting
action to address performance issues as required. The ExCo has
delegated certain functions to a number of executive sub-committees,
which operate under term of reference approved by the ExCo and
subject to formal review every two years.
• The Group Risk Committee (“GRC”) was established by, and is
accountable to, the ExCo to set policy and monitor all risk types
across the Group and to enable delivery of the Group’s risk strategy. It
is the primary second line of defence risk management committee of
the Group. It provides oversight and monitors strategic business
initiatives that have material implications for the Group to ensure they
align and are consistent with the Group risk appetite and other risk
policies as approved by the BRC.
• The Group Asset and Liability Committee (“ALCo”) is a sub-committee
of the ExCo and acts as the Group’s strategic and business decision
making forum for balance sheet management matters. It sets policy
and is responsible for effective balance sheet management and
alignment to Group strategy for funding and liquidity risk, market risk
and capital adequacy risk.
• There is a centralised risk control function headed by the CRO, who is
responsible for independent challenge, ensuring that risks are
understood, managed, measured, monitored and reported on, and for
reporting on risk mitigation actions.
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Internal Controls continued
• The Risk function is responsible for establishing and embedding risk
management frameworks, ensuring that material risk policies are
reviewed, and reporting on adherence to risk limits as set by the
Board of Directors.
• The Group’s risk profile is measured against its risk appetite and
exceptions are reported to the GRC and BRC through the CRO
report. Material breaches of risk appetite are escalated to the Board
and reported to the Central Bank of Ireland/Joint Supervisory Team
(“JST”).
• The centralised credit function is headed by a Chief Credit Officer who
reports to the CRO.
• Compliance, which is part of the Risk function, provides interpretation
and assessment of compliance risk, specifically, laws, regulations,
rules and codes of conduct applicable to its banking activities.
• There is an independent Group Internal Audit function which is
responsible for independently assessing the effectiveness of the
Group’s corporate governance, risk management and internal controls
and reports directly to the Chair of the BAC.
• AIB employees who perform pre-approved controlled functions/
controlled functions meet the required standards as outlined in the
Group’s Fitness and Probity programme.
For further information on the risk management framework of the Group,
see pages 122 to 124 of this report.
In the event that material failings or weaknesses in the systems of risk
management or internal control are identified, Management is required
to attend the relevant Board forum to provide an explanation of the issue
and to present a proposed remediation plan. Agreed remediation plans
are tracked to conclusion, with regular status updates provided to the
relevant Board forum.
Given the work of the Board, BRC, BAC and representations made by
the ExCo during the year, the Board is satisfied that the necessary
actions to address any material failings or weaknesses identified
through the operation of the Group’s risk management and internal
control framework have been taken, or are currently being undertaken.
Taking this and all other information into consideration as outlined
above, the Board is satisfied that there has been an effective system of
control in place throughout the year.
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Viability Statement
In accordance with provision 31 of the UK Corporate Governance Code
published in July 2018, the Directors have assessed the viability of the
Group taking into account its current position, the prevailing economic
and trading conditions and principal risks facing the Group over the next
three years to the end of 2026.
Horizon period
The Directors concluded that three years was an appropriate period to
assess the viability of the Group for the following reasons:
•
It is the same period used within the Group for strategic and financial
planning process;
• The Group prepares its annual Internal Capital Adequacy Assessment
(ICAAP) and Internal Liquidity Adequacy Assessment (ILAAP) on an
annual basis using a three year time horizon;
• A three year time horizon is used for both internal and regulatory
stress testing. Where certain impacts can be assessed reliably
beyond the 3 year forecast horizon, a quantification is performed (for
example the ECB Prudential provisioning backstop for non-performing
exposures) and considered; and
• A three year time horizon is consistent with the internal risk
management practices within the Group, including but not limited to:
setting of the Risk Appetite, the Material Risk Assessment as well as
Recovery and Resolution planning.
Considerations in assessing viability of the Group
Assessment of prospects
The assessment of the Group’s prospects is built up based on the
current financial position of the Group including its liquidity and funding,
MREL and capital position.
The Group’s fully loaded CET1 at 31 December 2023 is 15.8% against a
regulatory requirement of 11.13% as set out on pages 49 to 52. The
Group’s LCR of 199% and NSFR of 159% demonstrate a very strong
liquidity position as described on pages 177 and 183.
The Group has completed a review of its Strategy, covering the period of
assessment which is described on pages 20 and 21.As part of the
delivery of the Group’s Strategy, the Directors consider the risks facing
the Group including those that would threaten the competitive position of
the business, its operational capacity and resilience as well as the
Group’s governance and internal control systems.
Profitability and growth were reassessed in the annual planning exercise
covering the period 2024 to 2026 undertaken by the Group in the
second half of 2023 and which considers the Strategy. Given the
changing banking landscape, evolving operating environment and the
interest rate outlook, the Financial Plan (2024-2026) shows the Group
expects strong profitability. This resulted in the Group announcing an
increase in medium term RoTE target from greater than 13% to 15%.
However, the Board remains cognisant of and monitors a number of
headwinds to the credit environment, most notably inflation challenges
and geopolitical risks.
Assessment of risks
During the year, the Directors rely on the following processes and
outputs to identify and assess risks which could impact on the continued
viability of the Group:
• The Group’s Material Risk Assessment process seeks to ensure that
all significant risks to which the Group is exposed have been identified
and are being appropriately managed. New and emerging risks are
also identified and mitigating actions are put in place.
• As part of the setting of the Group’s risk appetite, consideration is
given to the amount of risk the Group is willing to accept in pursuit of
its strategic objectives.
Internal stress testing of the Group’s capital and liquidity position is
conducted using a variety of different macroeconomic scenarios.
In recovery and resolution planning, consideration is given to market
factors and the operational resiliency of the Group.
•
•
• The regular reporting of the Group’s financial performance by the
Chief Financial Officer and the reporting of the Group’s risk profile by
the Chief Risk Officer.
• The provision of independent and objective assurance of the
adequacy of the design and operational effectiveness of the risk and
control environment by Group Internal Audit to the Board Audit
Committee.
• The Board Risk Committee oversees the Group’s risk management.
A full description of the principal risks facing the Group is provided in the
Risk management section – Individual risk types pages 121 to 196.
As part of the internal capital adequacy assessment process, material
risks to the Group’s financial performance are considered in terms of
their potential impact on the Group’s position. Stress testing not only
includes changes in macroeconomic forecasts but also other factors
such as; financial crime losses, disruption to IT systems or cost of a
cyber incident as well as financial loss arising from compliance or
conduct issues.
In addition, the Group continues to work to understand and manage
risks that could arise in relation to climate risk, both in terms of the
transition to Net Zero and the physical risks from climate change.
Assessment of viability
The financial planning process is the main tool for assessing
the continued financial prospects of the Group. The plan is a detailed
three year financial forecast for each segment, and includes forecasts of
operating results, headcount, investment expenditure and new strategic
initiatives. Progress against the plan is reported monthly to the
Executive Committee and the Board. Updated forecasts are prepared as
required and mitigating management actions are taken where required.
The Board considers independent review of the plan by the Risk
function covering the alignment of the plan with Group strategy and the
risk appetite. This review also identifies the key risks to delivery of the
Group’s plan.
The Group’s base case underpins the financial plan and reflects
changes in the macro-economic and market environment and also
includes consideration of downside scenarios. In our Moderate
Downside scenario, amidst high wage inflation, further margin widening
by firms, and deepening geopolitical fragmentation that weighs on global
trade, impacting supply chains and boosting commodity prices, inflation
remains very high in 2024-2025. The major economies all experience a
significant recession in 2024, followed by a sluggish recovery in activity.
In the Severe scenario monetary tightening has a far more negative
impact on economic activity than had been anticipated by central banks,
with higher rates exposing further vulnerabilities in the financial system.
The world economy experiences in effect a credit crunch, with rising bad
debts and a severe global recession.
Separately, in light of the commitment to transition to Net Zero, the
Group also considers the impacts of transitioning to a low-carbon
economy and physical risks as part of climate risk stress testing. In
addition, the Group performs regular stress testing of its liquidity
position.
After assessing the Group’s prospects, risks, and reviewing the financial
plan as well as the results of stress testing scenarios, the Group
continues to:
• Demonstrate internal capital generation through continued profitability
in each of the forecast years
• Demonstrate capacity to carry out the proposed distribution strategy
to shareholders, including sustainability of dividends, as well as the
buyback strategy to return the states’ investment in the Group
• Remain in excess of its regulatory capital requirements; and
• Have significant liquidity over its regulatory liquidity coverage ratio
and net stable funding ratio.
Finally, the Group did not identify any material climate related risks for
the three year period under consideration. Climate risk in isolation is not
expected to have a material impact on ECLs.
Statement of viability
On the basis of the above, the Directors have a reasonable expectation,
taking into account the Group’s current position, and subject to the
identified risks and mitigating actions, that the Group will be able to
continue in operation and meet its liabilities as they fall due over the
three year period of assessment.
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Directors’ Report
for the financial year ended 31 December 2023
The Directors of AIB Group plc (‘the Company’) present their report
and the audited financial statements for the financial year ended
31 December 2023. The Statement of Directors’ Responsibilities is
shown on page 199.
For the purposes of this report ‘AIB Group’ or ‘the Group’ comprises the
Company and its subsidiaries in the financial year ended 31 December
2023.
Results
The Group’s profit attributable to the equity holders of the Company
amounted to € 2,061 million and was arrived at as shown in the
consolidated income statement on page 210.
Dividend
The Board proposes to pay an ordinary dividend of 26.6 cent per share
from 2023 profits (totalling €696 million based on the total number of
ordinary shares currently outstanding), payable on 10 May 2024. This is
subject to shareholder approval at the Annual General Meeting in May
2024.
On 12 May 2023, the Company paid a final dividend for the year ended
31 December 2022 of 6.2 cent per share, totalling €166 million, to its
shareholders on the Company’s Register of Members at the close of
business on 1 April 2023.
Buyback of ordinary shares
At the Annual General Meeting (“AGM”) the Board normally seeks, and
has received, a renewal of its authority from shareholders to undertake
on-market purchases of up to 10% of its ordinary shares. At the AGM on
4 May 2023, the authority of the Company to make off-market
purchases of its ordinary shares from the Minister was renewed. At the
2022 AGM, approval had been sought and was received to enter into
a Directed Buyback Contract (the “DBB Contract”) with the Minister for
Finance, the terms of which would permit the Company to make off-
market purchases of shares from the Minister of up to 4.99% of the
Company’s issued share capital in any 12 month period, with the
agreement of the Minister at that time. Any such off-market purchases
would be made at the relevant market price, the calculation of which
was set out in the DBB Contract. On 25 April 2023 the Group
announced that it had repurchased 54,674,818 ordinary shares,
representing approximately 2.05% of the issued share capital from the
Minister, for a total consideration of €215 million. These shares were
repurchased at a price of €3.938 per ordinary share, being the closing
price of the Group’s ordinary shares on Euronext Dublin on 24 April
2023, and were cancelled upon settlement. A summary of transactions
in own shares has been set out below and further information is
available in Note 36 Share Capital at page 281.
At 1 January 2023
Share buybacks*
Par Value
Number of
Shares
€m
000s
1,671
2,673,428
(34)
(54,675)
At 31 December 2023
1,637
2,618,753
*all of the purchased shares were cancelled
In accordance with regulatory requirements the Company is required to
obtain prior approval from the ECB in order to undertake any share
buybacks (including a Directed Buyback). In this context, the company
has received regulatory approval from the ECB to undertake a buyback
of ordinary shares in an aggregate consideration amount of up to €1,000
million. Discussions with the Department of Finance in relation to a
potential directed buyback of ordinary shares from the Minister for
Finance are currently underway. Any buyback of ordinary shares would
be subject to the approvals of the Board, the Minister for Finance and
shareholders.
Going concern
The financial statements for the financial year ended 31 December 2023
have been prepared on a going concern basis as the Directors are
satisfied, having considered the principal risks and uncertainties
impacting the Group, that it has the ability to continue in business for the
period of assessment. The period of assessment used by the Directors
is 12 months from the date of approval of this Annual Financial Report.
In making their assessment, the Directors considered a wide range of
information relating to present and future conditions. These included
financial plans covering the period 2024 to 2026, liquidity and funding
forecasts and capital resources projections, all of which were prepared
under base and stress scenarios.
In addition, the Directors considered the principal risks and uncertainties
which could materially affect the Group’s future business performance
and profitability and which are outlined on pages 27 to 30.
Directors’ Compliance Statement
As required by section 225(2) of the Companies Act 2014, the Directors
acknowledge that they are responsible for securing the Company’s
compliance with its relevant obligations (as defined in section 225(1)
and section 1374). The Directors confirm that:
(a) a compliance policy statement (as defined in section 225(3) (a)) has
been drawn up that sets out the Company’s policies and, in the
Directors’ opinion, is appropriate to ensure compliance with the
Company’s relevant obligations;
(b) appropriate arrangements or structures that are, in the Directors’
opinion, designed to secure material compliance with the relevant
obligations have been put in place; and
(c) a review of those arrangements or structures has been conducted in
the financial year to which this report relates.
Capital
Information on the structure of the Company’s share capital, including
the rights and obligations attaching to shares, is set out in the Schedule
on pages 281 to 282 and is part of note 36 to the consolidated financial
statements.
Accounting policies
The principal accounting policies, together with the basis on which the
financial statements have been prepared, are set out in note 1 to the
consolidated financial statements.
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Review of principal activities
The statement by the Chair on pages 8 and 9, the review by the Chief
Executive Officer on pages 10 to 15, and the operating and financial
review on pages 34 to 48 contain an overview of the development of the
business of the Group during the year, of recent events, and of likely
future developments.
Directors’ Remuneration
The Group’s policy with respect to Directors’ remuneration is included in
the Corporate Governance Remuneration Statement on pages 101 to
108. Details of the total remuneration of the Directors in office during
2023 and 2022 are shown in the Corporate Governance Remuneration
Statement on page 106.
Directors
At 31 December 2023, the Board of Directors of the Company was
comprised of Mr Jim Pettigrew, Ms Anik Chaumartin, Mr Donal Galvin,
Mr Basil Geoghegan, Ms Tanya Horgan, Dr Colin Hunt, Ms Sandy
Kinney Pritchard, Ms Elaine MacLean, Mr Andy Maguire, Mr Brendan
McDonagh, Ms Helen Normoyle, Ms Ann O’Brien, Mr Fergal O’Dwyer,
Mr Jan Sijbrand and Mr Raj Singh.
Ms Normoyle is the Senior Independent Non-Executive Director and
was appointed to this position on 1 July 2022. Ms Normoyle has served
as an Independent Non-Executive Director since December 2015.
Biographical details of all Directors are provided on pages 70 to 73.
The appointment and replacement of Directors, and their powers, are
governed by law and the Constitution of the Company, and information
on these is set out in the Schedule on page 118.
Directors’ and Secretary’s Interests in Shares
The beneficial interests of the Directors and the Company Secretary in
office at 31 December 2023, and of their spouses and minor children, in
the Company’s ordinary shares as disclosed to the Company are as
follows:
31 December
2023
1 January
2023*
—
—
—
—
Non-Financial Statement
Regulations on non-financial information, which were transposed into
Irish law by the European Union (disclosure of Non-Financial and
Diversity Information by certain large undertakings and groups)
Regulations 2017 as amended by Statutory Instrument No. 410 of 2018,
require that the Group reports on specific topics such as: environmental
matters; social and employee matters; respect for human rights; and
bribery and corruption (‘key non-financial matters’).
The Group is committed to maintaining sustainable and ethically
responsible corporate and social practices in every aspect of its
business. The tables included on pages 59 to 63 of the Annual Financial
Report, together with the information it refers to, is intended to assist
shareholders to understand the Group’s position on key non-financial
matters. A description of the Group’s business model is included on
page 6 of the Annual Financial Report and the content on pages 27 to
30 summarises the linkage between the Group’s strategic pillars, the
principal risks and uncertainties, and the Group’s material risks. The
material risks primarily impacted by key non-financial matters include
operational risk, credit risk, people and culture risk, regulatory
compliance risk and conduct risk. Further details of the Group’s risk
management governance and organisational framework can be found
on pages 122 to 124. Further information on our economic activities
that qualify as environmentally sustainable can be found in our EU
Taxonomy Disclosure on pages 64 to 65 and accompany templates
available in our appendices section on pages 325 to 328.
Substantial interests in the share capital
At 31 December 2023, the Company had been notified of the following
substantial interests:
9,835
9,835
• The Minister for Finance in Ireland held 1,067,638,190 ordinary
—
60,000
10,000
—
30,000
—
60,000
10,000
—
—
20,000
20,000
2,000
2,000
—
10,000
25,000
—
—
—
10,000
25,000
—
—
50,210
50,210
shares representing 40.77% of the total voting rights attached to the
issued share capital.
• Massachusetts Financial Services Company held 183,353,634
ordinary shares representing 7.00% of the total voting rights attached
to the issued share capital.
• BlackRock, Inc. held 179,511,691 ordinary shares representing 6.85%
of the total voting rights attached to the issued share capital.
• Orbis Investment Management Limited held 79,676,757 ordinary
shares representing 3.04% of the total voting rights attached to the
issued share capital.
The following interests were disclosed to the Company in accordance
with the Market Abuse Regulation and Part 5 of the Transparency
Regulations and the related transparency rules during the period from
31 December 2023 to 29 February 2024:
• BlackRock, Inc. held voting rights over 173,455,688 shares
representing 6.62% of the total voting rights attached to the issued
share capital.
Ordinary shares
Directors:
Anik Chaumartin
Donal Galvin
Basil Geoghegan
Tanya Horgan
Colin Hunt
Sandy Kinney Pritchard
Elaine MacLean
Andy Maguire
Brendan McDonagh
Helen Normoyle
Ann O’Brien
Fergal O’Dwyer
Jim Pettigrew
Jan Sijbrand
Raj Singh
Company Secretary:
Conor Gouldson
* Or date of appointment if later.
There is no requirement for Directors, or the Company Secretary, to hold
shares in the Company.
There were no changes in the interests of the Directors and the
Company Secretary shown above between 31 December 2023 and 29
February 2024.
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Directors’ Report continued
Corporate governance
Statement of relevant audit information
The Directors’ Corporate Governance report is set out on pages 66 to
79 and forms part of this report. Additional information, disclosed in
accordance with the European Communities (Takeover Bids (Directive
2004/25/EC)) Regulations 2006, is included in the Schedule to the
Directors’ Report on pages 117 to 118.
In accordance with Section 1097 and 1551 of the Companies Act 2014,
the Directors confirm that a Board Audit Committee is established.
Details on the Board Audit Committee’s membership and activities are
shown on pages 85 to 89.
Political donations
The Directors of the Company have satisfied themselves that there
were no political contributions that require disclosure under the
Electoral Act 1997.
Each of the persons who is a Director at the date of approval of this
report confirms that:
(a) so far as the Director is aware, there is no relevant audit information
of which the Company’s auditor is unaware; and
(b) the Director has taken all the steps that he/she ought to have taken
as a Director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s auditor is
aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of section 330 of the Companies Act 2014.
Other information
Other information relevant to the Directors’ Report may be found in the
following pages of the report:
2023 Results – Financial Performance
Risk management
Non-adjusting events after the reporting period
Page
2
122
314
Jim Pettigrew
Chair
5 March 2024
Colin Hunt
Chief Executive Officer
Accounting records
The measures taken by the Directors to secure compliance with the
Company’s obligation to keep adequate accounting records include the
use of appropriate systems and procedures, incorporating those set out
within “Internal control” in the Corporate Governance report on pages 111
and 112, and the employment of competent persons. The accounting
records are kept at the Company’s Registered Office at 10 Molesworth
Street, Dublin 2, Ireland and at the principal addresses outlined on
page 337.
Principal risks and uncertainties
Information concerning the principal risks and uncertainties facing the
Group, as required under the terms of the European Accounts
Modernisation Directive (2003/51/EEC) (implemented in Ireland by the
European Communities (International Financial Reporting Standards
and Miscellaneous Amendments) Regulations 2005), is set out on pages
27 to 30.
Branches outside the State
The Company has not established any branches since incorporation.
However, the Company’s principal operating subsidiary, Allied Irish
Banks, p.l.c., had established branches in the United Kingdom and the
United States of America.
Auditor
The auditors, PricewaterhouseCoopers (“PwC”) were appointed to
the Group on 4 May 2023 following shareholder approval at the 2023
Annual General Meeting on that date. Furthermore, PwC shall continue
to hold office until the conclusion of the next Annual General Meeting
of the Company on 2 May 2024, pursuant to section 383(2) of the
Companies Act 2014 at which time their continued appointment will be
proposed to the shareholders for approval pursuant to an advisory
resolution. PwC have indicated a willingness to continue in office in
accordance with section 383(2) of the Companies Act 2014.
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Schedule to the Directors’ Report
for the financial year ended 31 December 2023
Additional information required to be contained in the Directors’
Annual Report by the European Communities (Takeover Bids
(Directive 2004/25/EC)) Regulations 2006.
shares to an unconnected third party or due compliance, to the
satisfaction of the Company, with the notice served as provided for
above.
As required by these Regulations, the information contained below
represents the position of the Company as at 31 December 2023.
Capital structure
The authorised share capital of the Company is €2,500,000,000 divided
into 4,000,000,000 ordinary shares of €0.625 each (“Ordinary Shares”).
The issued share capital of the Company is 2,618,753,655 Ordinary
Shares of €0.625 each.
Rights and obligations of each class of share
The following rights attach to Ordinary Shares:
•
•
•
•
•
•
•
the right to receive duly declared dividends, in cash or, where offered
by the Directors, by allotment of additional Ordinary Shares;
the right to attend and speak, in person or by proxy, at general
meetings of the Company;
the right to vote, in person or by proxy, at general meetings of the
Company having, in a vote taken by a show of hands, one vote, and,
on a poll, a vote for each Ordinary Share held;
the right to appoint a proxy, in the required form, to attend and/or vote
at general meetings of the Company;
the right to receive, (by post or electronically), at least 21 days before
the Annual General Meeting, a copy of the Directors’ and Auditor’s
reports accompanied by copies of the balance sheet, profit and loss
account and other documents required by the Companies Act to be
annexed to the balance sheet or such summary financial statements
as may be permitted by the Companies Act;
the right to receive notice of general meetings of the Company; and
in a winding-up of the Company, and subject to payments of amounts
due to creditors and to holders of shares ranking in priority to the
Ordinary Shares, repayment of the capital paid up on the Ordinary
Shares and a proportionate part of any surplus from the realisation of
the assets of the Company.
There is, attached to the Ordinary Shares, an obligation for the holder,
when served with a notice from the Directors requiring the holder to do
so, to inform the Company in writing within not more than 14 days after
service of such notice, of the capacity in which the shareholder holds
any share of the Company and, if such shareholder holds any share
other than as beneficial owner, to furnish in writing, so far as it is within
the shareholder’s knowledge, the name and address of the person on
whose behalf the shareholder holds such share or, if the name or
address of such person is not forthcoming, such particulars as will
enable or assist in the identification of such person, and the nature of
the interest of such person in such share. Where the shareholder served
with such notice (or any person named or identified by a shareholder on
foot of such notice) fails to furnish the Company with the information
required within the time period specified, the shareholder shall not be
entitled to attend meetings of the Company, nor to exercise the voting
rights attached to such share, and, if the shareholder holds 0.25% or
more of the issued Ordinary Shares, the Directors will be entitled to
withhold payment of any dividend payable on such shares, and the
shareholder will not be entitled to transfer such shares except by sale
through a Stock Exchange to a bona fide unconnected third party. Such
sanctions will cease to apply after not more than seven days from the
earlier of receipt by the Company of notice that the member has sold the
Restrictions on the transfer of shares
Save as set out below, there are no limitations in Irish law or in the
Company’s Constitution on the holding of Ordinary Shares, and there is
no requirement to obtain the approval of the Company, or of other
holders of Ordinary Shares, for a transfer of Ordinary Shares.
The Ordinary Shares are, in general, freely transferable, but the Directors
may decline to register a transfer of Ordinary Shares upon notice to the
transferee, within two months after the lodgement of a transfer with the
Company, in the following cases:
(i) a lien held by the Company on the shares;
(ii) a purported transfer to an infant or a person lawfully declared to be
incapable for the time being of dealing with their affairs; or
(iii) a single transfer of shares which is in favour of more than four
persons jointly.
Ordinary Shares held in certificated form are transferable upon
production to the Company’s Registrars of the original share certificate
and the usual form of stock transfer duly executed by the holder of the
shares.
Shares held in uncertificated form are transferable in accordance with
the rules or conditions imposed by the operator of the relevant system
that enables title to the Ordinary Shares to be evidenced and transferred
without a written instrument, and in accordance with the Companies Act
2014.
The rights attaching to Ordinary Shares remain with the transferor until
the name of the transferee has been entered on the Register of
Members of the Company.
Exercise of rights of shares in Employee share schemes
The AIB Approved Employee Profit Sharing Scheme 1998 and the Allied
Irish Banks, p.l.c. Share Ownership Plan (UK) provide that voting rights
in respect of shares held in trust for employees who are participants in
those schemes are, on a poll, to be exercised only in accordance with
any directions in writing by the employees concerned to the Trustees of
the relevant scheme. Following the establishment of the Company, the
shares previously held in trust in Allied Irish Banks, p.l.c. were
exchanged, on a one-for-one basis, for new shares in the Company.
Deadlines for exercising voting rights
Voting rights at general meetings of the Company are exercised when
the Chair puts the resolution at issue to a vote of the meeting. A vote
decided by a show of hands is taken forthwith. A vote taken on a poll for
the election of the Chair or on a question of adjournment is also taken
forthwith, and a poll on any other question is taken either immediately or
at such time (not being more than 30 days from the date of the meeting
at which the poll was demanded or directed) as the Chair of the meeting
directs. Where a person is appointed to vote for a shareholder as proxy,
the instrument of appointment must be received by the Company not
less than 48 hours before the time appointed for holding the meeting or
adjourned meeting at which the appointed proxy proposes to vote, or, in
the case of a poll, not less than 48 hours before the time appointed for
taking the poll.
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118
Schedule to the Directors’ Report continued
Rules concerning amendment of the Company’s Constitution
As provided in the Companies Act 2014, the Company may, by special
resolution, alter or add to its Constitution. A resolution is a special
resolution when it has been passed by not less than three-fourths of the
votes cast by shareholders entitled to vote and voting in person or by
proxy, at a general meeting at which not less than 21 clear days’ notice
specifying the intention to propose the resolution as a special resolution,
has been duly given. A resolution may also be proposed and passed as
a special resolution at a meeting of which less than 21 clear days’ notice
has been given if it is so agreed by a majority in number of the members
having the right to attend and vote at any such meeting, being a majority
together holding not less than 90% in nominal value of the shares giving
that right.
Rules concerning the appointment and replacement of Directors of
the Company
• Other than in the case of a casual vacancy, Directors are appointed
on a resolution of the shareholders at a general meeting, usually the
Annual General Meeting.
• No person, other than a Director retiring at a general meeting is
eligible for appointment as a Director without a recommendation by
the Directors for that person’s appointment unless, not less than 42
days before the date of the general meeting, written notice by a
shareholder duly qualified to be present and vote at the meeting of the
intention to propose the person for appointment, and notice in writing
signed by the person to be proposed of willingness to act, if so
appointed, have been given to the Company.
• A shareholder may not propose himself or herself for appointment as
a Director.
• The Directors have the power to fill a casual vacancy or to appoint an
additional Director (within the maximum number of Directors fixed by
the Company in a general meeting), and any Director so appointed
holds office only until the conclusion of the next Annual General
Meeting following his/her appointment, when the Director concerned
shall retire, but shall be eligible for reappointment at that meeting.
• One-third of the Directors for the time being (or, if their number is not
three or a multiple of three, not less than one- third) are obliged to
retire from office at each Annual General Meeting on the basis of the
Directors who have been longest in office since their last appointment.
While not obliged to do so, the Directors have, in recent years,
adopted the practice of all (those wishing to continue in office) offering
themselves for re-election at the Annual General Meeting.
• A person is disqualified from being a Director, and their office as a
Director ipso facto vacated, in any of the following circumstances:
– if at any time the person has been adjudged bankrupt or has made
any arrangement or composition with his/her creditors generally;
– if found to no longer have adequate decision making capacity in
accordance with law;
– if the person be prohibited or restricted by law from being a Director;
– if, without prior leave of the Directors, he/she be absent from
meetings of the Directors for six successive months (without an
alternate attending) and the Directors resolve that his/her office be
vacated on that account;
– if, unless the Directors or a court otherwise determine, he/she be
convicted of an indictable offence;
– if he/she be requested, by resolution of the Directors, to resign his/
her office as Director on foot of a unanimous resolution (excluding
the vote of the Director concerned) passed at a specially convened
meeting at which every Director is present (or represented by an
alternate) and of which not less than seven days’ written notice of the
intention to move the resolution and specifying the grounds therefore
has been given to the Director; or
– if he/she has reached an age specified by the Directors as being that
at which that person may not be appointed a Director or, being
already a Director, is required to relinquish office and a Director who
reaches the specified age continues in office until the last day of the
year in which he/she reaches that age.
In addition, the office of Director is vacated, subject to any right of
appointment or reappointment under the Company’s Constitution, if:
– not being a Director holding for a fixed term an executive office in his/
•
her capacity as a Director, he/she resigns their office by a written
notice given to the Company, upon the expiry of such notice; or
– being the holder of an executive office other than for a fixed term, the
Director ceases to hold such executive office on retirement or
otherwise; or
– the Director tenders his/her resignation to the Directors and the
Directors resolve to accept it; or
– the Director ceases to be a Director pursuant to any provision of the
Company’s Constitution.
• Notwithstanding anything in the Company’s Constitution or in any
agreement between the Company and a Director, the Company may,
by ordinary resolution of which extended notice has been given in
accordance with the Companies Act 2014, remove any Director
before the expiry of his/her period of office.
• The Minister for Finance has the power to nominate two Non-
Executive Directors in accordance with the Relationship Framework
between the Group and the State and certain provisions as outlined
therein. The Relationship Framework is available on the Group’s
website at https://aib.ie/investorrelations.
The powers of the Directors
Under the Company’s Constitution, the business of the Company is to
be managed by the Directors, who may exercise all the powers of the
Company subject to the provisions of the Companies Act, the
Constitution of the Company, and to any directions given by special
resolution of a general meeting. The Company’s Constitution further
provides that the Directors may make such arrangements as may be
thought fit for the management, organisation and administration of the
Company’s affairs, including the appointment of such executive and
administrative officers, managers and other agents as they consider
appropriate, and may delegate to such persons (with such powers of
sub-delegation as the Directors shall deem fit) such functions, powers
and duties as the Directors may deem requisite or expedient.
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119
Other Governance Information
Other governance information
Relations with shareholders
The Group has a number of procedures in place to allow its
shareholders and other stakeholders to stay informed about matters
affecting their interests. In addition to this Annual Financial Report,
which is available on the Group’s website at www.aib.ie/investorrelations
and sent in hard copy to those shareholders who request it, the following
communication tools are used by the Group:
Website
The Group’s website contains, for the years since 2000, the Annual
Financial Report, the Half-Yearly Financial Report, and the Annual
Report on Form 20-F for relevant years. In accordance with the
Transparency (Directive 2004/109/EC) (Amendment) (No.2) Regulations
2015, this and all future Annual and Half-Yearly Financial Reports will
remain available to the public for at least ten years. For the period 2008
to 2013, the Annual Financial Report and the Annual Report on Form
20-F were combined. The Group’s presentation to fund managers and
analysts of annual and half-yearly financial results are also available on
the Group’s website. None of the information on the Group’s website is
incorporated in, or otherwise forms part of, this Annual Financial Report.
Annual General Meeting (“AGM”)
The AGM is an opportunity for shareholders to hear directly from the
Board on the Group’s performance and developments of interest for the
year to date and, importantly, to ask questions.
All shareholders of the Company are invited to attend the AGM.
Separate resolutions are proposed on each separate issue and voting is
conducted by way of poll. The votes for, against and withheld on each
resolution are subsequently published on the Group’s website. It is usual
for all Directors to attend the AGM and to be available to meet
shareholders before and after the meeting. The Chairs of the Board
Committees are available to answer questions about the Committee’s
activities. A help desk facility is available to shareholders attending the
AGM.
The Company’s 2024 AGM is scheduled to be held on 2 May 2024. It is
intended that Notice of the Meeting will be made available on the
Group’s website and sent in hard copy to those shareholders who
request it, at least 20 working days before the meeting, in accordance
with the Financial Reporting Council’s Board Effectiveness guidelines.
The location of the meeting and attendance options will be
communicated with the distribution of the aforementioned Notice.
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AIB Group plc
Supervision and Regulation
Throughout 2023, the Group continued to work with its regulators, which
include the European Central Bank (“ECB”), the Central Bank of Ireland
(“CBI”), the Prudential Regulation Authority (“PRA”), the Financial
Conduct Authority (“FCA”) in the United Kingdom (“UK”), the New York
State Department of Financial Services (“NYSDFS”) and the Federal
Reserve Bank of New York in the United States of America (“USA”) to
focus on ensuring compliance with existing regulatory requirements
together with the management of regulatory change.
AIB Group plc is the holding company of Allied Irish Banks, p.l.c. (the
principal operating company of AIB Group) and as such AIB Group plc is
subject to consolidated supervision with respect to Allied Irish Banks,
p.l.c. and other credit institutions and investment firms in the Group.
Allied Irish Banks London Branch was approved by the PRA/FCA as an
incoming third country branch to operate in the UK post Brexit.
Current climate of regulatory change
The level of regulatory change remained high in 2023 as the regulatory
landscape for the banking sector continued to evolve. 2023 saw a
continued focus by the Group’s regulators on regulatory change
implementation amidst this evolving regulatory landscape.
The Regulatory focus on Conduct, Culture and Prudential,including ESG
will continue in 2024 and beyond, with the full implementation of the
Senior Executive Accountability Regime as part of the Individual
Accountability Framework, the ongoing review of the Consumer
Protection Code, and the finalisation of preparations to implement the
Basel III final reforms.
The Group is committed to proactively identifying regulatory obligations
arising in each of the Group’s operating markets in Ireland, the UK and
the USA, ensuring the timely implementation of regulatory change.
Throughout 2023 the Group continued cross-functional programmes to
ensure that it met new regulatory requirements. In particular, the Group
focused on monitoring the development of the forthcoming EU AML
Reform package, key legislative initiatives in the areas of payments
(including plans to introduce instant payments, a digital euro and revisions
to the EU’s payments service directive), proposed amendments to primary
EU conduct of business legislation (including the consumer credit directive
and distance marketing directive), proposals to introduce new
requirements concerning access and acceptance of cash, new standards
on corporate sustainability reporting, and the staged implementation of the
Individual Accountability Framework in 2023.
The level of regulatory change is expected to remain at high levels in 2024
and beyond.
United Kingdom
During 2023, AIB Group (UK) p.l.c. continued to prioritise compliance
with its regulatory obligations in Great Britain and Northern Ireland and
will remain focused on this throughout 2024.
Regulatory change horizon – UK
Since the UK left the EU, the regulatory regime within the UK has
remained closely aligned with EU regulation. EU regulation has
effectively been on-shored onto the UK statute book. There has been
some regulatory divergence as a result of Brexit and the UK has
implemented changes, particularly in relation to financial crime including
sanctions. Implications for financial services regulations need to be
carefully monitored but given most EU regulations have been
transposed into UK law via the Financial Services and Markets Act, the
actual impact continues to be insignificant. AIB UK is well positioned to
identify and comply with any changes.
Work is ongoing by the Payment System Regulator in relation to
authorised push payment fraud to further enhance customer protection.
There were a number of strategic initiatives implemented within AIB UK
during 2023. Each of these were implemented in line with regulatory
requirements and all customers’ risks and the associated mitigating
actions were fully considered through the AIB (UK) Conduct Committee.
2023 saw the introduction of Confirmation of Payee service to better
protect customers from fraud and the implementation of the FCA’s new
Consumer Duty rules, requiring firms “to act to deliver good outcomes
for retail customers”. Phase 2 of Consumer Duty will continue in 2024.
Work commenced to deliver the final item on the CMA’s Open Banking
road map in 2024.
UK Regulators continue to focus on enhancing operational resilience in
the UK financial services sector and requiring banks to make plans to
take account of climate change.
United States
Compliance with federal and state banking laws and regulations
AIB New York continues to prioritise compliance with its regulatory
obligations in the USA and will remain focused on this throughout 2024.
The level of regulatory change remained high in 2023.
Regulatory focus on Liquidity Risk Management, AML & Sanctions,
Climate, Cybersecurity & Resiliency continues in 2024, with regulatory
developments in Climate and Cybersecurity. The NYDFS finalised its
second amendment to its 23 NYCRR Part 500 (Cybersecurity Rules) in
2023. The new compliance requirements will take effect in phases in
2024 and beyond.
The passing of the Anti-Money Laundering Act 2020 in 2021
will continue to be a focus throughout 2024 and beyond with
the enactment of new rules from FinCEN implementing the provisions.
US Regulators will move forward in 2024 with climate-related enhanced
supervision and increasingly codified requirements and guidance with
possible alignment to European regulations.
Expanded use of digital payments, crypto and digital assets has
increased the need for defined regulatory authority around key risk
areas.
AIB New York will continue to maintain the annual attestation of
compliance to the NYDFS for the AML (DFS 504) and Cybersecurity
(DFS 500) Programmes and to the FRB for its Security and Resiliency
requirements.
AIB New York will continue to work closely with AIB Group on regulatory
changes.
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AIB Group plc
Risk Management
1.
1.1
1.2
1.3
Risk Management Approach
Risk strategy
Risk Governance and Oversight
Identification and assessment
1.4 Monitoring, escalating and reporting
1.5
1.6
2.
2.1
2.2
2.3
Risk culture
Control environment
Individual risk types
Credit risk
Liquidity and funding risk
Financial risks
(a) Market risk
(b) Pension risk
(c) Equity risk
2.4
Business model risk
2.5 Operational risk
2.6
2.7
2.8
Conduct risk and culture risk
Regulatory compliance risk
Capital adequacy risk
2.9 Model risk
2.10 Climate and environmental risk
122
122
122
123
124
124
124
125
126
177
184
184
187
188
189
189
190
191
192
193
193
The information below in sections, paragraphs or tables denoted as audited in sections 2.1 to 2.10 in the Risk Management Report forms an integral
part of the audited financial statements as described in Note 1(c) ‘basis of preparation’ to the financial statements. All other information, including
tables, in the Risk Management Report are additional disclosures and do not form an integral part of the audited financial statements.
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AIB Group plc
Risk Management continued
1. Risk Management Approach
1. Introduction
The risk summary on pages 26 to 31 provides an overview of the
Group’s core risk management principles and the key developments in
2023. This full risk management section provides a more in-depth
picture of how risk is managed within the Group. A full analysis of the
principal risks categories are set out on pages 125 to 196, including the
framework by which risks are identified, managed, monitored and
reported. Each principal risk category is described using
standard headings.
The Group uses a comprehensive risk management approach across all
risk types. This is outlined in the Group’s risk management framework,
including the key practices that are implemented in managing risks, both
financial and non-financial. The framework is reviewed, updated and
approved by the Board at least annually to reflect any changes to the
Group’s business or consideration of external regulations, corporate
governance requirements and industry best practice.
The Group’s independent Risk function designs and maintains the
framework. The Risk function is led by the Chief Risk Officer who
provides oversight and monitoring of all risk management activities.
1.1 Risk strategy
Risk strategy setting
The following section sets out at a high level the approach to Risk strategy
setting applicable across the Group, its subsidiaries and joint ventures.
The Group has a set of strategic risk objectives which supports the
delivery of the Group’s strategy. A Risk Plan is developed by the Chief
Risk Officer and is designed to align to the Group Strategy, with
enhanced oversight of compliance with regulation and much closer
involvement in the development, implementation, and safe execution of
the Group’s strategy. The Group’s Risk Appetite Statement defines the
amount and type of risk that the Group is willing to accept, in pursuit of
its strategic goals.
The focus of the Group’s new strategic cycle is centred around
customers needs and anchored in a progressive sustainability agenda.
See “Our Strategy” on page 20. Sustainability is a key strategic objective
of the Group and Sustainable Communities is one of the Group’s five
Strategic Pillars (See “Creating Sustainable Value” on page 6). For
2023, Climate and Environmental risk has been included as a Principal
Risk. See pages 193 to 196 for more details on Climate and
Environmental Risk.
1.2 Risk governance and oversight
The Group’s Governance and Organisation Framework encompasses
the leadership, direction and control of the Group, reflecting policies,
guidelines and statutory obligations. This ensures that control
arrangements provide appropriate governance of the Group’s strategy,
operations and mitigation of related material risks. This is achieved
through a risk governance structure designed to facilitate the reporting,
evaluation and escalation of risk concerns from business segments and
control functions to the Board and its appointed committees and sub-
committees.
Board of Directors
The Board of Directors is ultimately responsible and accountable for the
effective management of risks and for the system of internal controls
in the Group. The Board has delegated a number of risk governance
responsibilities to various committees. The roles of the Board, the Board
Audit Committee, the Board Risk Committee, the Remuneration
Committee, Sustainability Business Advisory Committee, Technology
and Data Advisory Committee and the Nominations and Corporate
Governance Committee are all set out in the Governance and Oversight
– Corporate Governance report on pages 66 to 120.
Executive Committee (“ExCo”)
The ExCo has primary authority and responsibility for the day to day
operations of, and the development of strategy for the Group. The core
overarching areas of oversight and decision-making for the Executive
Committee are:
• Strategy and Business Development
• Performance and Operations
• Business Structure and Risk Management
• Talent and Culture
• Stakeholder Management
While the ExCo has delegated its powers and authorities to other
committees, it retains ultimate accountability for the functions delegated.
Group Risk Committee (“GRC”)
The GRC is the most senior management risk committee and is
accountable to the ExCo to set policy and monitor all risk types across
the Group to enable delivery of the Group’s risk strategy.
The roles and responsibilities of the GRC are:
• Reviewing and approving (or recommending to the Board and/or its
subcommittees where appropriate) risk frameworks, risk appetite
statements, risk policies and thresholds in order to manage the risk
profile of the Group;
• Monitoring and reviewing the Group’s risk profile (enterprise wide);
• Periodically reviewing the effectiveness of the Group’s risk
management policies for identifying, evaluating, monitoring, managing
and measuring significant risks;
• Providing oversight and challenge of regulatory, operational
and conduct risk related matters;
• Providing oversight and challenge of credit risk management related
matters and periodically reviewing the credit portfolio exposures and
trends;
• Providing oversight and challenge of risk measurement matters;
• Overseeing the development of the Group’s risk management culture;
• Monitoring and reviewing the Group’s risk profile and the business
segment limits for equity risk;
• Considering the annual Money Laundering Reporting Officer’s report;
and
• Considering and assessing management’s response to Group Internal
Audit findings.
The sub-committees of the GRC are the Group Credit Committee, the
Group Internal Ratings Based Committee, the Regulatory and Conduct
Risk Committee, the Model Risk Committee and the Operational Risk
Committee:
• The Group Credit Committee (and its sub-committees) is responsible
for developing and monitoring credit policy within the Group and
approval of all large credit transactions. The Areas Credit Committees
exercise approval authority in line with the relevant Credit Approval
and Review Authorities for the business areas;
• The Group Internal Ratings Based Committee ensures delivery of the
commitments set out in the IRB Enterprise Plan;
• The Regulatory and Conduct Risk Committee is responsible for the
governance and oversight of regulatory and conduct risks;
• The Model Risk Committee reviews the technical and methodological
aspects of the Group’s material models as well as maintenance of
existing material models and approval of less material models;
• The Operational Risk Committee is responsible for the governance
and oversight of operational risks.
Group Asset and Liability Management Committee(“ALCo”)
ALCo has been established as a sub-committee of the Executive
Committee. ALCo is the Group’s strategic and business decision making
forum for balance sheet management matters. ALCo is tasked with
decision making in respect of the Group’s balance sheet structure,
including capital, funding, liquidity, interest rate risk in the banking book
from an economic value and net interest margin (“NIM”) perspective,
foreign exchange (“FX”) risks and other market risks to ensure it enables
the delivery of the Group’s Strategic Plan. ALCo provides oversight of
funding and liquidity, capital, market and equity/investments risk as well
as balance sheet pricing in line with the relevant risk frameworks
and policies in accordance with risk appetite. ALCo also monitors,
reviews and makes decisions regarding key legal, regulatory and
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AIB Group plc
regulatory requirements. Multiple scenarios are considered for each
ILAAP including both firm specific, systemic risk events and
a combination of both to ensure the continued stability of the Group’s
liquidity position within the Group’s pre-defined liquidity risk tolerance
levels. The stress time horizon of three years is aligned with the
planning horizon.
Stress testing
Stress testing is recognised as a key risk management process within the
Group. It seeks to ensure that risk assessment is dynamic and forward
looking, and considers not only existing risks but also potential and
emerging threats. Stress test methodologies are developed to assess the
material risks identified in the material risk assessment process.
The Group’s stress testing programme embraces a range of forward
looking stress tests and takes all the Group’s material risks into account.
The type of stress test include:
•
ICAAP stress testing undertaken on an annual basis in support of
ICAAP and is integrated with the Group’s annual financial planning
process. This aims to highlight the key vulnerabilities of the Group
and inform potential future capital needs including capital buffers,
in excess of minimum regulatory capital requirements, and internal
capital requirements under both base and stressed conditions over
the planning horizon;
Internal capital stress tests on all of the material risks of the Group.
These consider the implications of a severe shock across the Group’s
material risks and additional supporting scenarios as deemed
appropriate;
•
• Annual ILAAP stress testing applied to the funding and liquidity plan
to formally assess the Group’s liquidity risks;
Internal liquidity stress tests which are performed weekly;
•
• The climate stress testing approach consider the impact of physical
and transition risks across a number of scenarios on the Group’s
exposures. The initial scope of climate stress testing activities and
climate modelling in the Group is primarily focused on the credit risk
implications for the loan portfolio;
• Reverse stress testing undertaken at least annually to explore the
vulnerabilities of the Group’s strategies and plans in extreme adverse
events that would cause the Group to fail. If necessary the Group will
adopt an action plan to prevent and mitigate these risks;
• Annual recovery stress tests which use scenarios to assess the
adequacy of recovery indicators of both capital and liquidity in
identifying the onset of a period of stress and the recovery plan
options used to exit that stress;
• Ad hoc stress testing on key core portfolios as required. This can
include emerging risks identified from the MRA process and as well as
in response to regulatory requests;
• Sensitivity analysis assesses the marginal impact of an incremental
change in one risk parameter on the Group’s capital and liquidity
position; and
• Subsidiary stress tests conducted on in-scope subsidiaries subject to
individual regulatory capital requirements.
Stress testing methodology
Across all of the Group’s material risks, the methodology will be an
appropriate blend of model based and expert judgement approaches.
Assumptions and outputs are reviewed by impacted businesses and
central functions, and via Risk review, to ensure they are plausible and
intuitive. All models used in the stress testing process are subject to
model validation as per the Group’s Model Risk Management
Framework. The stress tests comply with all regulatory requirements,
achieved through the comprehensive review and challenge of
macroeconomic scenarios and stress test outcomes, as well as the
ongoing validation requirements of stress testing models.
accounting developments affecting the measurement and control of
balance sheet risks and capital. ALCo is supported by its two
subcommittees, the Stress Testing and Scenarios Committee (“STSC”)
and the Asset and Liability Management Technical Committee (“ALMTC”).
Risk Data Governance
Data governance and quality is of prime importance to the Risk
Management process. It holds up all stages of risk lifecycle and lays the
base for decision making. The Group’s principles for Data Governance
are set out in the Data Framework, and the framework ensures that high
quality data is captured, used, and managed securely. The framework
enhances the monitoring of material risks, risk metrics and mitigates the
risk of inadequate data and risk reporting leading to poor decision
making by the Board and senior management.
1.3 Identification and assessment
Risk is identified and assessed in the Group through a combination of
on-going risk management practices including the following:
• Material risk assessment (“MRA”);
• Risk and control assessment(“RCA”);
•
•
•
• Stress testing & Scenario Analysis;
• Recovery planning; and
• Resolution planning.
Integrated Financial Plan;
Internal Capital Adequacy Assessment Process (“ICAAP”);
Internal Liquidity Adequacy Assessment Process (“ILAAP”);
Material risk assessment (“MRA”)
The MRA is a top down process performed on at least an annual basis
for the Group which identifies the key principal risks and the
identification of emerging and evolving risks. This assessment makes
use of horizon scanning and takes into account the Group’s strategic
objectives and incorporates both internal and external risk information.
The Board is responsible for the annual approval of the Group material
risk assessment.
Risk and control assessment (“RCA”)
The first line of defence is responsible for ensuring that detailed bottom
up RCAs are undertaken for all businesses or business processes
falling under their responsibility. These assessments are performed
regularly and whenever there is a material change in organisation,
business processes or business environment.
Integrated Financial Plan
The financial plan is integral to how the Group manages its business
and monitors performance. It informs the delivery of the Group’s
strategy and is aligned to the Risk Appetite Statement. It enables
realistic business objectives to be set for Management, identifies
accountability in the Group’s delivery of planning targets and identifies
the risks to the delivery of the Group’s strategic goals as well as the
mitigants of those risks. The plan is produced under a base scenario
and assessed under a range of alternative scenarios over a three year
time horizon. This assessment forms the basis for consideration of
business model risk and internal capital adequacy.
Internal Capital Adequacy Assessment Process (“ICAAP”)
This is the Group process to ensure adequate capital resources are
maintained at all times, having regard to the nature and scale of its
business and the risks arising from its operations. The ICAAP is the
process by which the Group performs a formal and rigorous assessment
of its balance sheet, business plans, risk profile and risk management
processes to determine whether it holds adequate capital resources to
meet both internal objectives and external regulatory requirements.
Multiple scenarios are considered for each ICAAP including both
systemic and idiosyncratic stress tests ranging from moderate to
extreme and are applied to the Group’s material risks as identified
through its material risk assessment. The stress time horizon of three
years is aligned with the planning horizon.
Internal Liquidity Adequacy Assessment Process (“ILAAP”)
The Internal Liquidity Adequacy Assessment Process (“ILAAP”) is a
process by which the Group performs a formal and rigorous assessment
of its balance sheet, business plans, risk profile and risk management
processes to determine whether it holds sufficient liquid resources of
appropriate quality to meet both internal objectives and external
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AIB Group plc
Risk Management continued
Recovery planning
The Group’s recovery plan sets out the arrangements and measures that
the Group could adopt in the event of severe financial stress to restore the
Group to long term viability. A suite of indicators and options are included
in the Group’s recovery plan, which together ensures the identification of
stress events and the tangible mitigating actions available to the Group to
restore viability.
Resolution planning
Resolution is the restructuring of a bank by a resolution authority that has
failed or is likely to fail, through the use of resolution tools in order to:
• safeguard the public interest;
• ensure the continuity of the Group’s critical functions;
• ensure financial stability in the economy in which it operates; and
• minimise costs to taxpayers.
The Group is under the remit of the Single Resolution Board (“SRB”)
due to its systemic importance. The SRB, in cooperation with the
National Resolution Authorities, (Central Bank of Ireland for Ireland and
Bank of England for the UK) draft the resolution plan for the Group. The
resolution plan describes the Preferred Resolution Strategy (“PRS”), in
addition to ensuring the continuity of the Group’s critical functions and
the identification and addressing of any impediments to the Group’s
resolvability.
The PRS for the Group is a single point of entry bail-in. The resolution
authorities set the loss absorbing capacity requirements for Minimum
Requirements for own funds and Eligible Liabilities (MREL), in addition
to any work programmes required to mitigate any perceived
impediments to resolvability. Senior management are responsible for
implementing the measures that are needed to ensure the Group’s
resolvability. There are a number of governance fora such as subject
matter working groups and a Resolution Steering Committee that
provides governance and oversight around resolution planning. The
Risk function liaises with the resolution planning team to provide
oversight over the Resolvability Programme to ensure that deliverables
are being met as set out within the Board approved project plan and as
outlined by regulatory guideline.
1.4 Monitoring, escalating and reporting
Setting risk appetite
The Board sets the risk appetite for the Group informed by the material
risk assessment. Risk appetite is the nature and extent of risk that the
Group is willing to take, accept, or tolerate in pursuit of its business
objectives and strategy. It also informs the Group’s strategy, and as part
of the Risk Management Framework, is a boundary condition to strategy
and guides the Group in its risk taking and related business activities.
The financial plan is tested to ensure risk appetite adherence.
The Group Risk Appetite Statement is an articulation of the Group’s
appetite for, and tolerance of risk expressed through qualitative
statements and quantitative limits and thresholds. The Group Risk
Appetite Statement seeks to encourage appropriate risk taking to ensure
that risks are consistent with the Group strategy and risk appetite. The
Group Risk Appetite Statement cascades into key business segments
with separate Risk Appetite Statements for each licenced subsidiary
reflecting the risk appetite of the subsidiary as a standalone entity.
Risk measurement
Each of the material risks has a specific approach to how the risk is
measured. The Group Risk Appetite Statement and the separate Risk
Appetite Statements for the licensed subsidiaries contain metrics which
are measured on a monthly basis against the thresholds set.
Risk management
The material risk types are actively managed and measured against
their respective frameworks, policies and processes on an ongoing
basis. Risk models are used to measure credit, market, liquidity and
funding risk, and where appropriate, capital is allocated (taking account
of risk concentrations) to mitigate material risks. The management and
measurement of the Group’s risk profile also informs the Group’s
strategic and operational planning processes.
Risk reporting
Risk reporting facilitates management decision making and is a critical
component of risk governance and oversight. Risk reporting processes
are in place for each of the material risks under the relevant risk
frameworks and policies. This enables management, governance
committees and other stakeholders to oversee the effectiveness of the
risk management processes, adherence to risk policies, and (where
relevant) adherence to regulatory requirements.
The CRO reports actual performance against Risk Appetite Statements
to the Board Risk Committee. A material breach of a Risk Appetite
Statement limit is reported to the Board and the Group’s regulator when
appropriate.
1.5 Risk culture
Risk culture is an integral part of the Group’s overall culture and is vital
for the Group to achieve its strategic objectives. The risk culture defines
how risk is managed and owned throughout the Group. It is the values,
behaviours, beliefs, knowledge, attitudes, awareness and understanding
of, and towards risk shared by individuals. It sets the foundation for how
the Group manages risk in a consistent and coherent manner. An
effective Group Risk Appetite Statement is highly dependent on risk
culture. Risk culture is one of the key elements of the Group’s Risk
Management Framework. It is through the risk framework and policy
documents that an awareness of risk and control is set and cascaded
throughout the Group including a Conduct Risk Framework which
emphasises the criticality of ensuring fair customer outcomes. The
Group’s promotion of risk learning through recommended risk training
and education supports the embedding of risk culture. These ongoing
activities are supported by an annual Group wide risk awareness week
to reinforce key risk themes.
1.6 Control environment
Three lines of defence model
The Group operates a three lines of defence model which defines clear
responsibilities and accountabilities, ensures effective independent
oversight and assurance activities take place covering key decisions.
The first line of defence lies with the business line managers who are
required to have effective governance and control frameworks in place
for their business and to act within the risk appetite parameters set out.
The second line of defence comprises the Risk function, and oversees
the first line, providing independent constructive challenge, setting the
frameworks, policies and limits, consistent with the risk appetite of the
Group. The third line of defence comprises Group Internal Audit who
provide an independent view on the key risks facing the Group, and the
adequacy and effectiveness of governance, risk management and the
internal control environment in managing these risks.
The Board and its sub committees, the Board Risk Committee (“BRC”)
and Board Audit Committee (“BAC”) are ultimately responsible for
ensuring the effective operation of the three lines of defence model.
They are supported by the Executive Committee (“ExCo”) and its sub-
committees. The Terms of References for the BRC and BAC are
available on the Group’s website.
Assurance testing
The Group has implemented testing and assurance activities with the
objective to provide assurance to the Board, and its delegated sub-
committees on the design and operating effectiveness of the control
environment within the Group. The material risk types are continuously
tested and assured in line with the Group assurance methodology,
which distinguishes between risk management, risk control and risk
assurance. Each line of defence is responsible for preparing business
controls testing plans with consideration of the adequacy of the risk
identified and the design and effectiveness of the controls in place. The
combined assurance is the alignment of governance, risk and assurance
activities, linked with the Group’s strategy with the objective to provide
better co-ordinated efforts, risk reporting, and to continuously improve
performance and resilience.
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2. Individual Risk Types
2.1 Credit risk
Definition
Credit risk organisation and structure
Measurement, methodologies and judgements
2.1.1 Credit risk – Credit exposure overview
Maximum exposure to credit risk
Concentration by industry sector
2.1.2 Credit risk – Credit profile of the loan portfolio
Credit profile of the loan portfolio
Internal credit grade profile by ECL staging
Non-performing loans
Age analysis of contractually past due loans
Gross loans and ECL movements
2.1.3 Credit risk – Impairment and write-offs
Income statement
Loans written-off and recovery of loans previously written-off
2.1.4 Credit risk – Asset class analysis
Residential mortgages
Other personal
Property and construction
Non-property business
2.1.5 Credit risk – Credit ratings
2.1.6 Credit risk – Forbearance overview
126
127
130
142
142
144
146
146
147
149
150
152
159
159
160
161
161
166
168
171
174
175
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Risk Management continued
2.1 Credit risk
Key Developments in 2023:
• The credit quality of the portfolio has remained relatively stable during the year and new lending is in line with targeted quality levels.
However, stress from current inflationary pressures and higher interest rates has manifested in an increase in Stage 2 loans, particularly in
the property and construction sector. This was somewhat offset by the non-property business sector which experienced an improved credit
performance as cases exited forbearance. The Group’s expected credit losses (ECLs) reflect the vigilant stance to emerging risks while
maintaining a comprehensive approach to assessing the credit environment, ensuring the level of ECL stock remains appropriately
conservative.
• The migration of the Ulster Bank portfolio acquisitions was largely completed in July with the remaining 20% of the tracker (and linked)
mortgage portfolio due to migrate in 2024.
• The Group remains focused on its evolving sustainability agenda, including the ongoing consideration of climate risk which continues to be
incorporated and embedded within the credit assessment process.
Definition of Credit risk
Credit risk is the risk that the Group will incur losses as a result of a
customer or counterparty being unable or unwilling to meet their
contractual obligations and associated bank credit exposure in respect
of loans or other financial transactions.
Based on the annual risk identification and materiality assessment
process, credit risk is grouped into the following three sub categories:
(i) Counterparty risk: The risk of losses arising as a result of the
counterparty not meeting their contractual obligations in full and on
time and the resulting credit default risk/risk of loss leading to a risk
to capital;
(ii) Concentration risk: The risk of excessive credit concentration
including to an individual, counterparty, group of connected
counterparties, industry sector, a geographic region, country, a type
of collateral or a type of credit facility; and
(iii) Country risk: The risk of having exposure to a country, arising from
possible changes in the business environment that may adversely
affect operating profits or the value of assets related to the country.
Credit risk exposure derives from standard on-balance sheet products
such as mortgages, loans, overdrafts and credit cards. However, credit
risk also arises from other products and activities including, but not
limited to: “off-balance sheet” guarantees and commitments; securities
financing; derivatives; investment securities; asset backed securities
and partial failure of a trade in a settlement or payment system.
Group Risk Appetite Statement
The Group’s Risk Appetite Statement (“RAS”) defines the aggregate
level and types of risks that the Group is willing to take, accept, or
tolerate in pursuit of its business objectives and strategy as set by the
Board. As part of the overall framework for risk governance, it forms a
boundary condition to strategy and guides the Group in its risk-taking
and related business activities. Credit risk appetite is set at Board level
and is described, reported and monitored through a suite of qualitative
and quantitative metrics. The credit risk metrics cover the three sub risks
identified as part of the AIB Group material risk assessment process –
counterparty risk, concentration risk and country risk, and include
concentration limits on quantum of new lending, balance sheet exposure
and credit quality. Risk appetite is stress tested to ensure limits are
within the risk-taking capacity of the Group. The Group’s risk appetite for
credit risk is reviewed and approved at least annually.
Credit risk principles and policy (audited)
The Group implements and operates policies to govern the
identification, assessment, approval, monitoring and reporting of credit
risk. The Group Credit Risk Framework and Group Credit Risk Policy
are overarching Board approved documents which set out the principles
of how the Group identifies, assesses, approves, monitors and reports
credit risk to ensure that robust credit risk management is in place.
These documents contain the minimum standards and principles that
are applied across the Group to provide a common, robust and
consistent approach to the management of credit risk.
The Group Credit Risk Policy is supported by a suite of credit policies,
standards and guidelines which define in greater detail the minimum
standards and credit risk metrics to be applied for specific products,
business lines, and market segments.
Credit Risk, as an independent risk management function, monitors key
credit risk metrics and trends, including policy exceptions and breaches,
reviews the overall quality of the loan book, challenges variances to
planned outcomes and tracks portfolio performance against agreed
credit risk indicators. This allows the Group, if required, to take early and
proactive mitigating actions for any potential areas of concern.
Credit risk management
The activities which govern the management of credit risk within the
Group are as follows:
• Establish governance authority fora to provide independent oversight
and assurance to the Board with regards to credit risk management
activities and the quality of the credit portfolio;
• Formulate and implement a comprehensive credit risk strategy that is
viable through various economic cycles, supported by a suite of credit
policies, is aligned to the Group’s approved Risk Appetite Statement
and generates appropriate returns on capital within acceptable levels
of credit quality;
• Operate within a sound and well defined credit granting process,
within which risks for new and existing lending exposures, including
connected exposures, are consistently identified, assessed,
measured, managed, monitored and reported in line with risk appetite
and the credit risk policies;
• Ensure all management and staff involved in core credit risk activities
across the three lines of defence are fully capable of conducting their
duties to the highest standard in compliance with the Group’s policies
and procedures;
• Establish and enforce an efficient internal review and reporting
system to manage effectively the Group’s credit risk across various
portfolios including; establishing and enforcing internal controls and
assurance practices to ensure that exceptions to policies, deviations
to credit standards and limits are monitored and reported in a timely
manner for review and action;
• Ensure a sound methodology exists and credit policies are in place to
proactively assess credit risk, to identify deteriorating credit quality
and take remedial action to minimise losses, provide customers with
affordable and sustainable solutions and maximise recovery for the
Group. This includes consideration of, and the granting of,
forbearance measures;
• Utilise quality management information and risk data to ensure an
effective credit risk management and measurement process when
reporting on the holistic credit risk profile of the Group, including any
changes in credit risk profile and emerging or horizon risks;
• Mitigate potential credit risk arising from new or amended products or
activities, including the identification and analysis of existing and
potential risks inherent in any credit product or activity; and
• Develop and continuously reinforce a strong, credit risk focused
culture across the credit risk management functions through the credit
cycle, which supports the Group’s goals and enables business
growth, provides constructive challenge and avoids credit risks that
cannot be adequately measured.
The Group’s Credit Risk Policy architecture supports these credit
activities and encompasses a suite of credit policies and standards
which provide a common and consistent approach to the management
of credit risk.
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2.1 Credit risk continued
Credit approval overview (audited)
The Group operates credit approval criteria which:
•
Include a clear indication of the Group’s target market(s), in line with
Group and segment risk appetite statements;
• Require a thorough understanding and assessment of the borrower or
counterparty, as well as the purpose and structure of credit, and the
source of repayment; and
• Enforce compliance with minimum credit assessment and facility
structuring standards.
Credit risk approval is undertaken by professionals operating within a
defined delegated authority framework. However, for certain selected
retail portfolios, scorecards and automated strategies (together referred
to as ‘score enabled decisions’) are deployed to automate and to
support credit decisions and credit management (e.g. score enabled
auto-renewal of overdrafts).
The Board is the ultimate credit approval authority in the Group. The
Board has delegated credit authority to various credit committees and to
the Chief Credit Officer (“CCO”). The CCO is permitted to further
delegate this credit authority to individuals within the Group on a risk
appropriate basis. Credit limits are approved in accordance with the
Group’s written risk policies and guidelines.
All exposures above certain levels require approval by the Group Credit
Committee (“GCC”) and/or Board. Other exposures are approved
according to a structure of tiered individual authorities which reflect
credit competence, proven judgement and experience. Depending on
the borrower/connection, grade or weighted average facility grade and
the level of exposure, limits are sanctioned by the relevant credit
authority. Material lending proposals are referred to credit units for
independent assessment/approval or formulation of a recommendation
and subsequent adjudication by the applicable approval authority.
ECL governance (audited)
The Board has put in place a framework, incorporating the governance
and delegation structures commensurate with a material risk, to ensure
credit risk is appropriately managed throughout the Group.
The key governance points in the ECL allowance approval process
during 2023 were:
• Model Risk Committee;
• Asset and Liability Committee;
• Business level ECL Committees;
• Group Credit Committee; and
• Board Audit Committee
For ECL governance, the Group’s senior management employ expert
judgement in assessing the adequacy of the ECL allowance. This is
supported by detailed information on the portfolios of credit risk
exposures and by the outputs of the measurement and classification
approaches, coupled with internal and external data provided on both
short term and long term economic outlook. Business segments and
Group management are required to ensure that there are appropriate
levels of cover for all of the credit portfolios and must take account of
both accounting and regulatory compliance when assessing the
expected levels of loss.
Assessment of the credit quality of each business segment and
subsidiaries is initially informed by the output of the quantitative
analytical models but may be subject to management adjustments.
This ECL output is then scrutinised and approved at individual business
unit level (ECL Committee), which also includes subsidiaries, prior to
onward submission to the Group Credit Committee (“GCC”). GCC
reviews and challenges ECL levels for onward recommendation to the
Board Audit Committee as the final approval authority. Board Audit
Committee then recommends the Group’s financial results to Board for
ultimate final approval.
Credit risk organisation and structure (audited)
The Group’s credit risk management structure operates through
a hierarchy of lending authorities. All customer loan requests are subject
to a credit assessment process. The role of the Credit Risk function is to
provide direction, independent oversight of and challenge to credit risk-
taking.
Credit risk management consideration of Environmental, Social,
and Governance (ESG) risks
The Group continues to adapt its credit risk management processes and
policies to capture ESG risks. In addition to a number of key initiatives
introduced by the Group to date, throughout 2023, further sector specific
rules and limitations were incorporated into credit policies within a
defined climate-related and environmental risk appetite. The ESG
Questionnaire continues to be used in credit applications for borrowers
in high climate risk sectors where the new lending is over €/£300k. In
2023, work has continued on the ESG Questionnaire to further enhance
and refine it, broadening the scope of coverage at both customer and
sector level. In addition, ESG risk commentary is required in all credit
applications for customers of the Group’s Capital Markets segment.
Further details on climate and environmental risk are outlined in section
2.10 on page 193.
The impact of climate risk on the management, escalating and reporting
of credit risk was considered by the Group. There is currently no
reasonable and supportable information that indicates a material impact
of climate change on ECLs and the Group’s approach to individual
counterparty risk assessment adequately captures climate risk where
appropriate. The impact of climate risk will continue to be monitored in
2024 to ensure ECLs appropriately reflect latent risk from potentially
emerging climate risks.
Internal credit ratings (audited)
One of the objectives of credit risk management is to accurately quantify
the level of credit risk to which the Group is exposed through the initial
credit approval and ongoing review process. All relevant exposures are
assigned to a rating model and within that to an internal risk grade
(rating). A grade is assigned on the basis of rating criteria within each
rating model from which estimates of probability of default (PD) are
derived.
Internal credit grades are fundamental in assessing the credit quality of
loan exposures, and for assessing capital requirements for portfolios
where prior regulatory approval has been received. Internal credit
grades are key to management reporting, credit portfolio analysis, credit
quality monitoring and in determining the level and nature of
management attention applied to exposures. Changes in the objective
information are reflected in the credit grade of the borrower/loan with the
resultant grade influencing the management of individual loans. In line
with the Group’s credit management lifecycle, heightened credit
management and special attention is paid to lower quality performing
loans or ‘criticised’ loans and non-performing/defaulted loans which are
defined on page 128.
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Risk Management continued
2.1 Credit risk continued
Internal credit ratings continued (audited)
Using internal models, the Group utilises a credit grading masterscale
that gives it the ability to categorise credit risk across different rating
models and portfolios in a consistent manner. Masterscale consolidates
complex credit information into a single attribute, aligning the output
from the risk models with the Group’s Forbearance and Definition of
Default and Credit Impairment policies. Masterscale grades are driven
by grading model appropriate through the cycle (TTC) PDs combined
with other asset quality indicators such as default, forbearance and
arrears in order to provide the Group with a mechanism for ranking and
comparing credit risk associated with a range of customers. Masterscale
categorises loans into a broad range of grades which can be
summarised into the following categories: strong/satisfactory grades;
criticised grades; and non-performing/default loans. Page 147 sets out
the profile of the Group’s loan portfolio under each of the above grade
categories.
The IFRS 9 PD modelling approach uses a combination of rating grades
and scores obtained from these credit risk models along with key factors
such as the current/recent arrears status or the current/recent
forbearance status and macroeconomic factors to obtain the relevant
IFRS 9 12 month and Lifetime PDs (i.e. point in time). The Group has
set out its methodologies and judgements exercised in determining its
expected credit loss (“ECL”) under IFRS 9 on pages 130 to 141.
Strong/satisfactory (audited)
Accounts are considered strong/satisfactory if they have no current or
recent credit distress and the probability of default is typically less than
6.95%, they are not in arrears and there are no indications that they are
unlikely to repay.
• Strong (typically with PD less than 0.99%): Strong credit with no
weakness evident.
• Satisfactory (typically with PD greater than or equal to 0.99% and less
than 6.95%): Satisfactory credit with no weakness evident.
Criticised (audited)
Accounts of lower credit quality and considered as less than satisfactory
are referred to as criticised and include the following:
• Criticised watch: The credit is exhibiting weakness in terms of credit
quality and may need additional management attention; the credit
may or may not be in arrears.
• Criticised recovery: Includes forborne cases that are classified as
performing including those which have transitioned from non-
performing forborne, but still require additional management attention
to monitor for re-default and continuing improvement in terms of credit
quality.
Non-performing/default (audited)
The Group’s definition of default is aligned with the EBA ‘Guidelines on
the application of the definition of default’ under Article 178 of Capital
Requirements Regulation and ECB Banking Supervision Guidance to
Banks on non-performing loans.
The Group has aligned the definitions of ‘non-performing’, ‘classification
of default’ and IFRS 9 Stage 3 ‘credit impaired’, with the exception of
loans measured at fair value through profit or loss, and those loans
which have been derecognised and newly originated in Stage 1 or POCI
(purchased or originated credit impaired) which are no longer classified
as credit impaired but continue to be classified as non-performing and in
default. This alignment ensures consistency with the Group’s internal
credit risk management and assessment practices.
Loans are identified as non-performing or defaulted by a number of
characteristics. The key criteria resulting in a classification of non-
performing are:
• Where the Group considers a borrower to be unlikely to pay their
loans in full without realisation of collateral, regardless of the
existence of any past-due amount; or
• The borrower is 90 days or more past due on any material loan. Day
count starts when any material amount of principal, interest or fee has
not been paid by a borrower on the due date.
The criteria for the definition of financial distress and forbearance are
included in the Group’s Forbearance Policy. Criteria for identification of
non-performing exposures and unlikeliness to pay are included in the
Group’s Definition of Default and Credit Impairment Policy.
Credit risk monitoring (audited)
The Group has developed and implemented processes and information
systems to monitor and report on individual credits and credit portfolios
in order to manage credit risk effectively. It is the Group’s practice to
ensure that adequate up-to-date credit management information is
available to support the credit management of individual account
relationships and the overall loan portfolio.
Credit risk, at a portfolio level, is monitored using key risk indicators and
early warning indicators which are reported regularly to senior
management and to the Board Risk Committee. Credit managers
proactively manage the Group’s credit risk exposures at a transaction
and relationship level. Monitoring includes credit exposure and excess
management, regular review of accounts, being up-to-date with any
developments in customer business, obtaining updated financial
information and monitoring of covenant compliance. This is reported on
a regular basis to senior management and includes information and
detailed commentary on loan book growth, quality of the loan book and
expected credit losses including individual large non-performing
exposures.
Changes in sectoral and single name concentrations are tracked on a
regular basis highlighting changes to risk concentration in the Group’s
loan book. The Group allocates significant resources to ensure ongoing
monitoring and compliance with approved risk limits. Credit risk,
including compliance with key credit risk limits, is reported monthly.
Once an account has been placed on a watch list, the exposure is
carefully monitored and where appropriate, exposure reductions are
effected.
As a matter of policy, non-retail facilities are subject to a review on, at
least, an annual basis, even when they are performing satisfactorily.
Annual review processes are supplemented by more frequent portfolio
and case review processes in addition to arrears or excess
management processes. Borrowers in Stage 2 may be subject to an
‘unlikely to pay’ test at the time of annual review, or earlier, if there is a
material adverse change or event in their credit risk profile.
Through a range of forbearance solutions as outlined on page 175, the
Group employs a dedicated approach to loan workout, monitoring and
proactive management of non-performing loans. A specialised recovery
function focuses on managing the majority of criticised loans and deals
with customers in default, collection or insolvency. Their mandate is to
support customers in difficulty while maximising the return on non-
performing loans. Whilst the basic principles for managing weaknesses
in corporate, commercial and retail exposures are broadly similar, the
solutions reflect the differing nature of the assets.
Further details on forbearance are set out in section ‘2.1.6 - forbearance
overview’.
Credit risk mitigants (audited)
The perceived strength of a borrower’s repayment capacity is
the primary factor in granting a loan. However, the Group uses various
approaches to help mitigate risks relating to individual credits, including
transaction structure, collateral and guarantees. Collateral and/or
guarantees are usually required as a secondary source of repayment in
the event of a borrower’s default. The main types of collateral for loans
and advances to customers are described under the section on
collateral. Credit policy and credit management standards are controlled
and set centrally by the Credit Risk function.
Occasionally, credit derivatives are purchased to hedge credit risk.
Current levels are modest and their use is subject to the normal credit
approval process.
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2.1 Credit risk continued
Credit risk mitigants continued (audited)
The Group enters into netting agreements for derivatives with certain
counterparties, to ensure that in the event of default, all amounts
outstanding with those counterparties will be settled on a net basis.
Depending on the size of the potential exposure derivative transactions
with wholesale counterparties are typically collateralised under a Credit
Support Annex in conjunction with the International Swaps and
Derivatives Association (“ISDA”) Master Agreement.
The Group also has in place an Interbank Exposure Policy which
establishes the maximum exposure for each counterparty bank,
depending on credit grade rating. Each bank is assessed for the
appropriate maximum exposure limit in line with the policy. Risk
generating business units in each segment are required to have an
approved bank and country limit prior to granting any credit facility, or
approving any credit obligation or commitment which has the potential to
create interbank or country exposure.
Collateral (audited)
Credit risk mitigation may include a requirement to obtain collateral as
set out in the Group’s lending policies. Where collateral and/or
guarantees are required, they are usually taken as a secondary source
of repayment in the event of a borrower’s default. The Group maintains
policies which detail the acceptability of specific classes of collateral.
The principal collateral types for loans and advances are:
• Charges over business assets such as premises, inventory and
accounts receivable;
• Charges over other assets such as plant and machinery, marine
vessels etc.;
• Mortgage/legal charge over residential and commercial real estate;
and
• Charges over financial instruments such as debt securities
and equities.
The nature and level of collateral required depends on a number of
factors such as the type of the credit facility, the term of the credit facility
and the amount of exposure. Collateral held as security for financial
assets, other than for loans and advances, is determined by the nature
of the instrument. Debt securities and treasury products are generally
unsecured, with the exception of asset backed securities, which are
secured by a portfolio of financial assets.
Collateral is not usually held against loans and advances to banks,
including central banks, except where securities are held as part of
reverse repurchase or securities borrowing transactions or where a
collateral agreement has been entered into under a master netting
agreement or where the bank purchases covered bonds as part of its
liquidity portfolio.
For non-mortgage/non-property lending, where collateral is taken, it will
typically include a charge over the business assets such as inventory
and accounts receivable. In some cases, a charge over property
collateral or a personal guarantee supported by a lien over personal
assets may also be taken. Where cash flows arising from the realisation
of collateral held are included in the expected credit loss assessments,
in many cases management rely on valuations or business appraisals
from independent external professionals.
Methodologies for valuing collateral (audited)
Details on the valuation rule methodologies applied and processes used
to assess the value of property assets taken as collateral are described
in the Group Property Valuation Policy and Property Valuation
Guidance. Both documents are subject to an annual review.
As property loans, including residential mortgages, represent
a significant concentration within the Group’s loans and advances to
customer’s portfolio, some key principles have been applied in respect
of the valuation of property collateral held by the Group.
The value of property collateral is assessed at loan origination and at
certain stages throughout the credit lifecycle in accordance with the
Group Property Valuation Policy e.g. at annual review where required.
In accordance with the Group Property Valuation Policy and guidelines,
the Group employs a number of methods to assist in reaching
appropriate valuations for property collateral held:
(a) External valuation firms on the Group’s Valuers Panel, are engaged
by the Group to undertake valuations of immovable property
collateral in accordance with the rules set out in the Group Property
Valuation Policy.
(b) Independent professional internal valuations are completed in
limited circumstances (e.g. agricultural land) using a desktop
valuation approach by professionally qualified internal valuers who
are independent of the credit process in the second line of defence.
The assets being valued by this means must have an independent
professional external valuation completed within the past 3 years.
(c) Internal valuations are completed by first line of defence case
managers pursuant to the rules in the Property Valuation Policy and
in line with the Property Valuation Guidance, which provides
appropriate valuation methodology guidance. These include the
following valuation methodologies:
I.
Index valuation approach – used for residential property;
II. Comparable valuation approach – a basic level of valuation
methodology used to value agricultural land or as a sense check
for the valuation of residential, commercial or development land;
III. Commercial investment valuation approach – used for the
valuation of commercial property using the Group’s commercial
investment yield matrices;
IV. Residual valuation approach – used for the valuation of
development land or land with development potential; and
V. Profits valuation approach – used for the valuation of trading
assets e.g. hotels, licensed premises, convenience stores etc.
using the Group’s stabilised EBITDA matrices.
Collateral and ECLs (audited)
Applying one or a combination of the above methodologies, in line with
the Group Property Valuation Policy, has resulted in an appropriate
range of discounts to original collateral valuations, influenced by the
nature, status and year of purchase of the asset. The frequency and
availability of such up-to-date valuations remain a key factor in ECL
determination. Additionally, relevant costs likely to be associated with
the realisation of the collateral are taken into account in the cash flow
forecasts. The spread of discounts is influenced by the type of collateral,
e.g. land, developed land or investment property and also its location.
The valuation arrived at, is therefore, a function of the nature of the
asset.
When assessing the level of ECL allowance required for property loans,
apart from the value to be realised from the collateral, other cash flows,
such as recourse to other assets or sponsor support, are also
considered, where available. The other key driver is the time it takes to
receive the funds from the realisation of collateral. While this depends
on the type of collateral and the stage of its development, the period of
time to realisation is typically one to five years but sometimes this time
period is exceeded. These estimates are periodically reassessed on a
case by case basis.
When undertaking an ECL review for individually assessed cases that
have been deemed unlikely to pay, the present value of future cash
flows, including the value of collateral held, and the likely time required
to realise such collateral is estimated. An ECL allowance is raised for
the difference between this present value and the carrying value of the
loan. When multiple discounted cash flows are captured where the
gross credit exposure is ≥ € 5 million (Republic of Ireland) or ≥ £ 5
million (UK) or cases in scope for the Group Leveraged Lending Policy,
the value of collateral is adjusted to reflect the impacts of up and
downside scenarios for these higher value exposures.
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AIB Group plc
Risk Management continued
2.1 Credit risk continued
Credit risk mitigants continued
Summary of risk mitigants by selected portfolios
Set out below are details of risk mitigants used by the Group in relation
to financial assets detailed in the maximum exposure to credit risk table
on page 142.
Residential Mortgages
For residential mortgages, the Group takes collateral in support of
lending transactions for the purchase of residential property. Collateral
valuations are required at the time of origination of each residential
mortgage. Details regarding the estimated fair value of collateral held for
the Group’s residential mortgage portfolio are included under the
residential mortgage section on page 163.
Securities financing (audited)
In addition to the credit risk mitigants, the Group, from time to time,
enters securities financing transactions. Securities financing consists of
securities borrowing transactions, reverse repurchase agreements and
securities sold under agreements to repurchase. At 31 December 2023,
the total fair value of the collateral received was € 6,466 million (2022:
€6,282 million) in relation to reverse repurchase agreements and
securities borrowing transactions (note 20 to the consolidated financial
statements).
Derivatives (audited)
Derivative financial instruments are recognised in the statement of
financial position at their fair value. Those with a positive fair value are
reported as assets which at 31 December 2023 amounted to € 2,377
million (2022: € 2,511 million) and those with a negative fair value are
reported as liabilities which at 31 December 2023 amounted to € 1,902
million (2022: € 2,982 million).
The enforcement of netting agreements would potentially reduce the
statement of financial position carrying amount of derivative assets and
liabilities by € 1,556 million at 31 December 2023 (2022: € 2,220
million). The Group also has Credit Support Annexes (“CSAs”) in place
which provide collateral for derivative contracts. At 31 December 2023,
€ 713 million (2022: € 795 million) of CSAs are included within financial
assets as collateral for derivative liabilities and € 839 million (2022:
€ 245 million) of CSAs are included within financial liabilities as collateral
for derivative assets (note 39 to the consolidated financial statements).
Additionally, the Group has agreements in place which may allow it to
net the termination values of cross currency swaps upon occurrence of
an event of default.
Investment securities
At 31 December 2023, government guaranteed senior bank debt which
amounted to € 202 million (2022: € 259 million) was held within the
investment securities portfolio.
Measurement, methodologies and judgements
Introduction (audited)
The Group has set out the methodologies used and judgements
exercised in determining its expected credit loss (“ECL”) allowance for
the year to 31 December 2023.
The Group, in estimating its ECL allowance does so in line with the
expected credit loss impairment model as set out by the International
Financial Reporting Standard 9 Financial Instruments (“the standard”).
This model requires a timely recognition of ECL across the Group. The
standard does not prescribe specific approaches to be used in
estimating ECL allowance, but stresses that the approach must reflect
the following:
• An unbiased and probability weighted amount that is determined by
evaluating a range of possible outcomes;
• Underlying models should be point in time and forward looking –
recognising economic conditions;
• The ECL must reflect the time value of money;
• A lifetime ECL is calculated for financial assets in Stages 2 and 3 and
Purchased or Originated Credit Impaired (“POCI”); and
• The ECL calculation must incorporate reasonable and supportable
information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of
future economic conditions.
The standard defines credit loss as the difference between all
contractual cash flows that are due to an entity in accordance with the
contract and all the cash flows that the entity expects to receive (i.e. all
cash shortfalls), discounted at the original effective interest rate (“EIR”)
or an approximation thereof.
ECLs are defined in the standard as the weighted average of credit
losses across multiple macroeconomic scenarios, with weights assigned
based on the probability of each scenario occurring and are an estimate
of credit losses over the life of a financial instrument.
The ECL model applies to financial instruments measured at amortised
cost or at fair value through other comprehensive income. In addition,
the ECL approach applies to lease receivables, loan commitments and
financial guarantee contracts that are not measured at fair value through
profit or loss.
A key principle of the ECL model is to reflect any relative deterioration or
improvement in the credit quality of financial instruments occurring (e.g.
change in the risk of a default). The ECL amount recognised as a loss
allowance or provision depends on the extent of credit deterioration
since initial recognition together with the impact on credit risk
parameters.
Bases of measurement (audited)
Under the standard, there are two measurement bases:
1. 12-month ECL (Stage 1), which applies to all financial instruments
from initial recognition as long as there has been no significant
increase in credit risk; and
2. Lifetime ECL (Stages 2 and 3 and POCI), which applies when a
significant increase in credit risk has been identified on an account
(Stage 2), an account has been identified as being credit-impaired
(Stage 3) or when an account meets the POCI criteria.
Staging (audited)
Financial assets are allocated to stages dependent on credit quality
relative to when assets were originated. A financial asset, including
financial assets acquired by the Group, can only originate in either
Stage 1 or POCI.
Credit risk at origination (audited)
Credit risk at origination (“CRAO”) is a key input into the staging
allocation process. The origination date of an account is determined by
the date on which the Group became irrevocably committed to the
contractual obligation and the account was first graded on an
appropriate model.
For undrawn credit facilities, the Group uses the date of origination as
the date when it becomes party to the irrevocably contractual
arrangements or irrevocable commitment. For overdrafts which have
both drawn and undrawn components, the date of origination is the
same for both.
The Group uses best available information for facilities which originated
prior to a credit risk rating model or scorecard being in place.
For accounts that originated prior to 1 January 2018, a neutral view of
the macroeconomic outlook at the time is used, i.e. where
macroeconomic variables are used in the Lifetime PD models, long-run
averages are used instead of historical forecasts.
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AIB Group plc
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Stage 1 characteristics (audited)
Obligations are classified Stage 1 at origination or at acquisition by the
Group, unless POCI, with a 12 month ECL being recognised. These
obligations remain in Stage 1 unless there has been a significant
increase in credit risk.
Accounts can also return to Stage 1 if they no longer meet either the
Stage 2 or Stage 3 criteria, subject to satisfaction of the appropriate
probation periods, in line with regulatory requirements.
Stage 2 characteristics (audited)
Obligations where there has been a ‘significant increase in credit
risk’ (“SICR”) since initial recognition but do not have objective evidence
of credit impairment are classified as Stage 2. For these assets, lifetime
ECLs are recognised.
The Group assesses at each reporting date whether a significant
increase in credit risk has occurred on its financial obligations since their
initial recognition. This assessment is performed on individual obligations
rather than at a portfolio level. If the increase is considered significant,
the obligation will be allocated to Stage 2 and a lifetime expected credit
loss will apply to the obligation. If the change is not considered
significant, a 12 month expected credit loss will continue to apply and the
obligation will remain in Stage 1.
SICR assessment (audited)
The Group’s SICR assessment is determined based on both quantitative
and qualitative measures:
Quantitative measure: This measure reflects an arithmetic assessment
of the change in credit risk arising from changes in the probability of
default. The Group compares each obligation’s annualised average
probability weighted residual origination lifetime probability of default
(“LTPD”) (see ‘Credit risk at origination’) to its current estimated
annualised average probability weighted residual LTPD at the reporting
date. If the difference between these two LTPDs meets the quantitative
definition of SICR, the Group transfers the financial obligation into Stage
2. Increases in LTPD may be due to credit deterioration of the individual
obligation or due to macroeconomic factors or a combination of both.
The Group has determined that an account had met the quantitative
measure if the average residual LTPD at the reporting date was at least
double the average residual LTPD at origination, and the difference
between the LTPDs was at least 50bps or 85bps in the case of
residential mortgages. The appropriateness of this threshold is kept
under review by the Group.
Qualitative measure: This measure reflects the assessment of the
change in credit risk based on the Group’s credit management and the
individual characteristics of the financial asset. This is not model driven
and seeks to capture any change in credit quality that may not be
already captured by the quantitative criteria. The qualitative assessment
reflects pro-active credit management including monitoring of account
activity on an individual or portfolio level, knowledge of client behaviour,
and cognisance of industry and economic trends.
The criteria for this Qualitative trigger include, for example:
• A downgrade to watch grade of the borrower’s/facility’s credit grade
reflecting the increased credit management focus on these accounts;
and/or
• Forbearance has been provided and the account is within the
probationary period.
• Lender assessed SICR triggers: For non-retail portfolios, a suite of
lender assessed triggers are in place to ensure appropriate and timely
identification of increased credit risk, which when occur, trigger a
SICR event.
The criteria for this lender assessed trigger include, for example:
• A post distressed restructure payment default occurs where the
borrower is neither in default nor forborne;
• A material adverse event has occurred for the borrower which may
impact the borrower’s ability to repay such as: adverse publicity
which raises concerns over the viability of a business; loss of key
personnel (CEO/CFO/COO) which raises concerns over the
strategy/viability of the business or significant negative
macroeconomic events (including but not limited to economic or
market volatility, changes in legislation and technological threats to
an industry, changes in access to markets) where the financial
impact to the borrower is deemed material.
• Backstop indicators: The Group has adopted the rebuttable
presumption within IFRS 9 that loans greater than 30 days past due
represent a significant increase in credit risk.
Where SICR criteria are no longer a trigger, the account can exit Stage
2 and return to Stage 1.
Stage 3 characteristics (audited)
Defaulted loans (with the exception of newly originated or acquired
loans that are in Stage 1 or POCI) are classed as credit impaired and
allocated to Stage 3. Where default criteria are no longer met, the
borrower exits Stage 3 subject to probation period, in line with regulatory
requirements.
The key criteria resulting in a classification of default are:
• Where the Group considers a borrower to be unlikely to pay their
loans in full without realisation of collateral, regardless of the
existence of any past-due amount; or
• The borrower is 90 days or more past due on any material loan (day
count starts when any material amount of principal, interest or fee has
not been paid by a borrower at the date it was due).
Identification of non-performing exposures and unlikeliness to pay are
included in the Group’s Definition of Default and Credit Impairment
Policy.
Purchased or originated credit impaired (“POCI”) (audited)
POCIs are assets originated credit impaired and have a discount to the
contractual value when measured at fair value. The Group uses an
appropriate discount rate for measuring ECL in the case of POCIs which
is the credit-adjusted effective interest rate. This rate is used to discount
the expected cash flows of such assets to fair value on initial
recognition.
POCI obligations remain outside of the normal stage allocation process
for the lifetime of the obligation. The ECL for POCI obligations is always
measured at an amount equal to lifetime expected credit losses. The
amount recognised as a loss allowance for these assets is the
cumulative change in lifetime expected credit losses since the initial
recognition of the assets rather than the total amount of lifetime
expected credit losses.
Measurement of expected credit loss (audited)
The measurement of ECL is estimated through one of the following
approaches:
(i) Standard approach: This approach is used for the majority of
exposures where each ECL input parameter (Probability of Default –
PD, Loss Given Default – LGD, Exposure at Default – EAD, and
Prepayments – PP) is developed in line with standard modelling
methodology. The Group’s IFRS 9 models have been developed
and approved in line with the Group’s Model Risk Management
Framework. (An overview of credit risk models is outlined on pages
132 and 133).
(ii) Simplified approach: For portfolios not on the standard approach,
the Group has followed a simplified approach. This approach
consists of applying portfolio level ECL averages, drawn from similar
portfolios, where it is not possible to estimate individual parameters.
These generally relate to portfolios where specific IFRS 9 models
have not been developed due to immateriality, low volumes or
where there are no underlying grading models. As granular PDs are
not available for these portfolios, a non-standard approach to
staging is required with reliance on the qualitative criteria (along with
the 30 days past due back-stop).
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AIB Group plc
Risk Management continued
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Measurement of expected credit loss continued (audited)
(iii) Discounted cash-flows (“DCFs”): Assets are grouped together and
modelled based on asset classification and sector with the exception
of those Stage 3 assets where a DCF is used. DCFs are used as an
input to the ECL calculation for Stage 3 credit impaired exposures
where gross credit exposure is ≥ € 1 million (Republic of Ireland) or
≥ £ 500,000 (UK). Multiple DCFs are captured where gross credit
exposure is ≥ € 5 million (Republic of Ireland) or ≥ £ 5 million (UK) or
cases in scope for the Group Leveraged Lending Policy, to reflect
the case specific impacts of up and downside scenarios for these
higher value exposures.
Collateral valuations and the estimated time to realisation of
collateral is a key component of the DCF model. The Group
incorporates forward looking information in the assessment
of individual borrowers through the credit assessment process.
Where a single DCF is utilised this assessment produces a base
case ECL. This is then adjusted to incorporate the impact of multiple
scenarios on the base ECL, by using a proportional uplift obtained
from ECL modelled sensitivities in the same/similar portfolio. Where
a range of scenarios are captured through multiple DCFs these are
probability weighted to produce the final ECL. An adjustment is
made for cases with very low final ECL to ensure a minimum level of
ECL is maintained, this is derived through reference to ECL
model outputs.
(iv) Management judgement: Where the estimate of ECL does not
adequately capture all available forward looking information about
the range of possible outcomes, or where there is a significant
degree of uncertainty, management judgement may be considered
appropriate for an adjustment to ECL. The management adjustment
must consider all relevant and supportable information, including but
not limited to, historical data analysis, predictive modelling and
management experience. The methodology to incorporate the
adjustment should consider the degree of any relevant over
collateralisation (headroom) and should not result in a zero overall
ECL unless there is sufficient headroom to support this. The key
judgements in the 2023 year end ECL estimates are outlined on
pages 140 and 141.
Effective interest rate (audited)
The ECL must incorporate the time value of money discounted to the
reporting date using the effective interest rate (“EIR”) determined at
initial recognition or an approximation thereof.
• The Group uses an approximation approach based on the account
level interest rate when calculating ECL which is applied to both
drawn and undrawn commitments.
• This approach is subject to an annual assessment that all
approximations remain appropriate and do not result in a material
misstatement of the ECL.
• The Group has tested the appropriateness of using current interest
rates as an approximation for the discount rates required for
measuring ECLs. This testing determined that using the current
interest rates as the discount rates is an appropriate approximation.
Policy elections and simplifications
Low credit risk exemption (audited)
The Group utilises practical expedients, as allowed by IFRS 9, for the
stage allocation of particular financial instruments which are deemed
‘low credit risk’. This practical expedient permits the Group to assume,
without more detailed analysis, that the credit risk on a financial
instrument has not increased significantly since initial recognition if the
financial instrument is determined to have ‘low credit risk’ at the
reporting date. The Group allocates such assets to Stage 1.
Under IFRS 9, the credit risk on a financial instrument is considered
low if:
•
•
the financial instrument has a low risk of default;
the borrower has a strong capacity to meet its contractual cash flow
obligations in the near term; and
• adverse changes in economic business conditions in the longer term
may, (but will not necessarily) reduce the ability of the borrower to
fulfil its contractual cash flow obligations.
This low credit risk exemption is applied to particular assets within the
debt securities investment portfolio and for loans and advances to
banks, specifically, assets which have an internal grade equivalent to an
external investment grade rating (BBB-) or higher.
The Group applies a quantitative backstop trigger of tripling of
probability of default subject to a minimum threshold movement of
30bps to determine whether assets subject to the low credit risk
exemption should be allocated to Stage 2. Additionally, if any of such
assets are on a watch list based on agreed criteria, they are allocated to
Stage 2.
Short term cash (audited)
The Group’s IFRS 9 Impairment Policy does not require calculation of
an ECL for short term cash at central banks and other banks which have
a low risk of default with a very low risk profile. The calculation of the
ECL at each reporting date would be immaterial given these exposures’
short term nature and their daily management.
Lease receivables and trade receivables (audited)
For lease receivables, the Group has elected to use its standard
approach for both stage allocation and the ECL calculation and has
elected to use an expedient (simplified approach) for trade receivables.
IFRS 9 ECL Credit Risk models (audited)
The IFRS 9 ECL models provide the risk parameters which are the
inputs into the model driven estimate of ECL which is used across all
Stage 1 and Stage 2 assets plus all non-DCF Stage 3 exposures on the
standard approach to ECL.
IFRS 9 Portfolio Delineation (audited)
The IFRS 9 models are delineated into retail and non-retail portfolios.
The retail IFRS 9 portfolios provide exposure level risk parameter
estimates which take into account borrower level characteristics and
metrics where appropriate, whilst the non-retail portfolios provide
metrics which are either borrower or connection level estimates.
Probability of default (audited)
Probability of default (“PD”) is the likelihood that an account or borrower
defaults over an observation period, given that they are not currently in
default, for each year of the expected contractual lifetime of the
exposure. The PD is a point in time estimate which is reflective of the
current and expected economic conditions.
In order to capture the appropriate risk dynamics across the lifetime of
the exposure the development process considers:
• Macroeconomic effects captured through factors such as
unemployment rate and GDP;
• Cross-sectional risk discriminators in particular the internal rating
model outputs plus other factors such as forbearance and days past
due; and
• Seasoning factors such as product type, delinquency and forbearance
status.
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2.1 Credit risk continued
Measurement, methodologies and judgements continued
Loss given default (audited)
Loss given default (“LGD”) is a current assessment of the amount that
will not be recovered in the event of default, taking account of future
conditions. It can be thought of as the difference between the amount
owed to the Group (i.e. the exposure) and the net present value of future
cash flows less any relevant costs expected to be incurred in the
recovery process. If an account returns to performing from default
(excluding any loss making concession) or if the discounted post-default
recoveries are equal to or greater than the exposure, the realised loss is
zero.
The LGD modelling approach depends on whether the facility has
underlying security and, if so, the nature of that security. The following
sets out the general approaches for the retail and non-retail portfolios:
– Retail portfolios
For unsecured loans, a cash flow curve, which estimates the
cumulative cash received following default until the loan is written-off
or returns to performing, is used to estimate the future recovery
amount. This is discounted at the effective interest rate and
compared to the current outstanding balance. Any shortfall between
the recovery amount and the outstanding balance is the LGD used
to estimate ECL. Where appropriate, this may then be adjusted to
reflect economic conditions.
For secured loans the following may be considered:
• The value of underlying collateral is estimated at the forecasted
time of disposal (taking into account forecasted market price
growth/falls and haircuts on market values that are expected at the
date of sale plus associated costs) in order to calculate the future
recovery amount;
• The potential for the exposure to be deleveraged through a portfolio
sale taking into account the costs associated with same; and
• Paths for returning to the performing portfolios such as forbearance
and self-cure.
– Non-retail portfolios
For unsecured loans, characteristics such as borrower sector and
nature of collateral linked to affiliated accounts under the same
customer group are used to determine future losses based on
historical experience of discounted recoveries.
For secured loans, the value of the underlying property collateral is
estimated at the reporting date. This is used to estimate the ECL
based on historical experience of discounted recoveries.
Exposure at default (audited)
Exposure at default (“EAD”) is defined as the exposure amount that will
be owed by a customer at the time of default. This will comprise
changes in the exposure amount between the reporting date and the
date that the customer defaults. This may be due to repayments,
interest and fees charged and additional drawdowns by the customer.
• Term credit products: the contractual maturity date, with exposure and
survival probability adjusted to reflect behaviour i.e. amortisation and
prepayment;
• Revolving credit products: the period may extend beyond the
contractual period over which the Group is exposed to credit risk, e.g.
overdrafts and credit cards. The Group’s approach is to use a
modelled behavioural life estimate for these obligations for ECL
calculation purposes.
Forward looking indicators in the models (audited)
For ECL calculations reliant on models in the standard and simplified
approaches, forward looking indicators are incorporated into the models
through the use of macroeconomic variables. These have been
identified statistically as the key macroeconomic variables that drive the
parameter being assessed (e.g. PD or LGD). The final model structure
incorporates these as inputs with the 12 month and lifetime calculations
utilising the macroeconomic forecasts for each scenario. See the
‘macroeconomic scenarios and weightings’ section for more detail on
the process for generating scenarios and associated key
macroeconomic factors relevant for the models. In circumstances where
there is a risk that the modelled output fails to capture the appropriate
response to changes in the macroeconomic environment such as
inflation and interest rate changes, these risks are captured through the
use of post model adjustments.
Write-offs (audited)
When the prospects of recovering a loan, either partially or fully, do not
improve, a point may come when it will be concluded that as there is no
realistic prospect of recovery, the loan and any related ECL will be
written-off. The Group determines, based on specific criteria, the point at
which there is no reasonable expectation of recovery. When the
following criteria exist (or comparable circumstances arise), the loan can
be subject to a partial or full write-off:
• A decision has been taken to enforce on a loan, due to no agreement
with the customer for a restructure/settlement and all customer
engagement with the Group regarding their loan agreement has
ceased;
Inception of informal insolvency proceedings has commenced or is
about to commence;
•
• Receivership or other formal recovery action (e.g. where expectation
of recovery of collateral is expected through enforcement activity but
no additional recoveries above the collateral value are anticipated)
has commenced or is about to commence; and
• A loan is substantially provided for or no material repayments have
been received for a period of time (minimum 12 months) and all
customer engagement with the Group regarding their loan agreement
has ceased.
Debt forgiveness may subsequently arise where there is a formal
contract with the customer for the write-off of the loan. In addition,
certain forbearance solutions and restructuring agreements may include
an element of debt write down (debt forgiveness). Further details on
forbearance are set out in section ‘2.1.6 - forbearance overview’.
Prepayments (audited)
For term credit products, prepayment occurs where a customer fully
prepays an account prior to the end of its contractual term. For revolving
credit products, ‘prepayment’ is defined as the cessation of use and
withdrawal of the facility provided that the account was not in default
prior to closure.
The contractual amount outstanding of loans written-off during the year
that are still subject to enforcement activity are outlined on page 160 and
relate to non-contracted write-offs, both full and partial. The Group
recognises cash received from the customer in excess of the carrying
value of the loan after a non-contracted write-off as ‘recoveries of
amounts previously written-off’ in the income statement.
Prepayment is used in the lifetime ECL calculation for Stage 2 loans to
account for the proportion of the facilities/customers that prepay each
year.
Determining the period over which to measure ECL (audited)
Both the origination date and the expected maturity of a facility must be
determined for ECL purposes. The origination date is used to measure
credit risk at origination.
The expected maturity is used for assets in Stage 2, where the ECL
must be estimated over the remaining life of the facility.
The expected maturity approach is:
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Risk Management continued
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Critical Judgements during the year:
• Both headline and core inflation have passed their respective peaks in most advanced economies during 2023 though generally remain
above what is deemed desirable (circa 2%). In addition, the uncertainty over the full impact of higher interest rates on real economic
activity continues to weigh on key indicators such as PMI data for the US, UK, Euro Area & Ireland. The Irish economy has not been
immune to the international slowdown with GDP growth falling well short of expectations arising from very weak manufacturing output and
export figures. In addition, the CSO published upward revisions to its unemployment rate series in late 2023 which prompted changes to
the Group’s baseline projections. However, other indicators suggest that underlying domestic activity has been more robust with strong
employment and consumption growth whilst income tax and VAT receipts have remained resilient.
• The Group is of the view that risks to the economic outlook remain tilted to the downside and, for the purposes of IFRS 9 ECL reporting,
has applied the following weightings for 31 December 2023: Base 50% (change +5% compared to 31 December 2022), Moderate Upside
10% (no change), Moderate Downside 30% (no change) and Severe 10% (change -5%). Further details are outlined in the
macroeconomic scenarios and weightings section below.
• The Group’s sensitivity analysis to the macroeconomic scenario weightings are outlined on page 140. Under the 100% Downside 2
(‘Credit Crunch’) scenario, a 45% increase in ECL compared to the reported ECL allowance stock is estimated.
• ECL allowance stock relating to post model adjustments (PMAs) has decreased by € 74 million in the year to € 534 million. ECL allowance
stock relating to PMAs as a percentage of total ECL stock is 35% (2022: 37%). The reduction in the year reflects the deployment of the
new IFRS 9 mortgage model which now incorporates portfolio sales as an NPE resolution mechanism and improved macroeconomic
factors. New PMAs in the year seek to capture potential adverse impacts due to inflation, higher interest rates, and security values
(particularly in commercial real estate exposures); consideration of an alternative exit strategy regarding a cohort of UK non-core legacy
loans and an increase in ECL stock relating to NPE exposures reflecting the economic uncertainty. Further details are outlined under the
post model adjustments section on pages 141 and 142.
the headwinds of high inflation, tighter fiscal and monetary policies as
well as tighter lending and credit conditions. The Euro Area economy
under-performed that of the US in 2023 (growth is estimated at 0.5%)
with consumption squeezed by inflation while investment and export
growth were weak.
As part of the process of deriving an ECL calculation, a range of
plausible scenarios was considered given the prevailing trends,
emerging risks and uncertainties facing the domestic and global
economies, as at the financial reporting date.
The Group has used four scenarios in the ECL calculation consisting of
a base scenario, along with three alternative scenarios. The base case
assumes that the global economy will experience a period of subdued
growth amid continuing uncertainty regarding the outlook. Interest rates
will gradually be reduced as inflation falls back towards target by 2026.
The upside scenario considers the implications of an end to the war in
Ukraine in the second half of 2024, improved consumer and business
sentiment as well as a loosening of financial conditions. A moderate
downside scenario assumes persistent inflation with higher-for-longer
interest rates. In addition, the more severe downside considers an
overly restrictive monetary policy tightening which quickly lowers
inflation but, in the process, has a far more negative impact on
economic activity than had been anticipated and exposes vulnerabilities
in the financial system. These developments necessitate an aggressive
series of cuts in official interest rates. Non-linear effects are captured in
the development of risk parameters as well as through the inclusion of
both the single upside and two downside scenarios.
The Group's Economic Research Unit ('ERU') provide the assumptions
for each scenario over five years. These are then independently
reviewed and challenged, on both a quantitative and qualitative basis,
by the Group’s Risk function. The base case is benchmarked against
the outlook available from official sources (e.g., Central Bank of Ireland,
IMF, ECB, Bank of England, etc.) to ensure it is appropriate.
Macroeconomic scenarios and weightings
The macroeconomic scenarios used by the Group for ECL allowance
calculation purposes have been developed in a consistent way with that
set out in the 2022 Annual Financial Report and have been subject to
the Group’s established governance process covering the development
and approval of macroeconomic scenarios used for planning and
internal stress testing purposes. The macroeconomic scenarios are
reviewed by the Asset and Liability Committee (“ALCo”) regularly, and
such reviews took place frequently during 2023 in response to economic
developments. The macroeconomic scenarios are then reviewed by the
Board Risk Committee (“BRC”) and approved for use by the Board. The
scenario probabilities are approved by the Board Audit
Committee (“BAC”).
The parameters used within the Group’s ECL models include
macroeconomic factors which have been established as drivers of the
default risk and loss estimates. Therefore, a different credit loss
estimate is produced for each scenario based on a combination of these
identified macroeconomic factors. The credit loss estimates for each
scenario are then weighted by the assessed likelihood of occurrence of
the respective scenarios to yield the ECL outcome.
Macroeconomic scenarios:
While fears of a recession have eased somewhat, the economic
backdrop remains challenging with advanced economies expected to
register subdued growth as stubborn inflation and interest rates are
expected to remain high over the medium term. Uncertainty around the
outlook also remains elevated.
The Irish economy recovered strongly from the ‘sudden stop’ to activity
induced by the COVID-19 pandemic but has been buffeted by a further
shock caused by the war in Ukraine which exacerbated an already
growing inflation problem due to a surge in energy and food prices. A
series of interest rate increases by central banks to curb inflationary
pressures has generated a cost-of-living squeeze on households and
raised operating costs for businesses. Amid an environment of
weakening confidence levels and elevated uncertainty, global growth
slowed sharply during 2022. The Irish economy has not been immune to
these developments with GDP significantly impacted in 2023 whilst
Modified Domestic Demand, a more appropriate measure of domestic
activity, registered below-trend growth.
Output in the UK economy is now estimated to exceed its pre-pandemic
level but not to the degree that other G7 economies have managed.
There has been a significant fall-off in trade with the EU as a result of
Brexit, which has been an additional headwind for the economy on top
of monetary and fiscal tightening and high inflation. The economy has
been close to stagnant since mid-2022. For the US economy growth is
estimated at 2.5% in 2023 which is a strong result for the economy amid
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2.1 Credit risk continued
Measurement, methodologies and judgements continued
Macroeconomic scenarios and weightings continued
The long term projections reflect the relatively limited climate change
mitigation policies, mainly comprising the continued gradual substitution
of gas for coal, that have been announced so far. Without significantly
enhanced mitigating actions, the world is on course to warm by about
2°C above pre-industrial levels by 2050. The long term baseline
scenario seeks to follow the International Energy Agency (IEA) “stated
policies” scenario and implies emissions remaining roughly constant.
The scenarios used for the year-end ECL process are described below
and reflect the views of the Group as at the reporting date.
Base case: While fears of a recession have eased somewhat in many
economies, the economic backdrop remains challenging with subdued
global growth, stubborn inflation and interest rates that are expected to
remain high over the medium term. Uncertainty also remains elevated
due to the lagged impacts of the monetary tightening as well as other
factors such as rising geopolitical risk.
The Irish economy has not been immune to this global slowdown during
2023 with multinational-related activities mostly affected. In the context
of an under-performance of GDP against expectations in 2023, AIB
forecasts GDP growth to range from 3.5-4.0% over the period
2024-2026, before decelerating to 3% thereafter. These estimates are
broadly in line with official, institutional, and peer projections. Given the
UK economy is faced with numerous headwinds, including the lagged
effects of a sharp tightening of monetary policy, we expect GDP growth
to pick up only slightly (from 0.5% in 2023) to a still subdued 0.7% in
2024 and to grow in a 1.2-1.5% range in the period 2025-2028.
A combination of tighter credit conditions and the lagged effects of the
tight monetary policy will continue to weigh on US economic activity
during 2024. As a result, the Group expects much slower US GDP
growth of 1.0% in 2024, with growth picking up in the following year but
remaining in a 1.7-2.0% range in the period 2025-2028. For the Euro
Area, the prospect is for a continuation of subdued activity. GDP growth
of 1.0% is projected in 2024 with a pick up to a 1.3-1.5% range over the
period 2025-2028.
The unemployment rate in Ireland has approached near record lows
with some sectors of the labour market characterised by a shortage of
workers and a high rate of job vacancies. The unemployment rate is
expected to rise moderately during the period 2024-2028 as economic
growth ‘normalises’ following the rapid post-pandemic recovery. With
modest, below-trend, growth likely to prevail for the UK economy in the
short term, we expect the jobless rate to increase to 5.2% by 2025 but to
ease back below 5% by 2027-2028.
Irish inflation reached a 40-year high during 2023 but has moderated
towards the end of 2023, helped by sharp declines in wholesale energy
prices. However, core inflation remains ‘sticky’ and is expected to ease
more slowly. A similar pattern is also evident for the Euro Area as a
whole and it is likely to be 2025 before inflation falls back to the 2% rate
targeted by the European Central Bank.
House price inflation eased considerably in the past year in Ireland with
rising interest rates, the cost-of-living squeeze and economic uncertainty
acting as headwinds. While there has been a notable uptick in housing
starts and completions over the course of 2023, ongoing housing supply
shortfalls in addition to accumulated household savings will continue to
support the market. Overall, modest growth in house prices (within a
range of 1.0-2.5% per annum) is anticipated over the 2024-2028 period.
A fall of 2% in UK house prices is projected in 2024 as the sharp rises in
mortgage rates continues to take effect. Weak growth in UK house
prices is expected thereafter. Commercial property prices fell sharply
during 2023 in Ireland (-14% year-on-year in the third quarter) with even
bigger declines in the UK (-17%). Irish CRE prices are expected to fall
further in 2024, before staging a modest recovery. There are some signs
that UK CRE prices may also stage a modest recovery over the period
2024-2028 following a correction in prices during the previous couple of
years.
A gradual process of lowering official interest rates is expected to
commence over the 2024-2025 period as inflation falls back towards
target. However, over the period 2024-2028, rates are not expected to
return to the historically lows levels which prevailed prior to the recent
tightening cycle, as indicated by both futures contracts and central bank
guidance.
Downside 1 (‘Persistent Inflation’): In this scenario, a combination of
high wage inflation, further margin widening by firms, and deepening
geopolitical fragmentation (that weighs on global trade, impacting supply
chains and boosting commodity prices) implies that inflation remains
very high in 2024-2025. Central banks are forced to continue raising
interest rates into 2025. Conditions in financial markets continue to
tighten, with further rises in bond yields and credit spreads and a
resumption of contracting stock markets. As a result, the major
economies all experience a significant recession in 2024, followed by a
sluggish recovery in activity.
In Ireland’s case, GDP growth remains lacklustre at 1.3% in 2024 and
2% in 2025 (while for the UK, it contracts by 1.0% and 0.5% in 2024 and
2025, respectively). GDP is 4.5% lower in Ireland compared to the base
case by 2026. There is also a marked rise in unemployment to circa 8%
by end-2026 in both Ireland and the UK. The recession and sharp rise in
unemployment eventually sees inflation move decidedly lower by late
2025/26. There are very big falls in property prices. By 2025, house
prices in Ireland and the UK decline by 13% and 19%, respectively.
The ECB raises official rates to 5.5% by mid-2025 (the corresponding
rates for the UK and US are 7% and 6.875%, respectively). Rates are
then cut aggressively from Q4 2025 onwards (to 1% in the Euro Area,
and c.1.5% in both the UK and US, by early-2027) as inflation falls
sharply before remaining on hold, as inflation stabilises around 2%.
Downside 2 (‘Credit crunch’): In this scenario, monetary tightening has
a far more negative impact on economic activity than had been
anticipated by central banks, with higher interest rates exposing, inter
alia, further vulnerabilities in the financial system during 2024. Banks
take a far more cautious approach to lending activities, as they are hit by
rising bad debts with global property prices falling sharply, especially for
commercial real estate. Additionally, growth in the Chinese economy is
greatly curtailed amid ongoing balance sheet adjustments in both the
property market and financial sector.The world economy experiences a
credit crunch, with rising bad debts.
The lagged effects of the marked monetary tightening, in particular a
sharp tightening in credit conditions, triggers a severe global recession
in the 2024-2025 period with the US, UK and Euro Area economies
contracting by a cumulative 4.0-4.5% over this period (Irish GDP
contracts by almost 3%). By 2026, the Irish economy is 12.5% smaller
than it would be in the base case. There is a modest pick-up in global
activity from 2026 onwards after interest rates are lowered aggressively
in 2024-25 and inflation falls back to its 2% target.
The rate of unemployment rises quickly and to very high levels in the
main economies while Irish unemployment reaches an average of
12.5% (10.5% for the UK) by 2027. Residential property prices in Ireland
and the UK decline, in cumulative terms, by 24% and 27%, respectively,
over the 2024-2026 period, followed by only a slight recovery in these
markets during 2027-2028. Commercial property prices in Ireland and
the UK fall by a further 30-33% over the 2024-2026 period, which takes
them almost 50% below their previous peaks.
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Risk Management continued
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Macroeconomic scenarios and weightings continued
Central banks lower rates aggressively as economies enter a deep
recession. Interest rates are reduced to 1% in the eurozone by
end-2025 (1.5% in both the US and UK) and put on hold thereafter to
end-2028, with inflation stabilising around 2%.
Upside (‘Quick recovery’): In this more benign scenario, the economic
environment improves following an end to the war in Ukraine in the
second half of 2024 which helps boost business and consumer
confidence. In addition, there is a faster than anticipated rundown of
personal and corporate savings and a loosening of financial conditions.
Global economic activity rebounds as a result with economic activity
significantly higher than the base case by 2026. Irish GDP growth
averages 5% in 2024-2025 and 4.5% in 2026 while unemployment falls
to new record lows. With a more rapid pace of economic expansion,
there is an uptick in inflation once again that is slower to decline than in
the base case, gradually easing back to 2% by 2027-2028.
With the stronger growth in economic activity, Irish house prices perform
much better than in the base case scenario rising by 4.0-4.5% (in the
UK by 3%) per annum over the 2023-2025 period. Commercial property
prices increases range from 4.0-7.0% per annum in the UK, and from
3.0% to 6.0% in Ireland, over the 2024-2026 period.
Central banks continue to raise official interest rates in 2024 with rates
reaching much higher levels than in the base case peaking at 5.25% in
the Euro Area (7.0% in the UK and 6.625% in the US) by end-2024.
They are kept on hold at these levels until later in 2028.
The table below sets out the five year average forecast for each of the
key macroeconomic variables that are required to generate the
scenarios or are material drivers of the ECL under (i) Base,
(ii) Downside 1, (iii) Downside 2 and (iv) Upside scenarios at
31 December 2023 (average over 2024-2028) and at 31 December
2022 (average over 2023-2027).
Macroeconomic factor (%)
Republic of Ireland
GDP growth
Residential property price growth
Unemployment rate
Commercial property price growth
Employment growth
Average disposable Income growth
Inflation
United Kingdom
GDP growth
Residential property price growth
Unemployment rate
Commercial property price growth
Inflation
December 2023
5 year (2024-2028) average forecast
December 2022
5 year (2023-2027) average forecast
Downside 1
(‘Persistent
inflation’)
Downside 2
(‘Credit
crunch’)
Upside
(‘Quick
recovery’)
Base
Downside 1
(‘Lower
growth in
2023’)
Base
Downside 2
(‘Energy
shock and
persistently
high
inflation’)
Upside
(‘Quick
economic
recovery’)
3.5
2.1
5.5
2.5
1.6
5.2
2.3
1.2
1.2
5.0
3.3
2.4
3.0
(0.5)
7.1
(1.4)
0.9
4.9
3.3
0.4
(1.2)
7.2
(2.0)
3.9
1.1
(4.7)
10.4
(5.2)
(0.6)
3.3
2.1
(0.1)
(5.4)
9.1
(6.1)
2.3
4.2
3.6
3.6
4.7
1.9
6.5
3.4
1.8
3.0
3.8
5.5
4.0
3.6
2.5
5.0
1.0
1.6
5.1
2.7
0.4
0.2
5.1
0.2
3.3
3.4
0.2
6.8
(1.6)
1.1
4.3
2.7
0.3
(1.6)
6.8
(2.2)
3.3
2.6
(4.3)
8.5
(6.6)
0.2
3.4
3.9
(0.3)
(5.7)
8.3
(6.9)
4.4
4.3
3.8
3.9
2.7
1.9
6.0
3.5
1.5
2.2
3.7
2.6
4.2
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2.1 Credit risk continued
Measurement, methodologies and judgements continued
Macroeconomic scenarios and weightings continued
Additional information is provided in the table below which details the individual macroeconomic factor forecast for each year across the four
scenarios, at 31 December 2023.
Macroeconomic factor
Republic of Ireland
GDP growth *
Residential property price growth
Unemployment rate
Commercial property price growth
Employment growth
Average disposable income growth
Inflation
United Kingdom
GDP growth
Residential property price growth
Unemployment rate
Commercial property price growth
Inflation
Estimate
2023
%
2024
%
2025
%
2026
%
2027
%
Base
2028
%
Downside 1 (‘Persistent inflation’)
2024
%
2025
%
2026
%
2027
%
2028
%
1.0
(1.5)
4.5
(12.0)
2.9
7.7
5.3
0.5
(6.5)
4.3
(2.5)
8.0
3.7
4.0
3.5
3.2
1.0
2.0
2.5
2.5
5.1
5.3
5.6
5.7
3.0
2.5
5.8
1.3
2.0
3.2
4.0
(8.5)
(2.0)
3.0
2.5
5.2
6.9
7.8
8.0
(2.5)
4.0
5.0
3.0
3.0
(11.0)
(4.0)
3.0
3.0
1.8
1.7
1.6
1.6
6.8
5.7
4.6
4.6
3.0
2.4
2.0
2.0
1.5
4.5
2.0
0.5
(0.2)
0.7
1.3
6.8
5.0
4.5
4.2
5.5
4.5
2.5
2.0
0.7
1.2
1.5
1.4
1.3
(1.0)
(0.5)
0.8
1.3
(2.0)
2.0
2.0
2.0
2.0
(10.5)
(3.0)
1.5
3.0
4.9
5.2
5.0
4.9
4.8
5.5
7.0
8.0
8.0
5.0
3.5
3.0
3.0
2.0
(12.5)
(3.0)
1.5
2.0
4.0
2.2
2.0
2.0
2.0
7.0
5.5
3.0
2.0
4.5
2.5
7.7
2.0
2.0
4.0
2.0
1.6
3.0
7.5
2.0
2.0
*The macroeconomic scenario assumptions presented in these tables were prepared in Q4 2023 using information available at the time. In the case
of Irish GDP growth, subsequent data released by the CSO now indicates that GDP may have contracted for 2023 as a whole.
Macroeconomic factor
Republic of Ireland
GDP growth
Residential property price growth
Unemployment rate
Commercial property price growth
Employment growth
Average disposable Income growth
Inflation
United Kingdom
GDP growth
Residential property price growth
Unemployment rate
Commercial property price growth
Inflation
Downside 2 (‘Credit Crunch’)
Upside (‘Quick recovery’)
2024
%
2025
%
2026
%
2027
%
2028
%
2024
%
2025
%
2026
%
2027
%
2028
%
(1.5)
(1.5)
0.5
3.5
(12.0) (13.0)
(1.0)
1.0
4.5
1.5
5.0
5.0
4.5
3.7
4.0
4.5
4.0
3.0
6.3
9.4 11.7 12.5 12.0
3.9
3.7
3.5
3.4
(15.0) (16.0)
(1.0)
2.5
(1.1)
(2.5)
(1.7)
0.4
4.5
2.5
2.5
3.2
2.6
2.0
2.0
2.0
(2.5)
(2.0)
0.5
1.5
(12.5) (15.0)
(2.0)
1.0
3.5
2.0
4.0
2.0
2.0
1.5
6.0
5.5
5.0
4.0
2.2
2.0
2.0
1.7
8.2
7.5
6.5
5.2
5.5
4.0
3.0
2.5
2.0
2.5
2.0
1.5
3.0
3.0
3.0
3.0
6.3
8.5 10.0 10.5 10.0
4.3
3.9
3.7
3.5
(15.5) (17.0)
(4.5)
2.5
3.5
2.0
2.0
2.0
4.0
2.0
7.0
7.0
5.5
4.0
7.0
5.0
3.7
2.5
3.0
2.5
3.4
3.0
1.5
5.0
2.0
1.2
3.0
3.6
4.0
2.0
The key changes to the scenario forecasts in the reporting period have been driven by a weaker global growth outlook (although the risk of
recession in some advanced economies, such as the UK, has receded) as a result of weaker growth in the global labour force and increased geo-
economic fragmentation with slower growth in world trade. In relation to the Irish economy, international headwinds have impacted headline GDP
growth figures during 2023 with underlying domestic demand less affected. Important upward revisions to the Irish unemployment rate forecasts for
the entire scenario horizon were required in late 2023 on foot of higher than expected trends in official data. This occurred despite strong
employment growth and was explained by strong labour force growth driven by higher participation rates, particularly among women, and inward
migration.
The four scenarios detailed above are used to reflect a representative sample of possible outcomes. The ECL allowance reflects a weighted
average of the credit loss estimates under the four scenarios.
Similar to the scenario forecasts, the probability weight assigned to each scenario is proposed by the ERU, with a review and challenge from the
Group Risk function. The probabilities described below reflect the views of the Group at the reporting date.
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Risk Management continued
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Macroeconomic scenarios and weightings continued
The weights for the scenarios at the reporting date are derived based on expert judgement, but are also informed by quantitative analysis (e.g., early
warning indicators of economic activity and property market values) and external market information where possible.
The key drivers of the weightings are:
• The base scenario assumptions for global growth remain very subdued when viewed in a historical context. Estimates of headline GDP growth in
2023 for Ireland have been scaled back, reflecting a big decline in output from the pharmaceutical and Information, Communication and
Technology (ICT) sectors after a COVID-19 related surge in 2021-2022, while UK and US growth has been revised upwards relative to the half-
year outlook. For the period 2024-2026, the Irish GDP growth forecast remains unchanged compared to mid-year and is aligned with official
forecasts.
• With regard to the scenario probability weightings, the risks to growth remain very much to the downside as highlighted in recent commentary
from institutions such as the OECD, ECB, and Central Bank of Ireland. Many economies, particularly in Europe, have lost momentum and central
banks have indicated that interest rates may have to remain higher for longer in order to restore price stability given fears that core inflation may
prove persistent.
• A sharper than expected slowdown in China is a significant risk also, especially if the real estate crisis deepens further. Geo-political risks remain
elevated and have been exacerbated by the conflict in Gaza, while the outcome of the US presidential election at the end of 2024 could add to
global uncertainty.
• Despite these downside risks, compared to December 2022, the more substantial risks to the downside have somewhat alleviated due to a lower
impact from tighter monetary policy than previously anticipated. Hence the weighting associated with the Downside 2 scenario has reduced from
15% to 10%.
The weightings that have been applied as at 31 December 2023 are:
Scenario (audited)
Base
Downside 1 (‘Persistent inflation’)
Downside 2 (‘Credit crunch’)
Upside (‘Quick recovery’)
Weighting
December
2023
50 %
30 %
10 %
10 %
Base
Downside 1 (‘Lower growth in 2023’)
Downside 2 (‘Energy shock and persistently high
inflation’)
Upside (‘Quick economic recovery’)
Weighting
December
2022
45 %
30 %
15 %
10 %
In assessing the adequacy of the ECL allowance, the Group has considered all available forward looking information as of the balance sheet date in
order to estimate the future expected credit losses. The Group, through its risk management processes (including the use of expert credit judgement
and other techniques) assesses its ECL allowance for events that cannot be captured by the statistical models it uses and for other risks and
uncertainties. The assessment of ECL at the balance sheet date does not reflect the worst case outcome, but rather a probability-weighted outcome
of the four scenarios. Should the credit environment deteriorate beyond the Group’s expectation, the Group’s estimate of ECL would increase
accordingly.
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2.1 Credit risk continued
Measurement, methodologies and judgements continued
Sensitivities (audited)
The Group’s estimates of expected credit losses are responsive
to varying economic conditions and forward looking information. These
estimates are driven by the relationship between historic experienced
loss and the combination of macroeconomic variables. Given the co-
relationship of each of the macroeconomic variables to one another and
the fact that loss estimates do not follow a linear path, a sensitivity to
any single economic variable is not meaningful. As such, the following
sensitivities provide an indication of ECL movements that include
changes in model estimates, and quantitative ‘significant increase in
credit risk’ (“SICR”) staging assignments, with a single 100% weighting
applied individually. Increased sensitivity for the downside 2 ‘Credit
crunch’ scenario is evident in the 2023 sensitivities compared to
reported and 100% base, driven predominantly by underlying model and
staging sensitivities (including a redeveloped mortgage model suite
across all key risk parameters, some more negative macro assumptions
and an element of macro sensitive PMA allocation where relevant).
Further details on post model adjustments are outlined on pages 140
and 141.
Relative to the base scenario, in the 100% downside ‘Persistent
inflation’ and ‘Credit crunch’ scenarios, the ECL allowance increases by
13% and 55% respectively. In the 100% upside scenario, the ECL
allowance declines by 11%, showing that the ECL impact of the two
downside scenarios is greater than that of the upside scenario. At
31 December 2023, a 100% downside ‘Persistent inflation’ and ‘Credit
crunch’ scenario sees a higher ECL allowance sensitivity of € 191 million
and € 813 million respectively compared to base (€ 94 million and € 716
million respectively compared to reported). Lower relative impacts are
observed for the AIB UK portfolio.
Loans and advances to customers (audited)
Residential mortgages
Other personal
Property and construction
Non-property business
Total
Off-balance sheet loan commitments
Financial guarantee contracts
Of which:
AIB UK segment
Loans and advances to customers (audited)
Residential mortgages
Other personal
Property and construction
Non-property business
Total
Off-balance sheet loan commitments
Financial guarantee contracts
Of which:
AIB UK segment
Reported
100% Base
100% Downside
Scenario 1
(‘Persistent
Inflation’)
ECL allowance at 31 December 2023
100% Downside
Scenario 2
(‘Credit crunch’)
100% Upside
Scenario
(‘Quick recovery’)
Total
€ m
309
97
541
573
1,520
43
16
1,579
221
Total
€ m
291
94
501
543
1,429
37
16
1,482
214
Total
€ m
329
98
567
618
1,612
44
17
1,673
232
Total
€ m
540
119
796
749
2,204
65
26
2,295
233
Total
€ m
262
90
433
490
1,275
32
15
1,322
208
Reported
100% Base
100% Downside
Scenario 1 (‘Lower
growth in 2023’)
Total
€ m
283
177
320
838
1,618
59
19
1,696
245
Total
€ m
275
175
298
790
1,538
55
17
1,610
214
Total
€ m
284
179
331
878
1,672
60
20
1,752
259
ECL allowance at 31 December 2022
100% Downside
Scenario 2 (‘Energy
shock and
persistently high
inflation’)
Total
€ m
318
185
385
977
1,865
65
22
1,952
336
100% Upside
Scenario (‘Quick
economic
recovery’)
Total
€ m
271
173
282
711
1,437
53
13
1,503
196
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AIB Group plc
Risk Management continued
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Post model adjustments (PMAs) (audited)
Post model adjustments (‘PMAs’) are applied where management
believe that they are necessary to ensure an adequate level of ECL
provision and to address known model limitations and/or emerging
trends not captured in the models. PMAs are approved under the ECL
governance process through which the appropriateness of PMAs is
considered against the backdrop of the risk profile of the loan book,
recent loss history or changes in underlying resolution strategies not
captured in the models and management’s view of emerging trends.
Releases of PMAs will occur as new models are deployed (i.e. mortgage
model) or where the risk has been judged by management to be
captured in the model outcomes.
The PMAs approved for 31 December 2023 (and 2022 comparison,
where applicable), are set out below and categorised as follows:
• NPE resolution – ECL adjustments where the current model does
not take into account downside risks that should be incorporated into
the final loss estimate.
• Emerging headwinds – ECL adjustments required where the
modelled outcomes are not sensitive to the uncertainties associated
with the impact of current emerging economic headwinds such as
inflation and higher interest rates.
• Macroeconomic factors – ECL adjustments reflecting a greater
impact from downside scenarios/impact of certain macroeconomic
factors.
• Other – ECL adjustments where it was judged that an amendment to
the modelled ECL was required.
Post model adjustments (audited)
NPE resolution
Emerging headwinds
Macroeconomic factors
Other
PMA Total
Post model adjustments (audited)
NPE resolution
Emerging headwinds
Macroeconomic factors
Other
PMA Total
Residential
mortgages
Other personal
Property and
construction
Non-property
business
€ m
58
22
—
—
80
€ m
—
—
—
—
—
€ m
113
150
—
19
282
€ m
29
62
—
81
172
Residential
mortgages
Other personal
Property and
construction
Non-property
business
€ m
140
43
20
—
203
€ m
—
11
—
—
11
€ m
37
69
10
—
116
€ m
73
124
20
61
278
2023
Total
€ m
200
234
—
100
534
2022
Total
€ m
250
247
50
61
608
NPE resolution (audited)
The redeveloped IFRS 9 mortgage model was deployed in 2023 and
now incorporates portfolio sales as a potential NPE resolution
mechanism. The enhancements to the model resulted in an increase in
modelled ECL which allowed for the release of substantially all the
mortgage NPE resolution PMA held at 31 December 2022 to reflect
potential sales outcomes not captured in the model.
environment on customers’ ability to repay. The ultimate impact of these
effects is highly uncertain. However, should they lead to a reduction in
customers’ ability to meet their loan repayment obligations, there will be
an increase in credit risk which is expected to have a negative impact on
the asset quality of the Group’s loan portfolios. The PMA is informed by
a range of sensitivities and scenarios in relation to potential deterioration
within the portfolio and associated ECL outcome.
A new PMA of € 58 million was implemented at 31 December 2023 on
Stage 3 mortgages, primarily to address potential ECL underestimation
from higher yields in the current interest rate environment impacting
portfolio sale assumptions within the mortgage model and uncertainty of
the timing to transact NPE mortgage portfolio sales.
Post model adjustments relating to non-performing property (€ 113
million, of which € 6 million relates to AIB UK) and non-property
business (€ 29 million, of which € 7 million relates to AIB UK) loans
reflect an adjustment to account for latent risks and alternative
resolution strategies, such as portfolio loan sales. This post model
adjustment is to address the potential range of ECL outcomes
depending on the ultimate resolution type. At 31 December 2023, the
increased post model adjustment for non-performing property loans
reflects the potential reduction in asset values, particularly within
commercial real estate. The reduction in the non-property business post
model adjustment is a result of NPE portfolio sales in the period.
Emerging headwinds (audited)
Particular focus from management continues to be on assessing
portfolios impacted by the combined effects of cost of living challenges,
persistent inflationary pressures and the higher interest rate
Within Capital Markets a PMA of € 124 million on property is to address
potential adverse sector impacts due to a reduction in commercial
property values and higher interest rates.
The Capital Markets non-property business PMA (€ 47 million) reflects
the potential impact of inflation (including higher energy costs) and high
interest rates on non-property business. This has been retained at a
substantially reduced level reflecting resilient performance of the
underlying portfolios and cases completing forbearance probation
periods. The corporate model which is currently being redeveloped for
deployment in 2024 is expected to reduce the requirement for a PMA on
the portfolio.
Within the Retail Banking portfolio, a cost of living PMA of € 72 million at
31 December 2022 has been reduced to € 10 million at 31 December
2023 as the model outcomes now adequately capture the expected
credit loss outcomes. The remaining € 10 million retained reflects the
possible lag effect of higher rates pass through on residential mortgages
rolling off fixed rate contracts over the next 3 years.
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AIB Group plc
2.1 Credit risk continued
Measurement, methodologies and judgements continued
Emerging headwinds continued (audited)
The migration of € 3.8 billion of eligible Ulster Bank Tracker (and linked)
mortgages was completed in July 2023. At 31 December 2023, a
staging adjustment has been completed to move € 287 million higher
risk Stage 1 loans to Stage 2 and apply appropriate Stage 2 ECL cover,
resulting in a new ECL PMA of € 12 million. This reflects the risk of
default which management view may not be fully captured in the PD
models given the portfolio’s credit performance observed post
acquisition.
Within AIB UK, a PMA of € 41 million (€ 15 million non-property business
and € 26 million property) also reflects the impact of higher interest rates
and changing dynamics in the property market.
Macroeconomic factors (audited)
In Retail Banking, an ECL adjustment of € 20 million at 31 December
2022 to reflect limitations within the mortgage model relating to the
house price index (‘HPI’) growth, has been released following
deployment of the new IFRS 9 mortgage model.
In AIB UK, an ECL adjustment of € 30 million at 31 December 2022 to
reflect a greater impact within the downside scenarios was subsequently
released at 30 June 2023 and is now captured in the updated
macroeconomic scenarios.
Other (audited)
Syndicated & International Finance (‘SIF') (audited)
For the SIF portfolio in Capital Markets, it was previously determined
that historically observed relationships between default rates and
macroeconomic factors in the modelled probabilities of default do not
fully capture the expected credit losses and therefore needed to be
increased for this portfolio.
Accordingly, expert credit judgement has determined a post model
adjustment is required of € 49 million at 31 December 2023.
AIB UK (audited)
Within AIB UK, a PMA of € 50 million was reflected in the accounts in
relation to AIB Group’s strategic decision to consider an alternative exit
strategy in respect of a cohort of non-core legacy loans.
Other post model adjustments in this category are not individually
significant.
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AIB Group plc
Risk Management continued
2.1.1 Credit risk – Credit exposure overview
Key Credit Profile Metrics in 2023:
• Overall credit quality has remained stable throughout the year against the backdrop of inflation and higher interest rates. There was a net
credit impairment charge of € 172 million in 2023 (2022: € 7 million charge) comprising a € 189 million charge on loans and advances to
customers (2022: € 5 million charge) partially offset by a € 17 million writeback for off-balance sheet exposures (2022: Nil). The prior year
also included a € 2 million charge on investment securities.
• Total gross loans and advances to customers have increased from € 61.2 billion to € 67.0 billion in the year driven by new lending of
€ 12.3 billion and a further € 4.7 billion relating to the Ulster Bank portfolio acquisitions, offset by redemptions/repayments of € 11.0 billion
and portfolio disposals of € 0.3 billion. ECL stock of € 1.5 billion represents 2.3% ECL cover (2022: € 1.6 billion, 2.7%).
• Total new lending in the year was € 12.3 billion which reflects a slight decrease of € 0.3 billion versus last year (2022: € 12.6 billion). The
reduction reflects a decrease in property (€ 0.7 billion) and mortgage (€ 0.6 billion) lending, however non-property business and other
personal lending increased by € 0.8 billion and € 0.2 billion respectively.
• The staging composition of the portfolio has remained relatively stable during the year with Stage 1 loans at 86%, Stage 2 loans at 11%
and Stage 3 loans at 3% (2022: 87%, 10% and 3% respectively). Stage 1 loans have increased by € 4.4 billion following the Ulster Bank
portfolio acquisitions, however Stage 2 loans have increased by € 1.7 billion to € 7.7 billion (2022: € 6.0 billion). The increase in Stage 2
was driven by the property and construction (€ 1.4 billion) and mortgage (€ 1.2 billion) portfolios, however these increases were slightly
offset by a € 0.9 billion reduction in the non-property business portfolio reflecting strong repayments and improved credit performance as
cases exited forbearance. Non-performing loans at € 2.0 billion, have decreased by € 0.2 billion in the year and now represent 3.0% of
total gross loans (2022: 3.5%).
Maximum exposure to credit risk (audited)
Maximum exposure to credit risk from on-balance sheet and off-balance sheet financial instruments is presented before taking account of any
collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). For financial assets recognised
on the statement of financial position, the maximum exposure to credit risk is their carrying amount, and for financial guarantees and similar
contracts granted, it is the maximum amount the Group would have to pay if the guarantees were called upon. For loan commitments and other
credit related commitments that are irrevocable over the life of the respective facilities, it is generally the full amount of the committed facilities.
Credit risk exposure derives from standard on-balance sheet products such as mortgages, loans, overdrafts and credit cards. In addition, credit risk
arises from other products and activities including, but not limited to: “off-balance sheet” guarantees and commitments; securities financing;
investment securities; asset backed securities; and the failure/partial failure of a trade in a settlement or payments system.
The following table sets out the financial instruments in the statement of financial position and the Group’s maximum exposure to credit risk on those
financial instruments at 31 December 2023 and 2022.
Maximum exposure to credit risk
(audited)
Cash and balances at central banks
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities(2)
Trading portfolio financial assets
Included elsewhere:
Trade receivables
Items in course of collection
Accrued interest
Loan commitments and other credit
related commitment
Financial guarantees
Total
Statement of financial position
Maximum exposure
Exposure
€ m
38,018
2,377
1,329
67,011
6,467
17,001
93
102
42
396
ECL
allowance
€ m
—
—
—
(1,520)
(1)
(3)
—
(1)
—
—
Carrying
amount
€ m
38,018 (1)
2,377
1,329
65,491
6,466
16,998
93
101
42
396
Amortised
cost
€ m
37,420
—
1,329
65,449
6,466
4,510
—
101
42
396
Fair value
€ m
—
2,377
—
42
—
12,488
93
—
—
—
2023
Total
€ m
37,420 (1)
2,377
1,329
65,491
6,466
16,998
93
101
42
396
132,836
(1,525)
131,311
115,713
15,000
130,713
16,136
857
16,993 (3)
149,829
(43)
(16)
(59)
(43)
(16)
(59)
(1,584)
131,252
16,136
857
16,993
132,706
—
—
—
15,000
16,136
857
16,993
147,706
(1) Comprises balances at central banks of € 37,420 million and other cash on hand of € 598 million.
(2) Excluding equity shares of € 355 million.
(3) Comprises off-balance sheet instruments.
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AIB Group plc
2.1.1 Credit risk – Credit exposure overview continued
Maximum exposure to credit risk
(audited)
Cash and balances at central
banks
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities(2)
Trading portfolio financial assets
Included elsewhere:
Trade receivables
Items in course of collection
Accrued interest
Loan commitments and other credit
related commitments
Financial guarantees
Total
Statement of financial position
Maximum Exposure
Exposure
€ m
38,138
2,511
1,502
61,231
6,283
15,971
8
100
51
281
ECL
allowance
€ m
—
—
—
(1,618)
(1)
(3)
—
(1)
—
—
Carrying
amount
€ m
38,138 (1)
2,511
1,502
59,613
6,282
15,968
8
99
51
281
Amortised
cost
€ m
Fair value
€ m
37,565
—
1,502
59,364
6,282
4,131
—
99
51
281
—
2,511
—
249
—
11,837
8
—
—
—
2022
Total
€ m
37,565 (1)
2,511
1,502
59,613
6,282
15,968
8
99
51
281
126,076
(1,623)
124,453
109,275
14,605
123,880
15,060
802
15,862 (3)
141,938
(59)
(19)
(78)
(59)
(19)
(78)
(1,701)
124,375
15,060
802
15,862
125,137
—
—
—
14,605
15,060
802
15,862
139,742
(1) Comprises balances at central banks of €37,565 million and other cash on hand of € 573 million.
(2) Excluding equity shares of € 302 million.
(3) Comprises off-balance sheet instruments.
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AIB Group plc
Risk Management continued
2.1.1 Credit risk – Credit exposure overview continued
The following tables set out the concentration of credit by industry sector and geography for loans and advances to customers and loan commitments
and financial guarantee contracts issued together with the related ECL allowance analysed by the ECL stage profile at 31 December 2023 and 2022:
Gross exposures to customers
Gross carrying amount
Analysed by stage profile
2023
At amortised cost At FVTPL
Concentration by industry sector
Non-property business:(1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecommunications, media and technology
Financial, insurance and other government activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total
Concentration by location(2)
Republic of Ireland
United Kingdom
North America
Rest of the World
ECL allowance
Concentration by industry sector
Non-property business:(1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecommunications, media and technology
Financial, insurance and other government activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total
Concentration by location(2)
Republic of Ireland
United Kingdom
North America
Rest of the World
Loans and
advances
to
customers
€ m
Loan
commitments
and financial
guarantees
issued
€ m
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Total
€ m
€ m
€ m
€ m
€ m
€ m
€ m
3,610
2,907
2,666
2,519
2,032
2,064
1,780
1,747
1,710
1,394
506
20,028
9,237
34,764
2,940
66,969
53,887
8,240
2,007
2,835
66,969
2,113
1,133
555
2,179
385
1,333
707
1,516
596
332
891
5,723
4,040
3,221
4,698
2,417
3,397
2,487
3,263
2,306
1,726
1,397
10,607 30,635
2,224 11,461
1,236 36,000
5,866
2,926
16,993 83,962
12,887 66,774
3,082 11,322
2,372
3,494
16,993 83,962
365
659
5,502
3,960
2,428
4,281
1,928
3,103
2,071
2,915
2,094
1,621
1,360
27,303
7,504
32,817
5,339
72,963
57,876
10,068
2,124
2,895
72,963
198
80
603
375
448
247
323
279
171
93
26
2,763
3,270
2,390
437
8,860
7,280
922
240
418
8,860
23
—
185
40
39
43
84
63
40
12
11
540
683
695
90
2,008
1,487
332
8
181
2,008
— 5,723
— 4,040
3,221
5
4,698
2
2,417
2
3,397
4
2,487
9
3,263
6
2,306
1
— 1,726
— 1,397
29 30,635
4 11,461
98 36,000
— 5,866
131 83,962
131 66,774
— 11,322
— 2,372
— 3,494
131 83,962
27
—
—
—
—
—
—
15
—
—
—
42
—
—
—
42
42
—
—
—
42
ECL allowance
2023
At amortised cost
Analysed by stage profile
Loans and
advances
to
customers
€ m
Loan
commitments
and financial
guarantees
issued
€ m
Total Stage 1 Stage 2 Stage 3
POCI
Total
€ m
€ m
€ m
€ m
€ m
€ m
40
17
168
58
83
48
50
55
29
22
20
573
541
309
97
1,520
1,085
236
51
148
1,520
3
2
3
5
2
4
3
7
1
1
—
29
23
1
6
59
52
6
1
—
59
43
19
171
63
85
52
53
62
30
23
20
602
564
310
103
1,579
1,137
242
52
148
1,579
17
13
19
13
34
16
7
10
9
9
6
140
87
19
22
268
137
104
13
14
268
12
6
107
32
41
20
15
31
10
9
3
280
273
77
36
666
495
59
34
78
666
14
—
46
18
12
16
36
21
11
5
11
190
205
207
45
647
507
79
5
56
647
—
—
(1)
—
(2)
—
(5)
—
—
—
—
(8)
(1)
7
—
(2)
(2)
—
—
—
(2)
43
19
171
63
85
52
53
62
30
23
20
602
564
310
103
1,579
1,137
242
52
148
1,579
(1) In 2023, the Group undertook a review of the sector codes included under the non-property business asset class. These changes in presentation provide more relevant information on the Group’s
non-property business exposures and aligns to how these sub-sectors are managed and reported internally. The 2022 comparative period has also been restated.
(2) Based on country of risk.
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AIB Group plc
2.1.1 Credit risk – Credit exposure overview continued
Gross exposures to customers
Gross carrying amount
Analysed by stage profile
2022
At amortised cost At FVTPL
Concentration by industry sector
Non-property business:(1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecommunications, media and technology
Financial, insurance and other government activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total
Concentration by location(2)
Republic of Ireland
United Kingdom
North America
Rest of the World
ECL allowance
Concentration by industry sector
Non-property business:(1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecommunications, media and technology
Financial, insurance and other government activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total
Concentration by location(2)
Republic of Ireland
United Kingdom
North America
Rest of the World
Loans and
advances
to
customers
€ m
Loan
commitments
and financial
guarantees
issued
€ m
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Total
€ m
€ m
€ m
€ m
€ m
€ m
€ m
2,961
2,190
2,910
2,849
2,012
1,832
1,655
1,751
1,661
1,230
502
19,363
8,617
30,279
2,723
60,982
48,061
8,087
2,116
2,718
60,982
1,706
802
604
1,929
452
1,045
669
1,201
611
369
858
4,667
2,992
3,514
4,778
2,464
2,877
2,324
2,952
2,272
1,599
1,360
9,444 28,807
2,384
11,001
1,168 31,447
5,589
2,866
15,862 76,844
11,971 60,032
11,063
2,976
2,491
375
3,258
540
15,862 76,844
4,408
2,786
1,422
4,297
2,173
2,544
1,975
2,540
1,983
1,503
1,283
24,128
9,056
29,553
4,810
67,547
53,343
9,322
2,158
2,724
67,547
225
179
1,713
396
231
282
270
318
271
71
76
3,853
1,509
1,161
591
7,114
5,125
1,339
312
338
7,114
34
27
379
85
60
51
79
94
18
25
1
826
436
646
188
2,096
1,477
402
21
196
2,096
— 4,667
— 2,992
— 3,514
— 4,778
— 2,464
— 2,877
— 2,324
— 2,952
— 2,272
— 1,599
— 1,360
— 28,807
— 11,001
87 31,447
— 5,589
87 76,844
87 60,032
— 11,063
— 2,491
— 3,258
87 76,844
9
—
—
—
—
—
—
14
—
—
—
23
226
—
—
249
249
—
—
—
249
ECL allowance
2022
At amortised cost
Analysed by stage profile
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Loans and
advances
to
customers
Loan
commitments
and financial
guarantees
issued
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
59
49
353
88
51
62
54
76
40
24
31
838
320
283
177
1,618
1,159
250
64
145
1,618
8
7
12
11
4
4
3
4
1
—
—
47
23
—
8
78
64
11
3
—
78
67
56
365
99
55
66
57
80
41
24
31
885
343
283
185
1,696
1,223
261
67
145
1,696
16
10
21
23
15
12
11
12
7
8
3
128
90—
40—
26—
284
204
51
13
16
284
26
24
249
49
19
29
20
33
24
7
28
484
121—
37—
43—
685
442
111
47
85
685
25
22
95
27
21
25
26
35
10
9
—
273
132—
197—
116—
718
568
99
7
44
718
—
—
—
—
—
—
—
—
—
—
—
—
—
9
—
9
9
—
—
—
9
67
56
365
99
55
66
57
80
41
24
31
885
343
283
185
1,696
1,223
261
67
145
1,696
(1) In 2023, the Group undertook a review of the sector codes included under the non-property business asset class. These changes in presentation provide more relevant information on the Group’s
non-property business exposures and aligns to how these sub-sectors are managed and reported internally.
(2) Based on country of risk.
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AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio
The Group’s customer loan portfolio comprises loans (including overdrafts), instalment credit and finance lease receivables. An overdraft provides a
demand credit facility combined with a current account. Borrowings occur when the customer’s drawings take the current account into debit.
The balance may, therefore, fluctuate with the requirements of the customer. Although overdrafts are contractually repayable on demand (unless
a fixed term has been agreed), provided the account is deemed to be satisfactory, full repayment is not generally demanded without notice.
Credit profile of the loan portfolio
The following table analyses loans and advances to customers at amortised cost by segment, internal credit ratings and ECL staging at 31
December 2023 and 2022:
Amortised cost
Gross carrying amount
Residential mortgages
Other personal
Property and construction
Non-property business
Total
Analysed by internal credit ratings(1)
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Retail
Banking
Capital
Markets
AIB UK
Group
2023
Total
Retail
Banking
Capital
Markets
AIB UK
Group
2022
Total
€ m
33,383
2,825
€ m
476
45
456
6,553
3,107 13,013
39,771 20,087
28,088 13,843
8,964
4,454
37,052 18,297
1,330
360
1,690
1,029
892
248
1,140
650
€ m
905
70
2,228
3,880
7,083
5,156
1,280
6,436
175
170
345
302
€ m
€ m
€ m
— 34,764
28,764
— 2,940
2,600
€ m
528
49
— 9,237
452
6,166
28 20,028
3,026 12,177
28 66,969
34,842 18,920
9 47,096
24,294 12,813
19 14,717
7,654
4,023
28 61,813
31,948 16,836
— 2,397
1,241
—
778
— 3,175
— 1,981
431
1,672
1,222
496
1,178
1,674
410
€ m
987
74
1,999
4,145
7,205
4,763
1,448
6,211
203
405
608
386
€ m
€ m
— 30,279
— 2,723
— 8,617
15 19,363
15 60,982
— 41,870
15 13,140
15 55,010
— 1,940
— 2,014
— 3,954
— 2,018
Gross carrying amount
39,771 20,087
7,083
28 66,969
34,842 18,920
7,205
15 60,982
Analysed by ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
35,646 15,535
6,043
28 57,252
31,805 15,317
3,032
3,902
974
119
647
3
738
302
—
— 7,672
— 1,923
—
122
1,749
1,201
87
3,193
410
—
5,725
1,094
386
—
15 52,862
— 6,036
— 1,997
—
87
39,771 20,087
7,083
28 66,969
34,842 18,920
7,205
15 60,982
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
54
144
348
(2)
544
%
0.2
4.8
35.7
102
441
219
(1)
761
%
0.7
11.3
34.0
(1.5)
(50.3)
98
50
67
—
—
—
—
—
254
635
634
(3)
215
— 1,520
%
1.6
6.8
22.0
—
%
—
—
—
—
%
0.4
8.3
33.0
(2.5)
88
112
468
9
677
%
0.3
6.4
39.0
10.7
Income statement
€ m
€ m
€ m
€ m
€ m
€ m
Net remeasurement of ECL allowance
82
101
33
—
216
(101)
132
440
133
—
705
%
0.9
13.8
32.4
—
€ m
96
Recoveries of amounts previously written-off
(22)
(2)
(3) —
(27)
(38)
(3)
(4) —
Net credit impairment charge/(writeback)
60
99
30
—
189
(139)
93
51
—
(1) Further analysis of internal credit grade profile by ECL staging is set out on page 147.
43
94
99
—
—
—
—
—
263
646
700
9
236
— 1,618
%
0.8
8.6
25.6
—
€ m
55
%
—
—
—
—
€ m
—
%
0.5
10.7
35.1
10.7
€ m
50
(45)
5
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AIB Group plc
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Credit profile of the loan portfolio continued
The following table analyses loans and advances to customers at FVTPL by segment and internal credit ratings at 31 December 2023 and 2022:
FVTPL
Retail
Banking
Capital
Markets
AIB UK
Group
2023
Total
Retail
Banking
Capital
Markets
AIB UK
Group
Carrying amount
Property and construction
Non-property business
Total
€ m
—
—
—
€ m
—
42
42
€ m
€ m
—
—
—
—
—
—
€ m
€ m
— —
42 —
—
42
Analysed by internal credit ratings
Strong
Satisfactory
Total strong/satisfactory
Total criticised
Non-performing
Total
—
—
—
—
—
—
42
—
—
42
—
—
—
—
42
—
—
42
—
—
—
—
—
—
—
—
42
—
—
42
—
—
—
—
—
—
€ m
226
23
249
96
—
96
—
153
249
€ m
€ m
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2022
Total
€ m
226
23
249
96
—
96
—
153
249
Internal credit grade profile by ECL staging (audited)
The table below analyses the internal credit grading profile by ECL staging for the Group’s loans and advances to customers at 31 December 2023
and 2022:
Amortised cost (audited)
Total
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Gross carrying amount
ECL allowance
Carrying amount
Stage 1 Stage 2 Stage 3
€ m
€ m
€ m
POCI
€ m
2023
Total
€ m
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
POCI
€ m
2022
Total
€ m
44,273
12,014
56,287
919
44
963
2
57,252
2,808
2,697
5,505
1,473
694
2,167
—
7,672
—
—
—
—
—
—
1,923
1,923
(254)
(635)
(634)
56,998
7,037
1,289
15
6
21
47,096
14,717
61,813
40,708
11,365
52,073
5
40
45
56
122
3
125
668
119
787
2
52,862
2,397
778
3,175
1,981
66,969
(1,520)
65,449
1,159
1,772
2,931
1,271
1,834
3,105
—
6,036
—
—
—
—
—
—
1,997
1,997
(263)
(646)
(700)
52,599
5,390
1,297
3
3
6
41,870
13,140
55,010
1,940
1
2,014
61
3,954
62
2,018
19
87
60,982
(9) (1,618)
59,364
78
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AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Credit exposure by midpoint PD grade
The table below represents the credit risk profile for loans and advances to customers at amortised cost via the mapping of credit risk management
midpoint PD grades at 31 December 2023 and 2022. The ‘internal credit grading profile by ECL staging’ table on page 147 includes qualitative
factors such as financial distress and arrears (in addition to PD to prioritise credit risk management activity) which the midpoint PD table below does
not reflect.
Quality
Code
Lower
Bound PD
Upper
Bound PD
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
POCI
€ m
2023
Total
€ m
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
POCI
€ m
2022
Total
€ m
1 - 3
4 - 7
0.00%
1.23% 49,359
3,296
1.23%
6.94%
7,376
2,300
8 - 10
6.94%
99.99%
515
2,076
—
—
—
40 52,695
44,907
1,623
8
9,684
7,375
1,424
18
2,609
578
2,989
—
—
—
39 46,569
7
8,806
22
3,589
11
100.00% 100.00%
2
—
1,923
56
1,981
2
—
1,997
19
2,018
Gross carrying amount
57,252
7,672
1,923
122 66,969
52,862
6,036
1,997
87 60,982
At 31 December 2023, 93% of the portfolio is in quality codes 1 to 7 which are typically strong/satisfactory (2022: 91%), 4% of the portfolio is in
quality codes 8 to 10 which are typically criticised (2022: 6%) and the final 3% is in quality code 11 which is in default (2022: 3%).
IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability of default but includes significant increase in credit risk
(SICR), including relative movement in IFRS 9 probability of default since initial recognition. Therefore, there is no direct relationship between
internal PD grades and IFRS 9 stage classification.
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AIB Group plc
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Non-performing loans
The table below sets out the Group’s non-performing loans and advances to customers by asset class at 31 December 2023 and 2022:
Non-performing loans
At amortised cost
At FVTPL
Total non-performing loans and advances to customers
Non-performing loans as a % of total loans and advances
to customers
Residential
mortgages
Other personal
Property and
construction
Non-property
business
€ m
719
—
719
€ m
81
—
81
€ m
660
—
660
€ m
521
—
521
31 December
2023
Total
€ m
1,981
—
1,981
2.1 %
2.7 %
7.1 %
2.6 %
3.0 %
ECL allowance as a % of non-performing loans and
advances to customers at amortised cost
30 %
55 %
29 %
35 %
32 %
Non-performing loans
At amortised cost
At FVTPL
Total non-performing loans and advances to customers
Non-performing loans as a % of total loans and advances
to customers
31 December 2022
Residential
mortgages
Other personal
Property and
construction
Non-property
business
€ m
657
—
657
€ m
180
—
180
€ m
406
153
559
€ m
775
—
775
Total
€ m
2,018
153
2,171
2.2 %
6.6 %
6.3 %
4.0 %
3.5 %
ECL allowance as a % of non-performing loans and
advances to customers at amortised cost
31 %
64 %
29 %
35 %
35 %
Total Group non-performing loans have decreased by € 0.2 billion or 9% to € 2.0 billion in the year (2022: € 2.2 billion). The decrease reflects the
€ 0.3 billion sale of non-performing loan portfolios completed during the year while other underlying decreases have offset any new non-performing
loans during the year which included € 0.5 billion in property and construction. The ECL allowance cover rate on non-performing loans (at amortised
cost) has decreased to 32% in the year (2022: 35%). Non-performing loans as a percentage of total loans and advances to customers have reduced
to under 3.0% at 2.96% (2022: 3.5%). These non-performing exposures are spread across all asset classes.
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AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Aged analysis of contractually past due loans and advances to customers
The following table shows aged analysis of contractually past due loans and advances to customers by industry sector analysed by ECL staging and
segment at 31 December 2023 and 2022.
At amortised cost
Industry sector
Non-property business: (1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecomms, media and technology
Financial, insurance and other government
activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total gross carrying amount
ECL staging
Stage 1
Stage 2
Stage 3
POCI
Segment
Retail Banking
Capital Markets
AIB UK
Group
As a percentage of total gross loans
at amortised cost
Of which past due
Not past
due
€ m
1-30
days
€ m
31-60
days
61-90
days
91-180
days
181-365
days
> 365
days
Total
past due
€ m
€ m
€ m
€ m
€ m
€ m
2023
Total
€ m
3,607
2,907
2,582
2,493
1,990
2,035
1,737
1,706
1,704
1,392
488
19,734
8,904
34,175
2,829
65,642
57,154
7,438
948
102
65,642
—
—
48
17
29
11
12
16
2
1
18
154
91
135
39
419
98
157
161
3
419
—
—
5
1
2
1
6
1
—
—
—
16
14
37
10
77
—
45
31
1
77
—
—
1
1
—
1
9
1
—
—
—
13
1
33
8
55
—
32
23
—
55
—
—
2
1
2
4
3
3
—
—
—
15
5
89
20
129
—
—
126
3
129
2
—
3
2
7
2
4
4
1
—
—
25
177
76
20
298
—
—
294
4
298
1
—
25
4
2
10
9
16
3
1
—
71
45
219
14
349
—
—
340
9
349
3
3,610
— 2,907
2,666
84
26
42
29
43
41
6
2
18
2,519
2,032
2,064
1,780
1,747
1,710
1,394
506
294 20,028
333
9,237
589 34,764
111
2,940
1,327 66,969
98 57,252
234
975
20
7,672
1,923
122
1,327 66,969
38,952
189
19,754
127
6,915
96
59
3
15
43
119
117
292
819 39,771
7
5
5
5
167
14
24
33
333 20,087
168 7,083
21
7
—
—
—
—
—
7
28
65,642
419
77
55
129
298
349
1,327 66,969
%
%
%
%
%
%
%
%
%
98.02
0.63
0.11
0.08
0.19
0.44
0.52
1.98
100
(1) In 2023, the Group undertook a review of the sector codes included under the non-property business asset class. These changes in presentation provide more relevant information on the Group’s
non-property business exposures and aligns to how these sub-sectors are managed and reported internally. The 2022 comparative period has also been restated.
The figures reported are inclusive of overdrafts, bridging loans and cases with expired limits. There were no contractually past due loans measured
at FVTPL at 31 December 2023 and 2022.
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AIB Group plc
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Aged analysis of contractually past due loans and advances to customers continued
At amortised cost
Industry sector
Non-property business:
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Of which past due
Not past
due
€ m
1-30
days
€ m
31-60
days
61-90
days
91-180
days
181-365
days
> 365
days
Total
past due
€ m
€ m
€ m
€ m
€ m
€ m
2022
Total
€ m
—
—
—
1
—
19
2,961
—
5
—
2
—
5
—
34
—
46
17
126
2,190
2,910
2,942
2,173
2,784
2,831
2,007
1,793
1,621
1,680
1,652
18
17
34
8
1
11
9
29
2
—
—
—
3
3
1
3
1
1
1
1
3
2
10
1
—
—
—
1
—
3
4
7
3
6
3
16
15
23
5
1
1
18
2,849
5
2,012
39
34
71
1,832
1,655
1,751
9
1,661
13
1,230
1
502
Telecommunications, media and technology
1,217
—
1
—
1
10
Financial, insurance and other government
activities
501
—
—
—
—
—
Total non-property business
Property and construction
Residential mortgages
Other personal
Total gross carrying amount
19,028
111
8,404
29,871
2,526
64
67
39
59,829
281
15
14
19
12
60
7
18
20
7
52
23
19
33
21
96
63
45
60
30
116
335
19,363
53
213
8,617
209
408
30,279
88
197
2,723
198
466
1,153
60,982
ECL staging
Stage 1
Stage 2
Stage 3
POCI
Segment
Retail Banking
Capital Markets
AIB UK
Group
As a percentage of total gross loans
at amortised cost
52,777
85
—
—
—
—
—
85
52,862
5,850
128
1,122
67
39
21
19
33
—
—
—
186
6,036
96
197
461
875
1,997
80
1
—
—
—
1
5
7
87
59,829
281
60
52
96
198
466
1,153
60,982
34,015
129
39
35
18,857
13
2
—
6,942
139
19
17
72
18
6
144
408
827
34,842
9
21
63
18,920
45
37
263
7,205
15
—
—
—
—
—
—
—
15
59,829
281
60
52
96
198
466
1,153
60,982
%
%
%
%
%
%
%
%
%
98.11
0.46
0.10
0.09
0.16
0.32
0.76
1.89
100.00
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AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Gross loans(1) and ECL movements (audited)
The following tables set out the movements in the gross carrying amount and ECL allowance for loans and advances to customers at amortised cost
by ECL staging between 1 January 2023 and 31 December 2023 and the corresponding movements between 1 January 2022 and 31 December
2022.
Accounts that triggered movements between Stage 1 and Stage 2 as a result of failing/curing a quantitative measure only (as disclosed on page
131) and that subsequently reverted within the year to their original stage, are excluded from ‘Transferred from Stage 1 to Stage 2’ and ‘Transferred
from Stage 2 to Stage 1’. The Group believes this presentation aids the understanding of the underlying credit migration.
Gross carrying amount movements – total (audited)
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
New loans originated/top-ups
Redemptions/repayments
Interest credited
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Impact of model, parameter and overlay changes
Other movements
At 31 December
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
New loans originated/top-ups
Redemptions/repayments
Interest credited
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Impact of model, parameter and overlay changes
Other movements
At 31 December
Stage 1
€ m
52,862
(7,377)
4,518
(125)
47
17,186
(11,266)
2,426
—
(47)
74
(1,082)
36
57,252
Stage 2
€ m
6,036
7,377
(4,518)
(1,070)
262
—
(1,895)
419
—
(43)
21
1,082
1
7,672
Stage 3
€ m
1,997
—
—
1,195
(309)
—
(579)
80
(125)
(316)
6
—
(26)
1,923
POCI
€ m
87
—
—
—
—
36
2023
Total
€ m
60,982
—
—
—
—
17,222
(10)
(13,750)
3
—
—
—
—
6
2,928
(125)
(406)
101
—
17
122
66,969
Stage 1
€ m
48,394
(3,599)
Stage 2
€ m
6,768
3,599
2,317
(2,317)
(91)
39
14,594
(623)
301
—
(10,071)
(1,768)
1,566
—
(151)
(212)
—
76
202
—
(109)
(69)
—
52
Stage 3
€ m
POCI
€ m
2022
Total
€ m
2,885
103
58,150
—
—
714
(340)
—
(657)
71
(94)
(541)
(25)
—
(16)
—
—
—
—
—
—
—
—
—
14,594
(12)
(12,508)
2
—
(6)
—
—
—
1,841
(94)
(807)
(306)
—
112
52,862
6,036
1,997
87
60,982
(1) The gross carrying amount movement is recorded at each month end with movements calculated versus the position at previous month end. The sum of all 12
months movement is then presented.
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AIB Group plc
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Gross loans and ECL movements continued
ECL allowance movements – total (audited)
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
New loans originated/top-ups
Redemptions/repayments
Impact of model and overlay changes
Impact of credit or economic risk parameters
Income statement net credit impairment charge/(writeback)
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Other movements
At 31 December
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
New loans originated/top-ups
Redemptions/repayments
Impact of model and overlay changes
Impact of credit or economic risk parameters
Income statement net credit impairment charge/(writeback)
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Other movements
At 31 December
Stage 1
€ m
263
(100)
73
(1)
2
29
49
(25)
(16)
(22)
(11)
—
(9)
—
11
254
Stage 2
€ m
Stage 3
€ m
POCI
€ m
646
252
(209)
(99)
28
67
—
(99)
34
19
(7)
—
(8)
2
2
635
700
—
—
180
(52)
56
—
—
82
(16)
250
(125)
(183)
2
(10)
634
9
—
—
—
—
(12)
—
—
(4)
—
(16)
—
—
—
4
(3)
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
POCI
€ m
236
(40)
700
146
30
(102)
918
—
—
(3)
(71)
126
3
31
66
39
(16)
—
(26)
(67)
21
(59)
23
—
(1)
(1)
6
263
20
22
(29)
—
(7)
(5)
(13)
646
(91)
(16)
—
—
48
6
73
(94)
(202)
(7)
12
700
31
—
—
—
—
(5)
—
—
(12)
—
(17)
—
—
—
(5)
2023
Total
€ m
1,618
152
(136)
80
(22)
140
49
(124)
96
(19)
216
(125)
(200)
4
7
1,520
2022
Total
€ m
1,885
106
(72)
52
(49)
(6)
66
(93)
77
(31)
50
(94)
(210)
(13)
—
9
1,618
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AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Gross loans and ECL movements continued (audited)
Total exposures to which an ECL applies increased during the year by
€ 6.0 billion from € 61.0 billion at 1 January 2023 to € 67.0 billion at 31
December 2023. The increase in the year was influenced by new
lending and the Ulster Bank portfolio acquisitions (which are included
within ‘new loans originated/top-ups’) and were partially offset against
redemptions/repayments and disposals.
Stage transfers are a key component of ECL allowance movements (i.e.
Stage 1 to Stage 2 to Stage 3 and vice versa) in addition to the net
remeasurement of ECL due to change in risk parameters within a stage.
Excluding the impact of model/overlay changes and the updated
macroeconomic scenarios, an ECL charge of € 139 million occurred due
to underlying credit management activity and a slight deterioration in
credit parameters which inform the modelled outcomes.
The impact of model and overlay changes resulted in an ECL charge of
€ 96 million. This was driven by a € 102 million charge following the
deployment of the new IFRS 9 mortgage model and a € 6 million
writeback relating to post model adjustments. Further details on the post
model adjustments are outlined on pages 140 and 141. These ensure
exposures subject to risks which are not adequately reflected in the
modelled outcomes, retain an appropriate ECL.
The updated macroeconomic scenarios and weightings resulted in an
ECL release of € 19 million. This ECL movement is presented
separately within ‘Impact of credit or economic risk parameters’. This
release was most significant within the non-property business portfolio
accounting for a release of € 16 million within the portfolio. The total
writeback reflects an increase in the base case scenario (45% to 50%)
and a reduction in the severe scenario (15% to 10%) as the economic
backdrop remains challenging reflecting a period of subdued growth due
to elevated inflation, higher interest rates and the lagged effect of
monetary tightening.
The gross loan transfers from Stage 1 to Stage 2 of € 7.4 billion are due
to underlying credit management activity where a significant increase in
credit risk occurred during the year through either the quantitative or
qualitative criteria for stage movement. 38% of the movements relied on
a qualitative or backstop indicator of significant increase in credit risk
(e.g. forbearance or movement to a watch grade) with 5% caused solely
by the backstop of 30 days past due. Of the € 7.4 billion which
transferred from Stage 1 to Stage 2 in the year approximately € 5.3
billion is reported as Stage 2 at 31 December 2023.
Where a movement to Stage 2 is triggered by multiple drivers
simultaneously these are reported in the following order: quantitative,
qualitative and backstop.
Similarly, transfers from Stage 2 to Stage 1 of € 4.5 billion represent
those loans where the triggers for significant increase in credit risk no
longer apply or loans that have fulfilled a probation period.
These transfers include loans which have been upgraded through
normal credit management process and incorporates loans which
transferred due to the impact of the updated macroeconomic scenarios
and weightings.
Transfers from Stage 2 to Stage 3 of € 1.1 billion represent those loans
that defaulted during the year. These arose in cases where it was
determined that the customers were unlikely to pay their loans in full
without the realisation of collateral regardless of the existence of any
past due amount or the number of days past due. In addition, transfers
also include all borrowers that are 90 days or more past due on a
material obligation. Of the transfers from Stage 2 to Stage 3, € 0.3 billion
had transferred from Stage 1 to Stage 2 earlier in the year.
Transfers from Stage 3 to Stage 2 of € 0.3 billion were mainly driven by
resolution activity with the customer, through either restructuring or
forbearance previously granted and which subsequently adhered to
default probation requirements. As part of the credit management
practices, active monitoring of loans and their adherence to default
probation requirements is in place.
In summary, the staging movements of the overall portfolio were as
follows:
Stage 1 loans increased by € 4.4 billion in the year to € 57.3 billion with
an ECL of € 0.3 billion and resulting cover of 0.4% (2022: 0.5%). The
increase in Stage 1 loans largely reflects the Ulster Bank portfolio
acquisitions.
Stage 2 loans increased by € 1.7 billion in the year to € 7.7 billion with
an ECL of € 0.6 billion and resulting cover of 8.3% (2022: 10.7%). The
increase in Stage 2 loans was driven by the property and construction
(€ 1.4 billion) and residential mortgage (€ 1.2 billion) portfolios. The
increase in property and construction was primarily due to increased
interest rates and reduced asset values impacting interest cover and
refinance terms. The increase in residential mortgages was driven by
the implementation of the new mortgage model and a post model
adjustment to migrate a cohort of the acquired Ulster Bank portfolio
reflecting managements view that the risk of default may not be fully
captured in the PD models given the portfolio’s credit performance
observed post acquisition. However, these increases in Stage 2 were
slightly offset by a € 0.9 billion reduction in the non-property business
portfolio reflecting strong repayments and improved credit performance
as cases exited forbearance.
Stage 3 loans decreased by € 0.1 billion in the year to € 1.9 billion with
an ECL of € 0.6 billion and resulting cover of 33.0% (2022: 35.1%). The
decrease reflects the sale of non-performing loan portfolios completed
during the year as net transfers to Stage 3 were offset by redemptions/
repayments and disposals.
Further details on stage movements by asset class are set out in the
following tables on pages 155 and 156.
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AIB Group plc
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Gross loans(1) and ECL movements continued
The following tables set out the movements in the gross carrying amount and ECL allowance for loans and advances to customers by asset class and ECL staging for the year to 31 December 2023 and 2022:
Gross carrying amount movements – Asset class
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
New loans originated/top-ups
Redemptions/repayments
Interest credited
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Impact of model, parameter and
overlay changes
Other movements
At 31 December
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
New loans originated/top-ups
Redemptions/repayments
Interest credited
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Impact of model, parameter and overlay
changes
Other movements
At 31 December
Stage 2
€ m
Stage 1
€ m
Stage 3
€ m
Residential mortgages
Total
POCI
€ m
€ m
28,396 1,158 638
87 30,279
(1,412) 1,412 — — —
(875) — — —
875
(244) 277 — —
(33)
(114) — —
13 101
13 7,909
(12) (4,499) (1,000)
196
7,896 — —
(119)
(233)
(4,135)
16
920
55
— —
(17) —
— — — — —
21
1 —
2 993
19
1
Stage 2
€ m
Stage 1
€ m
Other personal
Total
Stage 3
€ m
€ m
2,274 270 179 2,723
(329) 329 — —
(204) — —
95 —
(22) —
1,227 — — 1,227
204
(9)
1
(86)
21
(103)
28
(41)
(17) — —
(80)
(7)
(2)
1 — —
POCI
€ m
Stage 1
€ m
Stage 3
€ m
Stage 2
€ m
Property and construction
Total
€ m
6,820 1,391 406 — 8,617
(3,737) 3,737 — — —
1,553 (1,553) — — —
(432) 487 — —
(31) — —
4 2,494
(160) — (2,257) (4,663)
(55)
16
15
2,490 — —
(629)
326 144
(41) — —
(2) —
(89)
7
35
1
22 — 492
(20) —
(50) —
2 —
Stage 3
€ m
Stage 2
€ m
Stage 1
€ m
2023
Non-property business
Total
POCI
€ m
€ m
15,372 3,217 774 — 19,363
(1,899) 1,899 — — —
1,886 (1,886) — — —
(308) 336 — —
(142) — —
19 5,592
2 (5,857)
1 1,213
(47)
(265)
35
5,573 — —
(266)
(930)
36
984 192
(47) —
(20) — —
(186) —
(36)
(43)
(52)
3 —
13
19
44
(28)
17 125
(34) (1,137) (1,468)
6 230
(1,006) 1,006 — — —
78
97 34,764
6
31,594 2,385 688
61
7
4
— — — —
(23)
26
(1)
80 2,940
2,613 247
50
(76)
(79)
76 — — —
(2)
1
5,823 2,754 657
(81)
(1)
3 9,237
— — — — —
(6)
22 20,028
17,222 2,286 498
(10) —
4 —
POCI
€ m
Stage 2
€ m
Stage 1
€ m
Stage 3
€ m
Residential mortgages
Total
€ m
26,937 1,446 921 103 29,407
(1,120) 1,120 — — —
1,195 (1,195) — — —
(197) 230 — —
(193) — —
4,660 — — — 4,660
(225)
(3,917)
674
27
— —
(8)
(2)
(133)
18
(20) —
(6)
(2) —
(33)
12 181
(1)
(52)
(179)
(12) (4,287)
2 721
Stage 3
€ m
Stage 2
€ m
Stage 1
€ m
Other personal
Total
€ m
2,238 219 247 2,704
(377) 377 — —
(173) — —
99 —
(18) —
974 — — 974
173
(12)
1
(87)
17
Stage 1
€ m
Stage 3
€ m
Stage 2
€ m
Property and construction
Total
POCI
€ m
€ m
5,346 1,386 628 — 7,360
(680) 680 — — —
(311) — — —
83 — —
(40) — —
3,409 — — — 3,409
311
(7)
10
(76)
30
(915)
152
(98)
23
(20) — —
(2) —
(4)
(194)
(56)
(55) (1,068) (1,653)
211
8 183
(376)
38
(32) — —
(10)
(37)
(75)
(10)
(91)
(5)
(32)
(73)
(1) —
(164) — (2,193) (3,586) (1,069)
529 114
(19) — —
(91)
(111)
(56)
(65)
16 — 265
(19) —
(96) —
(5) —
(143)
(106)
Stage 3
€ m
Stage 2
€ m
Stage 1
€ m
2022
Non-property business
Total
POCI
€ m
€ m
13,873 3,717 1,089 — 18,679
(1,422) 1,422 — — —
(638) — — —
638
(263) 302 — —
(39)
(89) — —
16
5,551 — — — 5,551
(305) — (4,960)
29 — 672
(23) —
(23)
(395)
(193) —
(139)
(18) —
73
— — — — —
48
87 30,279
28,396 1,158 638
(4) —
11
41
— — — —
42
(7)
2,274 270 179 2,723
46
3
— — — — —
44
6,820 1,391 406 — 8,617
3 —
40
1
— — — — —
(22)
15,372 3,217 774 — 19,363
(18) —
(12)
8
(1) The gross carrying amount movement is recorded at each month end with movements calculated versus the position at previous month end. The sum of all 12 months movement is then presented.
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Annual Financial Report 2023 156
AIB Group plc
Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Gross loans and ECL movements continued
ECL allowance movements – Asset class
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
New loans originated/top-ups
Redemptions/repayments
Impact of model and overlay changes
Impact of credit or economic risk parameters
Net credit impairment (writeback)/charge
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Other movements
At 31 December
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
New loans originated/top-ups
Redemptions/repayments
Impact of model and overlay changes
Impact of credit or economic risk parameters
Net credit impairment charge/(writeback)
Write-offs
Derecognised due to disposals
Exchange translation adjustments
Other movements
At 31 December
Stage 1
€ m
40
(4)
6
—
—
4
3
(2)
(26)
(2)
Residential mortgages
Stage 1
Total
POCI
Stage 2
Stage 3
€ m
€ m
€ m
€ m
€ m
24
283
9
38
196
(7)
32
—
—
36
6
(7)
—
(13) —
11
25
(14)
—
—
(5) —
(9) —
4
33
33
(1)
3
—
(5)
(3) —
(21)
28
(4)
3
Stage 2
Stage 3
€ m
€ m
37
116
—
53
(25) —
44
(29)
(12)
4
(1) —
9
—
—
11
(1) —
(2)
9
(2)
(8)
(1)
(5)
(3)
Other personal
Stage 2
Stage 1
Total
€ m
€ m
€ m
84
117
177
(53) 104
46
19
(19)
(1)
15
1
(8)
13
8
19
11
(4)
(3)
(1)
3
(9) —
Property and construction
POCI
Total
Stage 3
€ m
€ m
€ m
—
320
119
—
51
—
(31)
—
(50) —
8
31
(22)
—
(1)
(4) —
2
56
10
34
—
19
—
—
—
(26) —
(30)
93
89
—
(9) —
19
185
10
—
—
(5) —
—
(19)
(1)
(3)
(4)
Stage 1
€ m
115
(36)
42
—
1
13
16
(17)
15
(17)
40
—
—
—
(21)
—
—
—
—
19
(1)
77
25
(17) —
—
—
4
6
—
—
3
207
(7)
37
(17) —
(4)
—
(5)
—
—
6
309
(1)
(6)
—
2
21
—
6
32
49
(41)
(71)
(9)
44
(3) 150
—
—
—
40
(41) —
(78) —
—
2
83
(1)
97
(3)
264
121
(20) —
(27) —
—
—
1
1
195
(1) 267
17
(20) —
(27)
1
—
(1) 541
—
7
131
(8)
(192)
—
(2)
2
—
262
—
—
188
Stage 2
€ m
454
59
2023
Non-property business
Total
POCI
Stage 3
€ m
€ m
€ m
838
269
—
23
—
—
(79)
(121) —
—
46
80
—
(8)
(27) —
43
16
(86)
(67)
(16)
4
—
(69) —
(81)
2
(34)
18
34
—
(8)
—
—
(1) —
(1) —
55
(47) —
(85) —
1
—
(5) —
(8) (128)
(47)
(95)
3
2
(8) 573
Stage 1
€ m
30
(8)
4
—
(26) —
10
3
(4)
(5)
5
(8)
11
(2)
1
(8)
Stage 2
Stage 3
€ m
€ m
33
159
—
58
(25) —
47
(30)
(10)
4
10
(2)
—
(1) —
(2)
1
Other personal
Stage 1
Total
€ m
€ m
50
222
(14)
50
3
(21)
17
—
(6) —
2
23
(14)
40
(17)
—
11
(3)
(18)
(8)
Property and construction
Total
POCI
Stage 2
Stage 3
€ m
€ m
€ m
€ m
313
—
91
172
27
—
—
41
(5)
—
(8) —
10
19
(9)
—
(8)
(12) —
4
(25)
(8) —
(19)
23
—
(22)
—
78
—
(28)
—
—
(8) —
5
33
3
(14)
(17)
(1)
—
—
Stage 1
€ m
122
2022
Non-property business
Total
€ m
968
11
(33)
18
(9)
9
29
(64)
22
—
POCI
Stage 2
Stage 3
€ m
€ m
€ m
535
311
—
—
27
—
(47) —
—
46
(25)
—
(18) —
7
(21) —
(3)
—
—
—
—
—
(55) —
29
10
—
34
—
(16)
14
(3)
2
33
29
(9)
(17)
(34)
Residential mortgages
Total
€ m
382
18
(13)
7
POCI
Stage 2
Stage 3
€ m
€ m
€ m
31
41
276
—
—
20
—
(22) —
—
14
(51) —
(7)
24
8
—
3
—
(3) —
31
4
(21)
1
—
—
(3)
(5)
—
—
(12)
—
Stage 1
€ m
34
(2)
9
—
1
4
3
(1)
(3)
—
11
—
—
—
1
(17)
(5)
(10)
(20) —
(68) —
—
(20) —
(71) —
—
4
24
(3)
—
(5)
9
283
3
—
—
—
1
37
29
(32)
(35)
23
22
(32) —
(35) —
—
—
(5) —
177
116
20
—
—
(1) —
12
6
117
84
7
—
(19) —
(34) —
(2) —
(5) —
—
119
50
(19) —
(34)
(1)
(1)
(52)
—
(3) —
13
320
115
(5)
454
(4)
(5)
(20)
36
—
(23) —
(65) —
(5) —
15
—
269
—
(17)
(23)
(70)
(10)
(10)
838
—
(5) —
38
40
—
7
196
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2.1.2 Credit risk – Credit profile of the loan portfolio continued
Movements in off-balance sheet exposures (audited)
The following tables set out the movements in the nominal amount and ECL allowance for loan commitments and financial guarantees by ECL
staging for the year to 31 December 2023 and 2022:
Nominal amount movements (audited)
2023
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
Loan commitments
Total
€ m
POCI
€ m
Stage 1
€ m
Stage 2
€ m
Financial guarantee contracts
Total
€ m
Stage 3
€ m
POCI
€ m
At 1 January
13,947 1,033
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net movement (1)
At 31 December
(631)
631
456
(456)
(17)
7
(8)
5
1,159
(69)
14,921 1,136
80
—
—
25
(12)
(22)
71
— 15,060
—
—
—
—
—
—
—
—
8 1,076
738
(40)
51
(1)
—
42
8 16,136
790
45
40
(51)
(1)
—
19
52
19
—
—
2
—
(7)
14
—
—
—
—
—
1
1
802
—
—
—
—
55
857
2022
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
Loan commitments
Total
€ m
POCI
€ m
Stage 1
€ m
Stage 2
€ m
Financial guarantee contracts
Total
POCI
Stage 3
€ m
€ m
€ m
At 1 January
Transferred from Stage 1 to Stage 2
12,824
(470)
768
470
Transferred from Stage 2 to Stage 1
297
(297)
Transferred to Stage 3
Transferred from Stage 3
Net movement (1)
At 31 December
(10)
14
1,292
(10)
4
98
13,947 1,033
(1) Includes new commitments, utilised and expired commitments.
135
— 13,727
—
—
20
(18)
(57)
80
—
—
—
—
—
—
—
—
— 1,333
743
(35)
31
—
1
(2)
50
35
(31)
(1)
—
(8)
45
26
—
—
1
(1)
(7)
19
—
—
—
—
—
—
—
819
—
—
—
—
(17)
802
— 15,060
738
The internal credit grade profile of loan commitments and financial guarantees is set out in the following table (audited):
Strong
Satisfactory
Criticised watch
Criticised recovery
Default
Total
Non-performing off-balance sheet commitments
Total non-performing off-balance sheet commitments amounted to € 93 million (2022: € 99 million).
2023
€ m
11,942
4,711
187
60
93
2022
€ m
10,844
4,528
257
134
99
16,993
15,862
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Risk Management continued
2.1.2 Credit risk – Credit profile of the loan portfolio continued
Movements in off-balance sheet exposures continued
ECL allowance movements (audited)
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
Stage 1 Stage 2 Stage 3
€ m
€ m
€ m
Loan commitments
Total
€ m
POCI
€ m
2023
Financial guarantee contracts
Total
€ m
POCI
€ m
Stage 1 Stage 2 Stage 3
€ m
€ m
€ m
19
(2)
35
23
5
—
—
—
3
(12) —
—
—
(2)
3
—
59
21
(9)
1
2
(3)
3
4
4
13
—
—
—
(5) —
—
19
1
(2)
(1) —
1
—
—
1
—
(1) —
—
1
—
(1) —
—
(9)
(17)
(2) —
(28)
—
1
(2) —
Net income statement (credit)/charge
(7)
(8) —
—
(15)
—
—
(2) —
Other movements
At 31 December
—
(1)
(1)
12
26
4
1
1
(1)
—
43
2
1
5
(2) —
9
—
(1)
(2)
(1)
16
Stage 1 Stage 2 Stage 3
€ m
€ m
€ m
Loan commitments
Total
€ m
POCI
€ m
Stage 1 Stage 2 Stage 3
€ m
€ m
€ m
2022
Financial guarantee contracts
Total
€ m
POCI
€ m
At 1 January
Transferred from Stage 1 to Stage 2
Transferred from Stage 2 to Stage 1
Transferred to Stage 3
Transferred from Stage 3
Net remeasurement
Net income statement charge/(credit)
Other movements
At 31 December
16
(2)
29
16
8
—
—
—
6
(15) —
—
—
(1)
2
—
—
—
(1) —
(1)
3
6
6
(3) —
(2) —
53
14
(9)
1
(1)
2
7
5
(4)
1
7
3
14
—
—
—
(3) —
—
26
(1)
(2)
(1) —
1
—
—
1
—
(1) —
—
—
(3)
(1) —
(3)
(3)
(1) —
(4)
(7)
—
—
(1) —
(1)
—
—
—
—
—
19
35
5
—
59
2
4
13
—
19
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AIB Group plc
2.1.3 Credit risk – Impairment and write-offs
Income statement
The table below analyses the key components of the income statement for loans and advances to customers at 31 December 2023 and 2022:
Amortised cost
Income Statement
Net stage transfers
Net remeasurement
New loans originated/top-ups
Redemptions/repayments
Impact of credit or economic
risk parameters
Impact of model and
overlay changes
Total net remeasurement of
ECL allowance
Recoveries of amounts
previously written-off
Net credit impairment
charge/(writeback)
Residential
mortgages
Other
personal
€ m
€ m
Property
and
construction
€ m
Non-
property
business
€ m
31
33
3
(5)
34
8
11
(3)
27
56
19
(30)
(18)
43
16
(86)
2023
Total
€ m
74
140
49
(124)
Residential
mortgages
Other
personal
Property
and
construction
€ m
Non-
property
business
€ m
€ m
40
—
11
(3)
24
(25)
23
(22)
(13)
9
29
(64)
€ m
(14)
10
3
(4)
2022
Total
€ m
37
(6)
66
(93)
(4)
(9)
10
(16)
(19)
5
(8)
(28)
—
(31)
(21)
37
(7)
30
(1)
40
(4)
36
185
267
(67)
(128)
96
216
(5)
(5)
(18)
22
78
50
22
(17)
77
50
(6)
261
(10)
(138)
(27)
189
(15)
(20)
(5)
17
(12)
38
(13)
(30)
(45)
5
There was a € 189 million net credit impairment charge in the year to 31
December 2023 which comprised a net remeasurement of ECL
allowance charge of € 216 million and recoveries of amounts previously
written-off of € 27 million (2022: € 5 million charge comprising a net
remeasurement charge of € 50 million and € 45 million of recoveries).
• The impact of model and overlay changes resulted in a net charge of
€ 96 million. This was driven by a € 102 million charge following the
deployment of the new IFRS 9 mortgage model and a € 6 million
writeback relating to post model adjustments. Further details on post
model adjustments are outlined on pages 140 and 141.
The key drivers of the net remeasurement of ECL allowance charge of
€ 216 million consist of the following components and activity:
• Net stage transfers resulted in a € 74 million charge which was
evident across all asset classes with the exception of non-property
business which experienced an € 18 million writeback reflecting
improved credit performance as cases exited forbearance and
transferred to Stage 1. Net remeasurements within stage resulted in a
€ 140 million charge driven by property and construction and non-
property business. Redemption and repayment activity offset by new
loans originated resulted in a € 75 million writeback. This was largely
due to strong repayments in the non-property business sector,
particularly within Stage 2 with a € 69 million writeback driven by
loans that fully repaid. Further details on the ECL allowance
movements are outlined on pages 152 to 158.
• Within the IFRS 9 models, € 19 million ECL writeback has been
observed due to macroeconomic factors. This writeback reflects an
increase in the base case scenario (45% to 50%) and a reduction in
the severe scenario (15% to 10%) as the macroeconomic scenarios
have been updated to reflect the economic backdrop which remains
challenging following a period of subdued growth due to elevated
inflation, higher interest rates and the lagged effect of monetary
tightening. Further details on the macroeconomic scenarios and
weightings are outlined on pages 134 to 138.
Recoveries of amounts previously written-off of € 27 million (2022: € 45
million) included € 13 million recoveries (2022: € 30 million) due to cash
recoveries received against legacy non-performing exposures. The
remaining € 14 million (2022: € 15 million) relates to interest recognised
as a result of loans curing from Stage 3.
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AIB Group plc
Risk Management continued
2.1.3 Credit risk – Impairment and write-offs continued
Loans written-off and recoveries of previously written-off loans
The following table analyses loans written-off and recoveries of previously written-off loans by geography and industry sector for the years ended 31
December 2023 and 2022:
Concentration by industry sector
Non-property business:(1)
Natural resources
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecommunications, media and technology
Financial, insurance and other government activities
Total non-property business
Property and construction
Residential mortgages
Other personal
Total
Concentration by location(2)
Republic of Ireland
United Kingdom
Rest of the World
Loans
written-off
2023
Recoveries
of amounts
previously
written-off
Loans
written-off
2022
Recoveries
of amounts
previously
written-off
€ m
€ m
€ m
€ m
16.4
—
2.2
14.2
7.6
0.6
2.6
0.5
0.3
3.0
47.4
19.9
16.7
41.4
—
2.3
0.5
0.4
0.3
0.9
1.1
0.5
—
4.1
10.1
6.0
7.4
3.6
125.4
27.1
85.5
39.6
0.3
125.4
23.2
3.2
0.7
27.1
—
5.6
—
—
2.4
—
0.6
0.9
10.3
3.1
22.9
19.2
19.7
32.1
93.9
73.5
20.4
—
93.9
—
—
1.1
0.3
0.7
1.5
5.4
0.4
0.2
3.4
13.0
12.2
14.6
5.0
44.8
39.7
4.1
1.0
44.8
(1) In 2023, the Group undertook a review of the sector codes included under the non-property business asset class. These changes in presentation provide more relevant information on the Group’s
non-property business exposures and aligns to how these sub-sectors are managed and reported internally. The 2022 comparative period has also been restated.
(2) By country of risk.
The contractual amount outstanding of loans written-off during the year that are subject to enforcement activity amounted to € 9 million
(2022: € 8 million) which includes both full and partial write-offs. Total cumulative non-contracted loans written-off at 31 December 2023 has reduced
to € 188 million (2022: € 261 million).
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2.1.4 Credit risk – Asset class analysis
Asset class summary – key points:
• The residential mortgage portfolio has increased by € 4.5 billion in the year to € 34.8 billion driven by the acquisition of the Ulster Bank
tracker (and linked) mortgage portfolio and stable new lending. The Stage 1 composition of the portfolio has reduced slightly in the year as
a result of an increase in Stage 2 stock with total ECL stock at € 0.3 billion (2022: € 0.3 billion) resulting in ECL cover of 0.9% (2022:
0.9%). There was a € 30 million net credit impairment charge in the year (2022: € 20 million writeback).
• The other personal portfolio increased by € 0.2 billion in the year to € 2.9 billion. New lending totalled € 1.2 billion for the year however
this was largely offset by redemptions/repayments. The staging composition has improved in the year and total ECL cover has reduced to
3.3% (2022: 6.5%). There was a net credit impairment charge of € 36 million for the year (2022: € 17 million charge).
• The property and construction portfolio has increased by € 0.4 billion in the year to € 9.2 billion, due to new lending and the Ulster Bank
corporate and commercial portfolio acquisition. The staging composition of the portfolio has deteriorated significantly in the year as Stage
2 loans increased by € 1.4 billion primarily due to individually assessed loans triggering a qualitative significant increase in credit risk. Total
ECL cover has also increased to 5.9% (2022: 3.7%), driven by the Stage 2 post model adjustment taken to address latent risk in the
portfolio. There was a € 261 million net credit impairment charge in the year (2022: € 38 million charge).
• The non-property business portfolio has increased by € 0.7 billion in the year to € 20.1 billion, due to new lending and the Ulster Bank
corporate and commercial portfolio acquisition. The staging composition of the portfolio has improved in the year as Stage 1 loans have
increased by € 1.9 billion, Stage 2 and Stage 3 loans have reduced by € 0.9 and € 0.3 billion respectively. The reduction in Stage 2 loans
was driven by strong repayments and and improved credit performance as cases exited forbearance. As a result of the stronger staging
composition, total ECL cover has reduced to 2.9% (2022: 4.3%). There was a € 138 million net credit impairment writeback in the year
(2022: € 30 million writeback).
Loans and advances to customers – Residential mortgages
Residential mortgages amounted to € 34.8 billion at 31 December 2023,
with the majority (97%) relating to residential mortgages in the Republic
of Ireland and the remainder relating to Northern Ireland. This compares
to € 30.3 billion at 31 December 2022, of which 97% related to
residential mortgages in the Republic of Ireland. The split of the
residential mortgage portfolio was owner-occupier € 33.3 billion and
buy-to-let € 1.5 billion (2022: owner-occupier € 28.9 billion and buy-to-let
€ 1.4 billion).
The portfolio increased by € 4.5 billion in the year as new lending of
€ 4.1 billion (2022: € 4.6 billion), in addition to a further € 3.8 billion
increase due to the Ulster Bank tracker (and linked) mortgage portfolio
acquisition, was partially offset by redemptions/repayments.
Stage 2 loans have increased by € 1.2 billion to € 2.4 billion at
31 December 2023 (2022: € 1.2 billion). The increase in Stage 2 loans
was driven by the implementation of the new mortgage model and a
post model adjustment to migrate a cohort of the acquired Ulster Bank
portfolio reflecting managements view that the risk of default may not be
fully captured in the PD models given the portfolio’s credit performance
observed post acquisition.
Income statement
There was a € 30 million net credit impairment charge in the year to
31 December 2023 compared to a € 20 million writeback in 2022. This
comprises a net remeasurement of ECL allowance charge of € 37
million and recoveries of previously written-off loans of € 7 million.
The key drivers of the net remeasurement of ECL allowance charge of
€ 37 million consist of the following components and activity:
• Slight deterioration in credit quality with net stage transfers resulting in
a € 31 million charge and a further € 33 million charge was due to net
remeasurements within stage.
• There was a € 21 million writeback primarily reflecting a reduction in
the NPE resolution post model adjustment (€ 138 million), however
this was largely offset by a € 102 million charge following the
deployment of the new IFRS 9 mortgage model. Further details on
post model adjustments are outlined on pages 140 and 141.
• The impact of the updated macroeconomic scenarios and weightings
resulted in a € 4 million writeback.
The ECL allowance for the portfolio totalled € 0.3 billion providing ECL
allowance cover of 0.9%. For the Stage 3 portfolio, the ECL allowance
cover is 30% (2022: € 0.3 billion, 0.9% and 31% respectively).
Residential mortgages – page 162 and 163
• Residential mortgage portfolio at amortised cost by segment, internal
credit ratings and ECL staging.
• Estimated fair value of collateral held for the Group’s residential
mortgage portfolio.
Republic of Ireland residential mortgages – pages 164 and 165
• Republic of Ireland residential mortgages portfolio at amortised cost
by ECL staging.
• A profile of the Republic of Ireland residential mortgage portfolio by
the indexed loan-to-value ratios.
Residual debt, which is now unsecured following the disposal of
property on which the residential mortgage was secured, is included in
the residential mortgage portfolio and as such, is included in the tables
within this section.
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AIB Group plc
Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Residential mortgages continued
The following table analyses the residential mortgage portfolio at amortised cost by segment, internal credit ratings and ECL staging at 31
December 2023 and 2022:
Group
2022
Total
€ m
€ m
— 28,883
— 1,396
— 30,279
— 23,313
— 5,089
— 28,402
—
—
911
309
— 1,220
—
657
— 30,279
— 28,396
— 1,158
—
—
638
87
(Audited)
Gross carrying amount
Owner occupier
Buy-to-let
Total
Analysed by internal credit ratings
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Retail
Banking
Capital
Markets
AIB UK
Group
2023
Total
Retail
Banking
Capital
Markets
€ m
32,068
1,315
33,383
25,812
5,758
31,570
891
247
1,138
675
€ m
405
71
476
324
140
464
10
—
10
2
€ m
854
51
905
758
68
826
33
4
37
42
€ m
€ m
€ m
— 33,327
27,526
—
1,437
1,238
— 34,764
28,764
— 26,894
22,151
—
5,966
4,832
— 32,860
26,983
—
—
—
—
934
251
865
303
1,185
1,168
719
613
€ m
429
99
528
343
168
511
9
2
11
6
AIB
UK
€ m
928
59
987
819
89
908
37
4
41
38
Gross carrying amount
33,383
476
905
— 34,764
28,764
528
987
Analysed by ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
30,318
2,324
644
97
436
840
— 31,594
26,976
496
924
38
2
—
23
42
—
—
—
—
2,385
1,107
688
97
594
87
26
6
—
25
38
—
33,383
476
905
— 34,764
28,764
528
987
— 30,279
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
Income statement
Net remeasurement of ECL allowance
Recoveries of amounts previously written-off
Net credit impairment charge/(writeback)
19
76
202
6
303
%
0.1
3.3
31.4
6.8
€ m
36
(7)
29
—
1
—
—
1
%
—
2.4
—
—
—
—
5
—
5
%
—
—
9.7
—
—
—
—
—
—
%
—
—
—
—
19
77
207
6
309
%
0.1
3.2
30.0
6.8
40
37
191
9
277
%
0.1
3.3
32.3
10.6
—
—
1
—
1
%
—
—
12.8
—
—
1
4
—
5
%
—
0.9
10.1
—
—
—
—
—
—
%
—
—
—
—
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
1
—
1
—
—
—
—
—
—
37
(4) —
(7)
(14) —
30
(18) —
(1) —
(1) —
(2) —
40
38
196
9
283
%
0.1
3.2
30.8
10.6
€ m
(5)
(15)
(20)
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2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers - residential mortgages
The following table shows the estimated fair value of collateral held for the Group’s residential mortgage portfolio at 31 December 2023 and 2022.
The value at 31 December 2023 and 2022 is estimated based on property values at origination or date of latest valuation and applying the CSO
Residential Property Price Index (Republic of Ireland) and Nationwide House Price Index (Great Britain & Northern Ireland) to these values to take
account of price movements in the interim.
Fully collateralised(1)
Loan-to-value ratio:
Less than 50%
50% – 70%
71% – 80%
81% – 90%
91% – 100%
Partially collateralised
Collateral value relating to loans over
100% loan-to-value
Stage 1 Stage 2
€ m
€ m
Stage 3
€ m
2023
At amortised cost
Total
€ m
POCI
€ m
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
2022
At amortised cost
Total
POCI
€ m
€ m
16,866 1,275
9,290
884
2,500
149
2,242
615
54
9
434
181
35
12
8
55 18,630
15,109
691
26 10,381
9,340
375
5 2,689
2,288
1 2,309
1,452
1
633
123
56
15
6
375
176
40
12
11
45 16,220
31 9,922
5 2,389
1 1,480
—
140
31,513 2,371
670
88 34,642
28,312 1,143
614
82 30,151
50
8
7
—
65
43
9
12
—
64
Total collateral value
31,563 2,379
677
88 34,707
28,355 1,152
626
82 30,215
Gross residential mortgages
31,594 2,385
688
97 34,764
28,396 1,158
638
87 30,279
ECL allowance
(19)
(77)
(207)
(6)
(309)
(40)
(38)
(196)
(9)
(283)
Net residential mortgages
31,575 2,308
481
91 34,455
28,356 1,120
442
78 29,996
(1) The value of collateral held for residential mortgages which are fully collateralised has been capped at the carrying value of the loans outstanding at each year end.
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Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Republic of Ireland residential mortgages
The following table analyses the Republic of Ireland residential mortgage portfolio at amortised cost by ECL staging at 31 December 2023 and 2022:
(Audited)
Gross carrying amount
Analysed as to ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
Owner-
occupier
Buy-to-let
2023
Total
€ m
€ m
€ m
Owner-
occupier
€ m
Buy-to-let
2022
Total
€ m
€ m
32,473
1,386
33,859
27,955
1,337
29,292
29,628
2,171
582
92
1,126
30,754
26,321
1,151
27,472
191
64
5
2,362
1,024
109
1,133
646
97
526
84
74
3
600
87
32,473
1,386
33,859
27,955
1,337
29,292
18
70
179
5
272
1
7
23
1
32
19
77
39
35
202
172
6
8
304
254
1
2
20
1
24
40
37
192
9
278
Republic of Ireland residential mortgages at amortised cost
32,201
1,354
33,555
27,701
1,313
29,014
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
Income statement
Net remeasurement of ECL allowance
Recoveries of amounts previously written-off
Net credit impairment charge/(writeback)
Republic of Ireland residential mortgages
Residential mortgages in Ireland amounted to € 33.9 billion at
31 December 2023 compared to € 29.3 billion at 31 December 2022.
The portfolio has increased by € 4.6 billion in the year primarily due to
the Ulster Bank tracker (and linked) mortgage portfolio acquisition
totalling € 3.8 billion. Total drawdowns during the year were € 4.0 billion
(2022: € 4.5 billion), of which 99% were to owner-occupiers.
The weighted average indexed loan-to-value of the stock of residential
mortgages at 31 December 2023 was 49% (2022: 48%), new residential
mortgages issued during the year was 71% (2022: 64%) and Stage 3
was 45% (2022: 46%). The increase in the weighted average of new
mortgages issued during the year was driven by a significant reduction
in the switcher market and aligning our mortgage offering to reflect
changes made to the Central Bank of Ireland’s macro prudential
mortgage measures. These changes resulted in second and subsequent
buyers being able to avail of a loan-to-value of up to 90%, which was
previously up to 80%, and first time buyers loan-to-income limit being
increased from 3.5 to 4 times gross income.
The split of the Irish residential mortgage portfolio is 96% owner-
occupier and 4% buy-to-let and comprises € 19.6 billion (58%) fixed
rate, € 7.3 billion (21%) variable rate and € 7.0 billion (21%) tracker rate
mortgages (2022: € 17.6 billion (60%) fixed rate, € 6.8 billion (23%)
variable rate and € 4.9 billion (17%) tracker rate mortgages).
Stage 3 loans remained at € 0.6 billion at 31 December 2023.
0.1
3.2
30.9
5.8
28
(4)
24
0.1
4.0
35.8
23.8
9
(3)
6
0.1
3.3
31.4
6.8
0.1
3.5
32.7
9.9
0.1
1.7
27.9
38.4
37
(7)
30
26
(10)
16
(30)
(4)
(34)
0.1
3.3
32.1
10.6
(4)
(14)
(18)
Residential mortgage arrears
Total concentration of loans in arrears (including non-performing loans)
by value increased by 1.6% during the year (2022: 1.3%), with 1.5% of
the owner-occupier portfolio and 4.0% of the buy-to-let portfolio in
arrears (2022: 1.2% and 3.0% respectively). The increase was driven by
a combination of inflationary pressure and higher interest rates. The
number of loans in arrears (based on number of accounts) greater than
90 days were 1.3% at 31 December 2023 and remains below the
industry average of 4.8%(1). For the owner-occupier portfolio, the
number of loans in arrears greater than 90 days at 1.2% were below the
industry average of 4.1%(1). For the buy-to-let portfolio, loans in arrears
greater than 90 days at 2.2% were below the industry average of
11.7%(1).
(1) Source: Central Bank of Ireland (“CBI”) Residential Mortgage Arrears and Repossessions
Statistics published 16 December 2023 based on number of accounts as at 30 September
2023.
Forbearance
Irish residential mortgages subject to forbearance measures remained
stable for 31 December 2023 at € 0.7 billion (2022: € 0.7 billion). Details
of forbearance measures are set out on pages 175 and 176.
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AIB Group plc
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Republic of Ireland residential mortgages continued
Indexed loan-to-value ratios of Republic of Ireland residential mortgages
The following table profiles the Republic of Ireland residential mortgage portfolio by the indexed loan-to-value ratios at 31 December 2023 and 2022:
(Audited)
Less than 80%
81-100%
100-120%
Greater than 120%
Total with LTVs
Unsecured
Total
Of which:
Owner occupier
Less than 80%
81-100%
100-120%
Greater than 120%
Total with LTVs
Unsecured
Total
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
2023
At amortised cost
Overall
total
€ m
POCI
€ m
Stage 1
€ m
Stage 2
€ m
Stage 3
€ m
2022
At amortised cost
Overall
total
€ m
POCI
€ m
27,889 2,288
619
86 30,882
25,889 1,100
565
81 27,635
2,796
61
19
2 2,878
1,527
20
21
1 1,569
24
43
3
8
3
2
—
—
30
53
22
31
6
6
6
4
—
—
34
41
30,752 2,360
643
88 33,843
27,469 1,132
596
82 29,279
2
2
3
9
16
3
1
4
5
13
30,754 2,362
646
97 33,859
27,472 1,133
600
87 29,292
26,783 2,102
566
85 29,536
24,760
995
504
80 26,339
2,782
59
11
2 2,854
1,514
18
13
1 1,546
22
40
3
6
3
1
—
—
28
47
20
25
5
5
6
2
—
—
31
32
29,627 2,170
581
87 32,465
26,319 1,023
525
81 27,948
1
1
1
5
8
2
1
1
3
7
29,628 2,171
582
92 32,473
26,321 1,024
526
84 27,955
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Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Other personal
The following table analyses other personal lending at amortised cost by segment, internal credit ratings and ECL staging at 31 December 2023 and
2022:
(Audited)
Gross carrying amount
Credit cards
Loans/overdrafts
Total
Analysed by internal credit ratings
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Gross carrying amount
Analysed by ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
Retail
Banking
Capital
Markets
AIB UK
Group
2023
Total
Retail
Banking
Capital
Markets
AIB UK
Group
2022
Total
€ m
9
36
45
14
29
43
1
—
1
1
45
€ m
700
2,125
2,825
1,326
1,153
2,479
253
14
267
79
2,825
2,511
235
79
—
€ m
23
47
70
€ m
€ m
—
732
€ m
644
—
2,208
1,956
—
2,940
2,600
61
6
67
2
—
2
1
70
— 1,401 1,232
— 1,188 1,015
— 2,589 2,247
256
163
270
81
177
176
— 2,940 2,600
—
—
—
—
14
14
—
€ m
8
41
49
17
29
46
1
1
2
49
42
5
2
€ m
23
51
74
€ m
€ m
—
675
—
2,048
—
2,723
62
—
1,311
7
—
1,051
69
—
2,362
2
1
3
2
—
166
—
15
—
181
—
180
74
—
2,723
61
11
—
2,274
—
270
2
—
179
41
4
—
61
—
2,613
2,171
8
1
—
247
—
80
254
175
—
—
—
—
—
—
—
—
—
2,825
45
70
—
2,940
2,600
49
74
—
2,723
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
20
31
44
—
95
%
0.8
13.3
55.2
—
—
1
—
—
1
%
—
25.0
—
—
1
—
—
—
1
%
0.2
—
—
—
—
—
—
—
—
%
—
—
—
—
21
32
44
24
37
114
—
—
—
—
—
—
24
37
1
1
—
116
— —
—
—
—
—
97
175
%
0.8
12.9
55.2
—
%
1.1
14.4
65.2
—
1
%
—
—
24.9
—
1
—
177
%
—
—
52.5
—
%
—
—
—
—
%
1.1
13.6
64.6
—
Income statement
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
Net remeasurement of ECL allowance
Recoveries of amounts previously written-off
Net credit impairment charge
40
(4)
36
—
—
—
—
—
—
—
—
—
40
22
—
—
—
(4)
(5) —
—
—
36
17
—
—
—
22
(5)
17
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2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Other personal continued
At 31 December 2023, the other personal lending portfolio of € 2.9
billion comprises € 2.2 billion in loans and overdrafts and € 0.7 billion in
credit card facilities (2022: € 2.7 billion, € 2.0 billion and € 0.7 billion
respectively). Credit quality of the portfolio improved slightly throughout
the year, with 12% categorised as less than satisfactory, of which
defaulted loans amounted to € 0.1 billion (2022: 13% and € 0.2 billion).
New lending totalled € 1.2 billion for the year to 31 December 2023
(2022: € 1.0 billion), however this was largely offset by redemptions/
repayments.
Total Stage 3 loans, predominantly in Retail Banking decreased by € 99
million following the sale of non-performing loan portfolios completed
during the year.
Income statement
There was a net credit impairment charge of € 36 million to the income
statement in the year to 31 December 2023 compared to a € 17 million
net credit impairment charge in 2022. This comprises a net
remeasurement of ECL allowance charge of € 40 million and recoveries
of previously written-off loans of € 4 million.
The key drivers of the net remeasurement of ECL allowance charge of
€ 40 million consist of the following components and activity:
• There was a € 42 million charge driven predominantly by € 34 million
downward net stage transfers together with € 8 million due to net
remeasurements within stage.
• The impact of the updated macroeconomic scenarios and weightings
resulted in a € 9 million writeback.
The ECL allowance for the portfolio totalled € 0.1 billion providing ECL
allowance cover of 3%. For the Stage 3 portfolio, the ECL allowance
cover is 55% with the reduction in the year driven by NPE portfolio sales
(2022: € 0.2 billion, 7% and 65% respectively).
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Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Property and construction
The following table analyses property and construction lending at amortised cost by segment, internal credit ratings and ECL staging at 31
December 2023 and 2022.(1)
Retail
Banking
Capital
Markets
AIB UK
Group
2023
Total
Retail
Banking
Capital
Markets
AIB UK
Group
2022
Total
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
(Audited)
Gross carrying amount
Investment:
Residential investment
Student Housing
Housing associations
Commercial investment - Office
Commercial investment - Retail
Commercial investment - Mixed
Commercial investment - Industrial
Total investment
Land and development:
Residential development
Commercial development
Total land and development
Contractors
Total
Analysed by internal credit ratings
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Gross carrying amount
Analysed by ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
Income statement
Net remeasurement of ECL allowance
Recoveries of amounts previously written-off
Net credit impairment charge/(writeback)
51
—
—
29
47
66
27
220
28
5
33
203
456
141
200
341
33
24
57
58
456
327
71
55
3
456
2
5
19
(1)
25
%
0.5
7.5
34.5
(43.7)
1,682
258
145
1,569
891
852
310
5,707
668
95
763
83
6,553
4,904
850
5,754
244
21
265
534
6,553
3,604
2,415
534
—
6,553
40
241
159
—
440
%
1.1
10.0
29.8
—
244
571
431
398
58
132
155
1,989
154
42
196
43
2,228
1,430
681
2,111
19
30
49
68
2,228
1,892
268
68
—
2,228
41
18
17
—
76
%
2.2
6.7
24.2
—
— 1,977
—
—
— 1,996
—
996
— 1,050
492
—
— 7,916
46
829 —
576 —
30
62
66
26
230
1,471
304
133
1,352
855
878
290
5,283
223
456
416
357
88
122
86
1,748
—
—
—
—
—
—
—
—
1,740
760
549
1,739
1,005
1,066
402
7,261
850
—
142
—
992
—
—
329
— 9,237
— 6,475
— 1,731
— 8,206
296
—
75
—
371
—
—
660
— 9,237
28
4
32
190
452
117
180
297
33
30
63
92
452
586
173
759
124
6,166
152
30
182
69
1,999
—
—
—
—
—
766
207
973
383
8,617
4,866
816
5,682
57
196
253
231
6,166
1,142
719
1,861
22
33
55
83
1,999
—
—
—
—
—
—
—
—
6,125
1,715
7,840
112
259
371
406
8,617
— 5,823
— 2,754
—
657
—
— 9,237
284
76
92
3 —
452
4,828
1,107
231
—
6,166
1,708
208
83
—
1,999
—
—
—
—
—
6,820
1,391
406
—
8,617
83
264
195
(1)
541
1
6
30
—
37
65
103
60
—
228
18
8
29
—
55
—
—
—
—
—
84
117
119
—
320
—
—
—
—
—
%
—
—
—
—
%
1.4
9.6
29.7
(43.7)
%
0.4
7.5
32.7
—
%
1.3
9.3
26.1
—
€ m
77
%
1.0
4.1
35.2
—
€ m
26
(2) —
26
75
%
—
—
—
—
€ m
—
—
—
%
1.2
8.5
29.4
—
€ m
50
(12)
38
€ m
4
€ m
220
€ m
43
€ m
—
€ m
267
(4)
—
219
(1)
(1) —
—
42
(6)
261
€ m
(53)
(10)
(63)
(1) In 2023, the Group has disclosed the sector breakdown of the Group’s commercial investment portfolio and exposures to housing associations are now presented within the Group’s investment
portfolio. In addition, the Group has presented certain construction activities (which were previously included within commercial development) as part of contractors. These changes in
presentation provide more relevant information on the Group’s property exposures. The 2022 comparative period has been restated with €104m (which was previously included within commercial
development) now presented under contractors. Refer to note 1(c) for further information about the change in presentation of certain notes in the financial statements.
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AIB Group plc
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Property and construction
continued
The property and construction portfolio consists of € 9.2 billion in loans
and advances to customers measured at amortised cost (2022: € 8.6
billion measured at amortised cost and € 0.2 billion measured at FVTPL
totalling € 8.8 billion).
The portfolio measured at amortised cost amounted to 14% of loans and
advances to customers and comprised 85% investment loans (€ 7.9
billion), 11% land and development loans (€ 1.0 billion) and 4% relating
to contractor loans (€ 0.3 billion). The Capital Markets and AIB UK
segments continue to account for the majority of this portfolio at 71%
and 24% respectively.
The portfolio measured at amortised cost increased by € 0.6 billion in
the year as new lending of € 2.0 billion (2022: € 2.7 billion), in addition to
a further € 0.2 billion increase due to the Ulster Bank corporate and
commercial portfolio acquisition, was partially offset by redemptions/
repayments.
At 31 December 2023, € 8.2 billion of the portfolio was in a strong/
satisfactory grade, which is an increase of € 0.4 billion in the year. The
level of non-performing loans increased in the year to € 0.7 billion (2022:
€ 0.4 billion) due to the impact of higher interest rates.
Stage 2 loans have increased by € 1.4 billion to € 2.8 billion at 31
December 2023 (2022: € 1.4 billion). The increase in Stage 2 loans was
driven by net stage transfers between Stage 1 to Stage 2 of € 2.2 billion
primarily due to increased interest rates and reduced asset values
impacting interest cover and refinance terms. These net transfers to
Stage 2 were slightly offset by redemptions/repayments of € 0.6 billion.
Income statement
There was a net credit impairment charge of € 261 million to the income
statement in the year to 31 December 2023 compared to a € 38 million
charge in 2022. This comprises a net remeasurement of ECL allowance
charge of € 267 million and recoveries of previously written-off loans of
€ 6 million.
The key drivers of the net remeasurement of ECL allowance charge of
€ 267 million consist of the following components and activity:
• A deteriorating staging composition led to an € 83 million charge
driven predominantly by a net remeasurement within stage charge of
€ 56 million which was primarily impacted by Stage 2 (€ 34 million),
together with a further € 27 million charge due to downward net stage
transfers. New loans originated and the impact of the updated
macroeconomic scenarios and weightings resulted in a € 19 million
and € 10 million charge respectively, however these charges were
offset by redemption and repayment activity writeback of € 30 million.
•
In order to capture potential adverse sector impacts, additional ECL
has been taken to address the increased risks through the use of an
€ 185 million post model adjustment charge. The main increases in
the year reflect a € 77 million charge relating to Stage 3 cases to
address latent risk in the portfolio and potential reduction in asset
values. A € 70 million charge relates to the negative outlook for the
ROI commercial real estate portfolio as a result of the higher interest
rate environment, refinance risk and changing market dynamics. A
further € 37 million charge in AIB UK also reflects the negative outlook
for the UK commercial real estate portfolio and a strategic decision
taken to consider an alternative exit strategy in respect of a cohort of
non-core legacy loans. Further details on post model adjustments are
outlined on pages 140 and 141.
The ECL allowance for the portfolio totalled € 0.5 billion providing ECL
allowance cover of 6%. For the Stage 3 portfolio, the ECL allowance
cover is 30% (2022: € 0.3 billion, 4% and 29% respectively).
Investment
Investment property loans amounted to € 7.9 billion at 31 December
2023 (2022: € 7.3 billion), of which, € 4.5 billion related to commercial
investment. The geographic profile of the investment property portfolio is
predominantly in the Republic of Ireland (€ 5.3 billion) and the United
Kingdom (€ 2.0 billion).
The following are the key themes within the investment property sub-
sectors in relation to the total property and construction portfolio:
• The residential investment sub-sector represents 21% of the portfolio
at € 2.0 billion. The Irish housing market is currently characterised by
a notable weakness in housing supply when compared with the
underlying level of demand. Consequently, house price inflation has
remained high throughout 2023 despite the higher interest rate
environment.
• The student housing residential investment sub-sector represents 9%
of the portfolio at € 0.8 billion. Notwithstanding the current inflationary
market resulting in increased rental rates, this sub-sector continues to
experience strong levels of occupancy and growth due to under-
supply.
• The social housing residential investment sub-sector represents 6%
of the portfolio at € 0.6 billion. Similar to other residential sub-sectors,
social housing has remained resilient in both Ireland and the UK
throughout 2023.
• The office commercial investment sub-sector represents 22% of the
portfolio at € 2.0 billion. This sub-sector is challenged by increasing
interest rates and economic uncertainties. Additionally, ESG
requirements and hybrid working practices are key factors which will
likely increase demarcation pressures in office pricing and headline
rent between prime and non-prime locations. That said, occupancy
and rents have remained robust across the entire office book,
characterised by corporate and institutional ownership.
• The retail commercial investment sub-sector represents 11% of the
portfolio at € 1.0 billion. Given the perceived higher risk profile, the
retail sub-sector has been slower to recover post-COVID than other
sub-sectors. However, there are early signs of stabilisation and
recovery evident. Despite the current inflationary impact, strong
occupier interest has been maintained and investor interest is building
momentum.
• The mixed commercial investment sub-sector represents 11% of the
portfolio at € 1.0 billion. The sub-sector consists of mixed investment
properties including retail, office and residential with the outlook
impacted by the current interest rate environment and economic
uncertainty.
• The industrial commercial investment sub-sector represents 5% of the
portfolio at € 0.5 billion. Rents continue to grow at a steady pace as a
result of sustained demand but constrained supply. Of the new stock
under construction and expected to be delivered in the final quarter of
2023 and during 2024, just under 40% is already pre-let or pre-sold.
At 31 December 2023, there was a net credit impairment charge of
€ 203 million to the income statement on the investment property
element of the property and construction portfolio (2022: € 57 million
charge).
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AIB Group plc
Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Property and construction
continued
Land and development
Land and development loans amounted to € 1.0 billion at 31 December
2023 (2022: € 1.0 billion) of which € 0.8 billion related to loans in the
Capital Markets segment and € 0.2 billion in the AIB UK segment.
The following are the key themes within the land and development
property sub-sectors in relation to the total property and construction
portfolio:
• The residential development sub-sector represents 9% of the property
and construction portfolio at € 0.9 billion. Structural demand and
supply imbalances continue to be enduring features of the residential
market with increased policy intervention aimed at underpinning
supply and supporting the viability of demand. Sales performance
across residential developments remains strong and leasing activity
and rent collections are robust. However, the number of new
commencements slowed throughout 2023 in line with the impact of
increasing interest rates and cost inflation.
• The commercial development sub-sector represents 2% of the
portfolio at € 0.1 billion.
The income statement net credit impairment charge for the year was
€ 53 million (2022: € 18 million writeback).
Contractors
The contractors sub-sector represents 4% of the portfolio at € 0.3 billion
(2022: € 0.4 billion). The demand for this sub-sector is underpinned by
public works and residential projects. This sub-sector continues to face
challenges in the current market such as a shortage in skilled labourers,
supply chain disruptions and input cost inflation (wages and interest
rates).
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AIB Group plc
2.1.4 Credit risk – Credit profile of the loan portfolio – Asset class analysis continued
Loans and advances to customers – Non-property business
The following table analyses non-property business lending at amortised cost by segment, internal credit ratings and ECL staging at 31 December
2023 and 2022:
(Audited)
Gross carrying amount (1)
Natural resources
Of which renewables
Leisure
Manufacturing
Health, education and social work
Services
Agriculture, forestry and fishing
Retail and wholesale trade
Transport and storage
Telecomms, media and technology
Financial, insurance and other
government activities
Total
Of which Syndicated & International
Finance (SIF)
Analysed by internal credit ratings
Strong
Satisfactory
Total strong/satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Gross carrying amount
Analysed by ECL staging
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance – statement of financial position
Stage 1
Stage 2
Stage 3
POCI
Total
13
32
83
(7)
121
ECL allowance cover percentage
Stage 1
Stage 2
Stage 3
POCI
%
0.5
8.0
42.4
(36.9)
%
0.5
13.7
53.6
(56.6)
Income statement
Net remeasurement of ECL allowance
Recoveries of amounts previously written-off
Net credit impairment (writeback)/charge
€ m
2
(7)
(5)
€ m
(120)
(1)
(121)
Retail
Banking
Capital
Markets
AIB UK
Group
Total
Retail
Banking
Capital
Markets
AIB
UK
Group
Total
2023
2022
€ m
€ m
20
2,049
— 1,695
1,876
2,256
340
141
112
504
1,338
398
192
35
1,344
1,272
382
1,257
1,017
1,203
€ m
1,541
1,212
450
122
576
288
60
92
501
156
€ m
€ m
€ m
— 3,610
21
— 2,907 —
407
— 2,666
163
— 2,519
112
— 2,032
— 2,064
459
— 1,780 1,191
419
— 1,747
189
— 1,710
36
— 1,394
€ m
1,518
1,212
1,825
2,498
1,228
1,081
397
1,172
1,037
1,061
€ m
1,422
978
678
188
672
292
67
160
435
133
€ m
—
—
—
—
—
—
—
—
—
—
€ m
2,961
2,190
2,910
2,849
2,012
1,832
1,655
1,751
1,661
1,230
27
3,107
357
13,013
— 2,618
94
3,880
—
506
29
28
28
20,028 3,026
— 2,618 —
360
12,177
3,003
98
4,145
—
15
15
—
502
19,363
3,003
809
1,853
2,662
153
75
228
217
3,107
2,490
402
196
19
3,107
8,601
3,435
12,036
637
227
864
113
13,013
11,454
1,445
111
3
13,013
62
198
60
(1)
319
2,907
525
3,432
121
136
257
191
3,880
3,250
439
191
—
3,880
56
32
45
—
133
%
1.7
7.2
23.7
—
€ m
(10)
(2)
(12)
12,326
9
19
28
911
—
—
438
— 1,349
—
521
28
794
5,832 1,627
18,158 2,421
180
84
264
341
20,028 3,026
7,587
3,010
10,597
429
980
1,409
171
12,177
2,740
633
3,373
142
367
509
263
4,145
—
15
15
—
—
—
—
15
11,121
5,285
16,406
751
1,431
2,182
775
19,363
28
— 2,286
—
498
—
28
17,222 2,374
312
340
22 —
20,028 3,026
9,951
2,055
171
—
12,177
3,032
850
263
—
4,145
15
—
—
—
15
15,372
3,217
774
—
19,363
—
—
—
—
—
%
—
—
—
—
€ m
—
—
—
131
262
188
(8)
573
23
32
133
—
188
67
337
71
—
475
25
85
65
—
175
—
—
—
—
—
115
454
269
—
838
%
0.8
11.4
37.8
(39.0)
€ m
(128)
(10)
(138)
%
1.0
10.3
39.1
—
%
0.7
16.4
41.5
—
%
0.8
10.0
24.7
—
%
—
—
—
—
€ m
€ m
€ m
€ m
(66)
(9)
(75)
19
(1)
18
30
—
(3) —
27
—
%
0.7
14.1
34.8
—
€ m
(17)
(13)
(30)
(1) In 2023, the Group undertook a review of the sector codes included under the non-property business asset class. These changes in presentation provide more relevant information on the Group’s
non-property business exposures and aligns to how these sub-sectors are managed and reported internally. The 2022 comparative period has also been restated. Refer to note 1(c) for further
information about the change in presentation of certain notes to the financial statements.
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AIB Group plc
Risk Management continued
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Non-property business
continued
The non-property business portfolio includes small and medium
enterprises (“SMEs”) which are reliant on the domestic economies in
which they operate. In addition to SMEs, the portfolio also includes
exposures to larger corporate and institutional borrowers which are
impacted by global economic conditions. The largest geographic
concentration of the portfolio exposure is to Irish borrowers (54%) with
the UK (25%) and USA (10%) being the other main geographic
concentrations.
The non-property business portfolio consists of € 20.1 billion in loans
and advances to customers measured at amortised cost and € 42
million of loans measured at FVTPL.
The portfolio measured at amortised cost increased by € 0.7 billion to
€ 20.1 billion in the year at 31 December 2023 (2022: € 19.4 billion).
New lending accounted for € 5.0 billion (2022: € 4.3 billion) with a further
€ 0.7 billion increase due to the Ulster Bank corporate and commercial
portfolio acquisition which is spread across the majority of sub-sectors.
These increases in the portfolio were partially offset by redemptions/
repayments. The non-property business portfolio amounted to 30% of
total Group loans and advances to customers in the year (2022: 32%).
The asset quality of the portfolio has remained generally resilient in the
face of inflationary pressures. Loans graded as strong/satisfactory
improved in the year to 31 December 2023 at 91% (2022: 85%). The
value of loans graded less than satisfactory (including defaulted loans)
decreased from € 3.0 billion at 31 December 2022 to € 1.9 billion at 31
December 2023. The performing forborne portfolio, seen in the criticised
recovery category, decreased by € 1.0 billion to € 0.4 billion in the year
(2022: €1.4 billion), as borrowers successfully demonstrated repayment
capacity over 24 months.
The following are the key themes within the main sub-sectors of the
non-property business portfolio:
• The natural resources sub-sector comprises 18% of the portfolio at
€ 3.6 billion. This sub-sector continues to be a strong focus of growth
for the Group which reflects the increase of € 0.6 billion in the year.
This was driven by new lending of € 0.8 billion to this sub-sector
which primarily relates to renewable energy initiatives (wind and
solar). This sub-sector contributes to the achievement of the Group’s
sustainability ambitions, which are funded by the Group’s Green Bond
issuance. The outlook is one of continued growth with strong demand,
as economies transition away from fossil fuels to meet climate goals
and to increase energy security after a period of heightened
geopolitical energy concerns;
• The leisure sub-sector comprises 13% of the portfolio at € 2.7 billion.
In the final quarter of 2023, the hotels sector performed strongly on
a ‘Revenue per Available Room’ basis boosted by a strong recovery
in international leisure travel and sustained domestic demand. The
outlook remains challenging owing to ongoing operational cost
inflation (energy, staffing, food and beverage), potential recessionary
impact on disposable income and staff availability. This sub-sector
includes licensed premises which comprises 3% of the portfolio at
€ 0.6 billion. Most operators of both city centre and suburban
premises are reporting sustained levels of trade greater than pre-
pandemic levels. Inflationary pressures in energy prices is somewhat
reducing however remains elevated. Wages, insurance and price
increases from suppliers remains high with the reversal of the VAT
rate to 13.5% presenting a real concern within the industry;
• The manufacturing sub-sector comprises 13% of the portfolio at
€ 2.5 billion. Performance was stable as many operators successfully
passed through cost increases or mitigated inflationary pressures
through operational efficiencies. Multinational manufacturers in
Ireland continue to invest heavily in their facilities, which has positive
downstream implications for operators within their sub-supply chain.
Although overall food exports fell slightly in 2023, as inflation and cost
of living pressures impacted consumer spend, they remained
significantly up on pre-pandemic levels with exporters optimistic
around expected market growth in 2024;
• The health, education and social work sub-sector comprises 10% of
the portfolio at € 2.0 billion. Cost inflation has impacted nursing
homes (including increased energy, labour and food costs) against
fixed price contracts. However, there is evidence of increases as
contracts are renegotiated upon expiry, with new deeds for shorter
terms enabling any further cost increases to be addressed more
expediently. Whilst short term pressure will continue particularly for
those homes locked into current contracts for a further year, medium/
long term outlook is positive given favourable demographic trends
showing a growing demand for high quality beds, and demand
outstripping supply in most locations;
• The services sub-sector comprises 10% of the portfolio at € 2.1
billion, and includes professional services (accounting, legal and
architectural/engineering activities) and other services, a more diverse
grouping which includes contract services, machinery & equipment,
management consultancy, research & development and public/
community groups. With performance of services businesses in part
correlated to the performance of the domestic and global economy,
the trading environment and outlook for 2024 is relatively positive,
with inflation beginning to reduce;
• The agriculture, forestry and fishing sub-sector represents 9% of the
portfolio at € 1.8 billion. 2023 was a mixed year for Irish Agriculture
with farm incomes reducing from historic highs back towards five and
ten-year average income levels. Input costs on farms continued to
reduce in 2023 with the sector expectation that this trend will continue
in 2024. Teagasc are forecasting that farm incomes will increase
across all sectors (except pig farming) in 2024. This is due to
improved commodity prices and lower input costs. The transition of
activities to more climate friendly and sustainable methods will
continue to be a key challenge in 2024;
• The retail and wholesale sub-sector comprises 9% of the portfolio at
€ 1.8 billion. Grocery retail/wholesalers continued to trade well and
whilst price inflation is a continuing concern, increased food costs are
mostly being passed on to the customer. Sector pressures include
labour shortages and wage cost inflation. Outlook is more challenging
for cyclical high discretionary retail which faces challenges including
inflation and associated interest rate increases/impact on disposable
incomes and continued shift in industry dynamics including the
transition of ‘bricks and mortar’ to online;
• The transport and storage sub-sector comprises 9% of the portfolio at
€ 1.7 billion and consists primarily of logistic, storage and travel
businesses. Whilst fuel prices have eased, the reintroduction of
excise duty ultimately increased fuel prices for hauliers in the second
half of 2023. Larger haulage operators benefit from fuel surcharge
agreements allowing the efficient pass through of price increases.
Long lead in times remain for sourcing certain new vehicles and
brands. Demand for logistics and warehousing remains strong as a
result of sustained online retail purchasing since COVID-19 and the
necessity for essential supply chains to remain robust, albeit light and
heat costs remain a key consideration. The travel sector has
rebounded in the year to 31 December 2023;
• The telecommunications, media and technology sub-sector comprises
7% of the portfolio at € 1.4 billion. Despite headwinds including
inflation and wage cost pressures, telecommunications and media
continue to prove resilient, with telecommunications continuing to
benefit from wider society changes and demand and need for more
connected digital and physical environments. The acceleration of 5G
in the medium term will see wider growth and opportunities in the
sector. Outlook for technology is positive and whilst inflationary wage
pressures are squeezing margins, sub-sectors such as IT services,
business to business software services and e-commerce will continue
to grow at an accelerated pace; and
• The financial, insurance and other government activities sub-sector
comprises 2% of the portfolio at € 0.5 billion. This sub-sector proved
resilient in 2023 despite emerging stresses in US and European
markets. Insurance businesses continued to perform well during 2023
as a result of the demand for housing and insurance related products.
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AIB Group plc
2.1.4 Credit risk – Asset class analysis continued
Loans and advances to customers – Non-property business
continued
Income statement
There was a net credit impairment writeback of € 138 million to the
income statement in the year to 31 December 2023 compared to
a € 30 million writeback in 2022. This comprises a net remeasurement
of ECL allowance writeback of € 128 million and recoveries of previously
written-off loans of € 10 million.
The key drivers of the net remeasurement of ECL allowance writeback
of € 128 million consist of the following components and activity:
•
Improvements in stage composition led to an € 18 million writeback
due to net stage transfers. Strong redemption and repayment activity
was also evident resulting in an € 86 million writeback, which
continues to impact predominantly within Stage 2 with a € 69 million
writeback driven by loans that fully repaid. However, these writebacks
were partially offset by a € 43 million net remeasurement charge in
addition to a further € 16 million charge on new loans originated.
• Post model adjustments resulted in a € 67 million writeback. This
writeback primarily relates to a net reduction in the Stage 3 NPE
resolution post model adjustment (€ 28 million), Capital Markets
corporate model post model adjustment reflecting the resilient
performance of the underlying portfolios and cases completing
forbearance probation periods (€ 20 million) and the Retail Banking
cost of living post model adjustment which is now reflected in the
modelled outcome (€ 18 million). Further details on post model
adjustments are outlined on pages 140 and 141.
• The impact of the updated macroeconomic scenarios and weightings
resulted in a € 16 million writeback.
The ECL allowance for the portfolio totalled € 0.6 billion providing ECL
allowance cover of 3%. For the Stage 3 portfolio, the ECL allowance
cover is 38% (2022: € 0.8 billion, 4% and 35% respectively).
Syndicated & International Finance
The Syndicated & International Finance (“SIF”) business unit, which is a
specialised lending unit within Capital Markets, is involved in
participating in the provision of finance to US and European
corporations for mergers, acquisitions, buy-outs and general corporate
purposes. The SIF non-property portfolio has reduced by € 0.4 billion to
€ 2.6 billion at 31 December 2023 (2022: € 3.0 billion). The reduction
reflects the Group’s risk appetite for the finance opportunities in these
markets during 2023 and the preference for selected growth in
syndicated lending to large scale international corporates.
At 31 December 2023, 96% of the SIF lending portfolio is in a strong/
satisfactory grade (2022: 94%). The profile of the portfolio from a
staging perspective consists of € 2.2 billion in Stage 1, € 0.4 billion in
Stage 2 and € 7 million in Stage 3 (2022: Stage 1: € 2.4 billion, Stage 2:
€ 0.6 billion and Stage 3: € 36 million). 86% of the SIF portfolio is rated
by S&P, with 70% rated B+ or above, 13% rated B and 3% rated B- or
below. The majority of the loans (84%) are to large borrowers with
EBITDA > € 250 million with the top 20 borrowers accounting for 31% of
total exposure. Exposures are diversified across all non-property
business sub-sectors, however manufacturing (25%),
telecommunications, media & technology (22%) and services (20%) are
the primary sectoral concentrations. 56% of the borrowers in this
portfolio are domiciled in the USA, 7% in the UK, and 37% in the Rest of
the World (primarily Europe - 36%) (2022: 62% in the USA, 4% in the
UK and 34% in the Rest of the World (primarily Europe - 31%)
respectively).
The SIF portfolio had a net credit impairment writeback to the income
statement in 2023 of € 27 million (2022: € 32 million charge).
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AIB Group plc
Risk Management continued
2.1.5 Credit risk - Credit ratings
External credit ratings of certain financial assets (audited)
The following table sets out the credit quality of certain financial assets based on available external credit ratings at 31 December 2023 and 2022.
These comprise loans and advances to banks of € 1,329 million (2022: € 1,502 million), securities financing of € 6,466 million (2022: € 6,282
million), and investment debt securities at amortised cost of € 4,510 million (2022: € 4,131 million) and at FVOCI of € 12,488 million (2022: € 11,837
million) and trading portfolio financial assets of € 84 million (2022: Nil). Information on the credit ratings for loans and advances to customers where
an external credit rating is available is disclosed on page 173.
At amortised cost
At FVOCI At FVTPL
2023
Total
Bank Corporate Sovereign
Bank Corporate Sovereign
Other
Total Sovereign
€ m
1,725
4,829
19
—
2
€ m
—
1,126
203
73
55
2,307
1,720
€ m
16
33
—
—
Other
€ m
192
5
—
—
1,917 (1)
Total
€ m
5,752
6,163
€ m
4,630
1,312
260
256
73
57
—
—
12,305
6,198
6,575
1,457
2,356
€ m
157
314
151
—
—
622
€ m
4,321
265
628
—
—
5,214 (2)
6,575
1,449
2,356 1,917
12,297
6,198
622
5,214
454 12,488
—
—
8
—
—
—
—
—
8
—
—
—
—
—
—
—
—
—
—
—
€ m
454
€ m
€ m
€ m
9,562
— 1,891
84
—
15,398
8,054
— 1,035
—
1,295
—
—
—
—
454
12,488
—
—
84
84
—
—
73
57
24,877
24,869
8
—
(Audited)
AAA/AA
A/A-
BBB+/BBB/
BBB-
Sub
investment
Unrated
Total
Of which:
Stage 1
Stage 2
Stage 3
(Audited)
AAA/AA
A/A-
BBB+/BBB/
Sub investment
Unrated
Total
Of which:
Stage 1
Stage 2
Stage 3
At amortised cost
Bank Corporate Sovereign
€ m
€ m
€ m
Other
€ m
Bank Corporate Sovereign
€ m
€ m
€ m
440
6,442
10
—
2
—
962
9
92
112
2,171
1,405
15
32
—
—
195
5
—
23
1,628 (1)
6,894
1,175
2,218
11,915
5,763
Total
€ m
4,016
7,614
56
92
137
4,008
1,408
347
—
—
110
216
173
—
—
499
4,048
213
861
—
—
5,122 (2)
At FVOCI
At
FVTPL
Total
€ m
Sovereig
n
€ m
2022
Total
€ m
8,619
— 12,635
Other
€ m
453
— 1,837
— 1,381
—
—
—
—
—
—
—
—
9,451
1,437
92
137
453
11,837
— 23,752
6,894
1,167
2,218
1,628
11,907
5,763
499
5,122
453
11,837
— 23,744
—
—
8
—
—
—
—
—
8
—
—
—
—
—
—
—
—
—
—
—
—
—
8
—
(1) Relates to asset backed securities.
(2) Includes supranational banks and government agencies.
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AIB Group plc
2.1.6 Credit risk - Forbearance overview
Additional credit quality and forbearance disclosures on loans and
advances to customers
Forbearance
Overview
Forbearance occurs when a customer is granted a temporary or
permanent concession or an agreed change to the existing contracted
terms of a facility (‘forbearance measure’), for reasons relating to the
actual or apparent financial stress or distress of that customer. This also
includes a total or partial refinancing of existing debt due to a customer
availing of an embedded forbearance clause(s) in their contract. A
forbearance agreement is entered into where the customer is in financial
difficulty to the extent that they are unable to meet their loans to the
Group in compliance with the existing agreed contracted terms and
conditions. A concession or an agreed change to the contracted terms
can be of a temporary (e.g. interest only) or permanent (e.g. term
extension) nature.
The Group uses a range of initiatives to support its customers. The
Group considers requests from customers who are experiencing cash
flow difficulties on a case by case basis in line with the Group’s
Forbearance Policy and relevant procedures, and completes an
affordability/repayment capacity assessment taking account of factors
such as current and likely future financial circumstances, the customer’s
willingness to resolve such difficulties, and all relevant legal and
regulatory obligations to ensure appropriate and sustainable measures
are put in place.
Group credit policies, supported by relevant processes and procedures,
are in place which set out the policy rules and principles underpinning
the Group’s approach to forbearance, ensuring the forbearance
measure(s) provided to customers are affordable and sustainable, and
in line with relevant regulatory requirements. Key principles include
supporting viable Small and Medium Enterprises (“SMEs”), and
providing support to enable customers to remain in their family home,
whenever possible. The Group has implemented the standards for the
Codes of Conduct in relation to customers in actual or apparent financial
stress or distress, as set out by the Central Bank of Ireland (“the Central
Bank”), ensuring these customers are dealt with in a professional and
timely manner.
A request for forbearance is a trigger event for the Group to undertake
an assessment of the customer’s financial circumstances prior to any
decision to grant a forbearance measure. This may result in the
downgrading of the credit grade assigned and an increase in the
expected credit loss. Facilities to which forbearance has been applied
continue to be classified as forborne until an appropriate probation
period has passed (minimum 24 months).
The effectiveness of forbearance measures over the lifetime of the
arrangements are subject to ongoing management review and
monitoring of forbearance. A forbearance measure is deemed to be
effective if the customer meets the revised or original terms of the
contract over a sustained period of time resulting in an improved
outcome for the Group and the customer.
Mortgage portfolio
Under the mandate of the Central Bank’s Code of Conduct on Mortgage
Arrears (“CCMA”), the Group introduced a four-step process called the
Mortgage Arrears Resolution Process, or MARP. This process aims to
engage with, support and find resolution for mortgage customers (for
their primary residence only) who are in arrears, or are at risk of going
into arrears.
The four step process is summarised as follows:
• Communications – We are here to listen, support and provide advice;
• Financial information – To allow us to understand the customer’s
finances;
• Assessment – We use the financial information to assess the
customer’s situation; and
• Resolution – We work with the customer to find an appropriate
resolution.
The core objective of the process is to determine appropriate and
sustainable solutions that, where possible, help to keep customers in
their family home. In addition to relevant temporary forbearance
measures (such as interest only and capital and interest moratorium),
this includes permanent forbearance measures which have been
devised to assist existing Republic of Ireland primary residential
mortgage customers in financial difficulty. This process may result in
debt write-off, where appropriate. The types of permanent forbearance
solutions currently include; arrears capitalisation, term extension, split
mortgages, mortgage to rent, voluntary sale for loss and negative equity
trade down.
Non-mortgage portfolio
The Group also has in place forbearance measures for customers in the
non-mortgage portfolio and Buy-To-Let mortgages (BTLs) who are in
financial difficulty.
This approach is based on customer affordability and sustainability by
applying the following core principles:
• Customers must be treated objectively and consistently;
• Customer circumstances and debt obligations must be viewed
holistically; and
• Solutions will be appropriately provided where customers are co-
operative, and are willing but unable to pay.
The forbearance process is one of structured engagement to assess the
long term levels of sustainable and unsustainable debt. The commercial
aspects of this process require that customer affordability is viewed
comprehensively, to include all available sources of finance for debt
repayment, including unencumbered assets.
Types of non-mortgage forbearance include temporary measures (such
as interest only and capital and interest moratorium) and permanent
measures (such as term extension and arrears capitalisation). This
process may result in debt write-off, where appropriate.
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AIB Group plc
Risk Management continued
2.1.6 Credit risk - Forbearance overview continued
Additional credit quality and forbearance disclosures on loans and advances to customers
Forbearance
The following table sets out the internal credit ratings and ECL staging of forborne loans and advances to customers at 31 December 2023
and 2022:
2023
At amortised cost
2022
At amortised cost
Residential
mortgages
Other
personal
Property
and
construction
Non-
property
business
Total
Residential
mortgages
Other
personal
Property
and
construction
Non-
property
business
Total
Analysed by
forbearance type
Temporary
forbearance
Permanent
forbearance
Analysed by
internal credit
ratings
Strong
Satisfactory
Total strong/
satisfactory
Criticised watch
Criticised recovery
Total criticised
Non-performing
Gross carrying
amount
Analysed by ECL
staging
Stage 1
Stage 2
Stage 3
POCI
Total
ECL allowance
€ m
€ m
€ m
€ m
€ m
€ m
€ m
342
335
677
—
—
—
—
251
251
426
677
27
184
397
69
677
140
7
24
31
—
—
—
—
14
14
17
31
—
14
17
—
31
10
19
225
593 (1)
271
290
536
761
1,166 (2)
1,759
—
—
—
—
75
75
215
—
—
—
—
438
438
323
—
—
—
—
778
778
981
290
761
1,759
—
75
215
—
290
87
18
421
320
2
45
694
949
71
761
1,759
201
438
374
378
752
—
—
—
—
309
309
443
752
2
246
424
80
752
151
19
47
66
—
—
—
—
15
15
51
66
—
15
51
—
66
32
€ m
74
479
553
—
—
—
—
€ m
€ m
842
1,309 (1)
1,044
1,886
1,948 (2)
3,257
—
—
—
—
—
—
—
—
259
1,431
2,014
259
1,431
2,014
294
455
1,243
553
1,886
3,257
19
240
294
—
553
146
98
1,333
455
—
119
1,834
1,224
80
1,886
3,257
424
753
(1) Of which: interest only € 272 million, payment moratorium € 165 million, reduced payment € 83 million (2022: of which: interest only € 715 million, payment moratorium € 401 million, reduced
payment € 107 million).
(2) Of which: arrears capitalisation and term extension € 585 million, amendment to or non-enforcement of financial covenant € 164 million, restructure € 267 million (2022: of which: arrears
capitalisation and term extension € 728 million, amendment to or non-enforcement of financial covenant € 596 million, restructure € 409 million).
The Group continues to support its existing customers ensuring they are provided with the appropriate forbearance measures, particularly given the
current macro environment where customers may seek forbearance measures as a result of inflationary pressures and subsequent affordability
issues as the costs of household goods and services rise, including mortgage repayments as a result of higher interest rates.
The total forbearance portfolio has decreased by € 1.5 billion to € 1.8 billion in the year (2022: € 3.3 billion). The decrease was driven by the
performing forborne element of the portfolio in criticised recovery which decreased by € 1.2 billion, due to lower inflows and customers previously
impacted by COVID-19 who have continued to perform well having completed their probation criteria to exit forbearance. The overall reduction in the
year was primarily in the non-property business portfolio which decreased by € 1.1 billion as cases predominantly in the leisure sector exited
forbearance.
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AIB Group plc
2.2 Liquidity and funding risk
Liquidity risk is the risk that the Group will not be able to fund its assets
and meet its payment obligations as they fall due, without incurring
unacceptable costs or losses. Funding is the means by which liquidity is
generated, e.g. secured or unsecured, corporate or retail. In this
respect, funding risk is the risk that a specific form of liquidity cannot be
obtained at an acceptable cost.
Identification and assessment
Liquidity and funding risk is identified and assessed by the Group’s
Material Risk Assessment (‘MRA’) process in support of the Internal
Liquidity Adequacy Assessment Process (‘ILAAP’). The MRA process is
a ‘top-down’ assessment performed on at least an annual basis and
identifies the key material risks to the Group, taking into account its
strategic objectives, in addition to internal and external risk information.
The ILAAP is fully integrated and embedded in the strategic, financial
and risk management processes of the Group. Embedding of the ILAAP
is facilitated through the setting of risk appetite and ensuring that
liquidity considerations are factored into all key strategic decisions.
The Group has a comprehensive ILAAP Framework for managing the
Group’s liquidity risk and complying with the Board’s risk appetite as well
as evolving regulatory standards. This is delivered through a
combination of policy formation, governance, analysis, stress testing
and limit setting and monitoring, and is part of the wider Risk
Management Framework.
Management and measurement(audited)
The objective of liquidity management is to ensure that, at all times, the
Group holds sufficient funds to meet its contracted and contingent
commitments to customers and counterparties at an economic price.
The ILAAP Framework and supporting Funding and Liquidity risk policy
set out the key requirements for managing the risk. These include:
• Adherence to both internal limits and regulatory defined liquidity ratios
including the Liquidity Coverage Ratio (‘LCR’) and the Net Stable
Funding Ratio (‘NSFR’). The LCR is designed to promote short term
resilience of the Group’s liquidity risk profile by ensuring that it has
sufficient high quality liquid resources to survive an acute stress
scenario lasting for 30 days. The NSFR has a time horizon of one
year and has been developed to promote a sustainable maturity
structure of assets and liabilities;
• Performing a multiyear projection of the Group’s funding sources
taking into account its baseline scenario, strategy and operational
plans as outlined in the Group’s Funding and Liquidity Plan. The
purpose of this Plan is to set out a comprehensive, forward looking
liquidity and funding strategy for the Group including subsidiary
companies;
• Assessing the Funding and Liquidity Plan under a range of adverse
scenarios, the outcomes of which should ensure sufficient liquidity to
implement a sustainable strategy even in a stressed environment;
• Maintaining a Contingency Funding Plan that identifies and quantifies
actions that are available to the Group in deteriorating liquidity
conditions and to help it emerge from a temporary liquidity crisis as a
credit worthy institution;
• Monitoring a further set of triggers and liquidity options outlined in the
Group’s Recovery Plan, which presents the actions available to the
Group to restore viability in the event of extreme stress; and
• Having an approved liquidity cost-benefit allocation mechanism in
place to attribute funding costs, benefits and risks to the Group’s
business lines.
Monitoring, escalating and reporting
The Group liquidity and funding position is reported regularly to the
Finance and Risk functions, Group Asset and Liability Committee
(‘ALCo’), Group Risk Committee (‘GRC’) and Board Risk Committee
(‘BRC’). In addition, the Executive Committee (‘ExCo’) and the Board
are briefed on liquidity and funding on an ongoing basis.
On an annual basis, the Board attests to the Group’s liquidity adequacy
via the liquidity adequacy statement as part of the ILAAP. The Group’s
ILAAP encompasses all aspects of liquidity and funding management,
including planning, analysis, stress testing, control, governance, policy
and contingency planning. This document is submitted to the Joint
Supervisory Team and forms the basis of their supervisory review and
evaluation process.
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AIB Group plc
Risk Management continued
2.2 Liquidity and funding risk continued
Management of the Group liquidity pool
The Group manages the liquidity pool on a centralised basis and is
primarily comprised of government guaranteed bonds, balances with
central banks and internal and external covered bonds. The composition
of the liquidity pool is subject to limits recommended by the Risk function
and approved by the Board.
Liquidity regulation
The Group is required to comply with the liquidity requirements of the
Single Supervisory Mechanism/Central Bank of Ireland and also with the
requirements of local regulators in jurisdictions in which it operates. The
Group adheres to these requirements.
At 31 December 2023, the Group held € 67,776 million (2022: € 61,077
million) in qualifying liquid assets ‘QLA’(1) of which € 6,903 million (2022:
€ 7,845 million) was not available due to repurchase, secured loans and
other restrictions.
Liquidity metrics
Liquidity Coverage Ratio
Net Stable Funding Ratio
2023
%
199
159
2022
%
192
164
At 31 December 2023, the Group's available QLA was € 60,873 million
(2022: € 53,232 million). During 2023, available QLA ranged from €
52,170 million to € 62,747 million (2022: € 48,105 million to € 54,295
million) and the average balance was € 55,905 million (2022: € 50,242
million).
The Group monitors and reports its liquidity positions against Capital
Requirements Regulation (CRR2) and other related liquidity regulations
(LCR Delegated Act). It has fully complied with the minimum LCR and
NSFR requirements of 100% during 2023 with ratios well in excess of
this level.
(1) QLA are assets that can be readily converted into cash, either with the market or with the
monetary authorities, and where there is no legal, operational or prudential impediments to
their use as liquid assets.
The Group’s available QLA increased in 2023 by € 7,641 million which
was predominantly due to an increase in customer deposits in Ireland as
well as retained and senior debt issuance, offset by an increase in
customer loans, covered bond maturities and securities financing
activities where cash was exchanged for non-QLA eligible collateral.
Other contingent liquidity
The Group has access to other unencumbered assets, providing a
source of contingent liquidity, which are not in the Group’s liquidity pool.
However, these assets may be monetised in a stress scenario to
generate liquidity through use as collateral for secured funding or
outright sale.
Liquidity stress testing
Liquidity stress testing is a key component of the ILAAP framework. The
purpose of these tests is to ensure the continued stability of the Group’s
liquidity position within the Group’s pre-defined liquidity risk tolerance
levels.The Group undertakes liquidity stress testing that includes both
firm specific and systemic risk events and a combination of both as a
key liquidity control. Stressed assumptions are applied to the Group’s
liquidity buffer and liquidity risk drivers. This estimates the potential
impact of a range of stress scenarios on the Group’s liquidity position.
Actions and strategies available to mitigate the impacts of the stress
scenarios are evaluated as to their appropriateness. Liquidity stress test
results are reported to the ALCo, ExCo and Board.
Funding structure (audited)
The Group’s funding strategy is to deliver a sustainable, diversified and
robust customer deposit base at economic pricing and to further
enhance and strengthen the wholesale funding franchise with
appropriate access to term markets to support core lending activities.
The strategy aims to deliver a solid funding structure that complies with
internal and regulatory policy requirements and reduces the probability
of a liquidity stress, i.e. an inability to meet funding obligations as they
fall due.
Customer deposits represent the largest source of funding for the Group
with the core retail franchises and accompanying deposit base in both
Ireland and the UK providing a stable and reasonably predictable source
of funds.
Customer accounts (audited)
Total
Of which:
Euro
Sterling
US dollar
Other currencies
2023
€ m
2022
€ m
104,782
102,359
93,732
9,237
1,608
205
89,816
10,478
1,925
140
Customer accounts increased by € 2,423 million in 2023 driven by
higher personal balances and inflows from banks exiting the Irish
market. This was reflected in higher Euro time deposit accounts offset
by a reduction across all other Group significant currencies (GBP and
USD). The decrease in GBP deposits was primarily driven by an
increase in customer spending due to the higher cost of living and the
residual impact of the Group’s decision to exit the SME market in Great
Britain. There was an underlying decrease in GBP and USD deposits of
€ 1,686 million on a constant currency basis coupled with a € 58 million
decrease in the value of USD offset by a € 186 million increase in the
value of GBP deposits due to currency movements.
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AIB Group plc
2.2 Liquidity and funding risk continued
Composition of wholesale funding(1) (audited)
The Group maintains access to a variety of sources of wholesale funding including bank deposits, securities financing, debt securities and
subordinated debt. At 31 December 2023, total wholesale funding outstanding was € 12,251 million (2022: € 10,019 million) of which € 2,805 million
is due to mature in less than one year (2022: € 2,507 million).
(Audited)
Deposits by central banks and banks
Securities financing
Senior debt
ACS
Subordinated liabilities and
other capital instruments
Total 31 December
Of which:
Secured
Unsecured
(Audited)
Deposits by central banks and banks
Securities financing
Senior debt
ACS
Subordinated liabilities and
other capital instruments
Total 31 December
Of which:
Secured
Unsecured
< 1
month
€ m
1,040
358
—
—
—
1,398
358
1,040
1,398
1–3
months
€ m
452
217
—
—
—
669
217
452
669
3–6
months
6–12
months
€ m
—
—
738
—
—
738
—
738
738
€ m
—
—
—
—
—
—
—
—
—
Total
< 1 year
€ m
1,492
575
738
—
—
1–3
years
€ m
98
—
3–5
years
€ m
190
—
> 5
years
€ m
—
—
2,786
1,643
3,229
—
—
5
—
22
2,805
2,884
1,838
1,473
4,724
1,473
12,251
575
2,230
2,805
98
2,786
2,884
195
1,643
1,838
22
4,702
4,724
890
11,361
12,251
< 1 month
€ m
1–3
months
€ m
3–6
months
€ m
6–12
months
€ m
Total
< 1 year
€ m
22
798
—
—
—
820
798
22
820
210
100
252
999
—
1,561
1,099
462
1,561
—
—
—
—
—
—
—
—
—
—
—
126
—
—
126
—
126
126
1–3
years
€ m
96
—
3–5
years
€ m
186
—
> 5
years
€ m
—
—
2,084
2,071
1,646
—
—
—
—
25
232
898
378
999
—
2,507
2,180
2,257
1,404
3,075
1,404
10,019
1,897
610
2,507
96
2,084
2,180
186
2,071
2,257
25
3,050
3,075
2,204
7,815
10,019
2023
Total
€ m
1,780
575
8,396
27
2022
Total
€ m
514
898
6,179
1,024
(1) The maturity analysis has been prepared using the residual contractual maturity of the liabilities.
Deposits by central banks and banks increased by € 1,266 million to
€ 1,780 million primarily driven by higher deposits by central banks and
cash collateral received from derivative counterparties. For further
details, see note 29 ‘Deposits by central banks and banks’ to the
consolidated financial statements. Securities Financing decreased
€ 323 million to € 575 million reflective of a decrease in standard
bilateral bank repo activity - see currency split in 'Currency composition
of wholesale funding' table on the next page.
During 2023, senior debt increased € 2,217 million primarily reflecting
€ 2,431 million issuance coupled with a positive fair value hedge
adjustment of € 251 million offset by € 382 million in contractual
maturities and € 83 million in negative exchange translation
adjustments. Over the twelve months to 31 December 2023, outstanding
asset covered securities (‘ACS’) decreased € 997 million to € 27 million
due to a contractual maturity. For further details, see note 31 ‘Debt
securities in issue’ to the consolidated financial statements.
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AIB Group plc
Risk Management continued
2.2 Liquidity and funding risk continued
Currency composition of wholesale funding
At 31 December 2023, 69% (2022: 75%) of wholesale funding was in Euro with the remainder held in GBP and USD. The Group manages cross-
currency refinancing risk against foreign exchange cash flow limits.
Deposits by central banks and banks
Securities financing
Senior debt
ACS
Subordinated liabilities and other capital
instruments
Total wholesale funding
% of wholesale funding
EUR
€ m
1,002
156
5,898
27
1,425
8,508
%
69
GBP
€ m
325
—
USD
€ m
453
419
— 2,498
—
—
3,370
—
48
373
%
3
Other
€ m
2023
Total
€ m
— 1,780
—
575
— 8,396
—
27
— 1,473
— 12,251
EUR
€ m
220
401
4,449
1,024
1,360
7,454
GBP
€ m
290
—
USD
€ m
4
497
Other
€ m
—
—
2022
Total
€ m
514
898
— 6,179
— 1,024
— 1,404
— 10,019
— 1,730
—
—
2,231
—
44
334
%
3
%
28
%
—
%
100
%
75
%
22
%
—
%
100
Encumbrance
An asset is defined as encumbered if it has been pledged as collateral,
and as a result is no longer available to the Group to secure funding,
satisfy collateral needs or to be sold. As part of managing its funding
requirements, the Group encumbers assets as collateral to support
wholesale funding initiatives. This would include covered bonds,
securities repurchase agreements and other structures that are secured
over customer loans. The Group manages encumbrance levels to
ensure that the Group has sufficient contingent collateral to maximise
balance sheet flexibility.
The Group’s encumbrance ratio has decreased to 6% at 31 December
2023 (2022: 8%) with € 8,295 million of the Group’s assets encumbered
(2022: € 11,188 million). The encumbrance level is based on the amount
of assets that are required in order to meet regulatory and contractual
commitments.
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AIB Group plc
2.2 Liquidity and funding risk continued
Financial assets and financial liabilities by contractual residual maturity (audited)
The following table analyses financial assets and financial liabilities by contractual residual maturity at 31 December 2023 and 2022:
(Audited)
Financial assets(1)
Cash and balances at central banks
Derivative financial instruments(2)
Loans and advances to banks(3)
Loans and advances to customers(3)
Securities financing
Investment securities(4)
Other financial assets
Financial liabilities(5)(6)
Deposits by central banks and banks
Customer accounts
Securities financing
Derivative financial instruments(2)
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
(Audited)
Financial assets(1)
Cash and balances at central banks
Derivative financial instruments(2)
Loans and advances to banks(3)
Loans and advances to customers(3)
Securities financing
Investment securities(4)
Other financial assets
Financial liabilities(5)(6)
Deposits by central banks and banks
Customer accounts
Securities financing
Derivative financial instruments(3)
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
<3 months
but not on
demand
€ m
3 months to
1 year
€ m
On demand
€ m
1–5 years
€ m
Over 5
years
€ m
2023
Total
€ m
—
38,018
38,018
—
588
2,145
10
23
—
—
14
741
1,770
849
586
688
—
56
—
3,003
3,329
470
—
—
717
—
1,590
—
18,545
41,548
2,278
6,484
—
—
9,435
—
2,377
1,329
67,011
6,466
16,998
688
40,784
4,648
6,858
28,024
52,573
132,887
22
95,095
—
—
—
—
1,571
96,688
1,470
5,297
575
41
—
—
—
—
2,943
—
110
738
—
—
288
1,418
—
444
4,434
—
—
—
29
—
1,307
3,251
1,473
—
1,780
104,782
575
1,902
8,423
1,473
1,571
7,383
3,791
6,584
6,060
120,506
<3 months
but not on
demand
€ m
On demand
€ m
3 months
to 1 year
€ m
1–5 years
€ m
Over 5
years
€ m
2022
Total
€ m
38,138
—
470
1,954
—
—
—
40,562
22
96,897
—
—
—
—
1,375
98,294
—
114
1,032
1,297
849
1,461
592
5,345
210
4,294
898
72
1,251
—
—
—
38,138
—
93
—
2,568
1,943
576
—
—
624
—
1,680
—
18,262
37,150
3,490
5,781
—
—
8,150
—
2,511
1,502
61,231
6,282
15,968
592
5,180
28,157
46,980
126,224
—
988
—
150
126
—
—
282
151
—
923
4,155
—
—
—
29
—
1,837
1,671
1,404
—
514
102,359
898
2,982
7,203
1,404
1,375
6,725
1,264
5,511
4,941
116,735
(1) Excludes trading portfolio financial assets € 93 million (2022: € 8 million). The contractual maturity of those assets in 2023 is: € 9 million in <3 months but not on demand; € 10 million in 3 months
to 1 year; € 2 million in 1-5 years; and € 72 million over 5 years (2022: € 8 million in <3 months but not on demand).
(2) Shown by maturity date of contract.
(3) Shown gross of expected credit losses.
(4) Excluding equity shares.
(5) A maturity of lease liabilities is disclosed in note 32.
(6) Excludes trading portfolio financial liabilities € 139 million (2022: € 4 million). The contractual maturity of those liabilities in 2023 is: € 7 million in <3 months but not on demand; € 89 million in 1-5
years and € 43 million over 5 years (2022: € 4 million in <3 months but not on demand).
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AIB Group plc
Risk Management continued
2.2 Liquidity and funding risk continued
Financial liabilities by undiscounted contractual maturity (audited)
The balances in the table below include the undiscounted cash flows
relating to principal and interest on financial liabilities and as such will
not agree directly with the balances on the consolidated statement of
financial position. All derivative financial instruments have been
analysed based on their contractual maturity undiscounted cash flows.
The following table analyses, on an undiscounted basis, financial
liabilities by remaining contractual maturity at 31 December 2023
and 2022:
(Audited)
Financial liabilities(1)(2)
Deposits by central banks and banks
Customer accounts
Securities financing
Derivative financial instruments
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
(Audited)
Financial liabilities(1)(2)
Deposits by central banks and banks
Customer accounts
Securities financing
Derivative financial instruments
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
In the daily management of liquidity risk, the Group adjusts the
contractual outflows on customer deposits to reflect the inherent stability
of these deposits. Offsetting the liability outflows are cash inflows from
the assets on the statement of financial position. Additionally, the Group
holds a stock of high quality liquid assets, which are held for the purpose
of covering unexpected cash outflows.
On
demand
€ m
<3 months
but not on
demand
€ m
22
95,095
1,473
5,320
—
—
—
—
1,571
96,688
577
275
44
—
—
3 months
to 1 year
€ m
1–5 years
€ m
Over 5
years
€ m
—
3,016
—
400
312
1,452
—
925
1,018
5,506
38
—
262
—
—
29
—
411
3,471
1,724
—
2023
Total
€ m
1,807
104,912
577
2,011
10,039
2,024
1,571
7,689
4,472
8,457
5,635
122,941
On
demand
€ m
<3 months
but not on
demand
€ m
3 months
to 1 year
€ m
1–5 years
€ m
Over 5
years
€ m
2022
Total
€ m
22
96,897
—
—
—
—
1,375
98,294
210
4,296
903
245
1,271
—
—
—
999
—
703
304
38
—
320
158
—
1,652
4,714
150
—
—
49
—
688
1,918
1,883
—
552
102,399
903
3,288
8,207
2,071
1,375
6,925
2,044
6,994
4,538
118,795
(1) Excludes trading portfolio financial liabilities € 139 million (2022: € 4 million). The undiscounted contractual maturity for those liabilities in 2023 is: € 2 million in <3 months but not on demand;
€ 5 million in 3 months to 1 year € 89 million in 1-5 years; and € 43 million over 5 years.
(2) A maturity of lease liabilities is disclosed in note 32.
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AIB Group plc
2.2 Liquidity and funding risk continued
Financial liabilities by undiscounted contractual maturity
continued
The undiscounted cash flows potentially payable under guarantees and
similar contracts (audited)
The undiscounted cash flows potentially payable under guarantees and
similar contracts, included below within contingent liabilities, are
classified on the basis of the earliest date the facilities can be called.
The Group is only called upon to satisfy a guarantee when the
guaranteed party fails to meet their obligations. The Group expects that
most guarantees it provides will expire unused.
The Group has given commitments to provide funds to customers under
undrawn facilities. The undiscounted cash flows have been classified on
the basis of the earliest date that the facility can be drawn. The Group
does not expect all facilities to be drawn, and some may lapse before
drawdown. For further details see note 40 ‘Contingent liabilities and
commitments’ to the consolidated financial statements.
The following table analyses undiscounted cash flows potentially
payable under guarantees and similar contracts at 31 December 2023
and 2022:
(Audited)
Contingent liabilities
Commitments
(Audited)
Contingent liabilities
Commitments
<3 months
but not on
demand
€ m
3 months to
1 year
€ m
—
—
—
—
—
—
On demand
€ m
857
16,136
16,993
<3 months
but not on
demand
€ m
3 months to
1 year
€ m
—
—
—
—
—
—
On demand
€ m
802
15,060
15,862
1–5 years
€ m
—
—
—
1–5 years
€ m
—
—
—
2023
Total
€ m
857
16,136
16,993
2022
Total
€ m
802
15,060
15,862
Over 5
years
€ m
—
—
—
Over 5
years
€ m
—
—
—
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Risk Management continued
2.3 Financial risks
(a) Market risk
Market risk is the uncertainty of returns attributable to fluctuations in
market factors. Where the uncertainty is expressed as a potential loss in
earnings or value, it represents a risk to the income and capital position
of the Group.
Changes in customer behaviours and the relationship between
wholesale and retail rates give rise to changes in the Group’s exposure
to market risk factors and are also an important component of market
risk.
Identification and assessment
The key market risks that the Group assumes as a result of its banking
and trading book activities that have been identified as part of the MRA
are:
• Credit spread risk is the exposure of the Group’s financial position to
adverse movements in the credit spreads of bonds held in the hold-to-
collect-and-sell (‘HTCS’) securities portfolio. Credit spreads are
defined as the difference between bond yields and interest rate swap
rates of equivalent maturity. The HTCS bond portfolio is the principal
source of credit spread risk;
Interest rate risk in the banking book (‘IRRBB’) is the current or
prospective risk to both the earnings and capital of the Group as a
result of adverse movements in interest rates. Changes in interest
rates impact the underlying value of the Group’s assets, liabilities and
off-balance sheet instruments and, hence, its economic value (or
capital position). Similarly, interest rate changes will impact the
Group’s net interest income (‘NII’) through interest-sensitive income
and expense effects; and
•
• The Group also assumes market risk through its trading book
activities which relate to all positions in financial instruments
(principally derivatives) that are held with trading intent or in order to
hedge positions held with trading intent. Risks associated with
valuation adjustments such as credit value adjustment (‘CVA’) and
funding value adjustment (‘FVA’) are managed by the Group’s
Treasury function.
Market risk scenarios are developed to test the capital requirements for
this risk in the semi-annual stress testing process and the annual
ICAAP.
In addition to above market risks, equity investment risk and pension
risk are also identified by the MRA process as sub-risks.
Management and measurement (audited)
The Market Risk Management framework and policies set out the key
requirements for managing market risk. The key aspects of this are:
• The Group’s Treasury function is responsible for managing market
risk. Treasury also has a mandate to trade on its own account in
selected wholesale markets with risk tolerances approved on an
annual basis through the Group’s Risk Appetite process;
• The Group documents its annual Market Risk Strategy and Appetite
statement as part of the annual financial planning cycle which ensures
market risk aligns with the Group’s strategic business plan; and
• Market risk is managed against a range of Board approved VaR limits
which cover market risk in the trading book, interest rate risk and
credit spread risk in the banking book. The Board approved limits are
supplemented by a range of ALCo approved limits which include
nominal, sensitivity limits and ‘stop loss’ limits.
Market risk is managed and measured using portfolio sensitivities, Value
at Risk (‘VaR’) and stress testing. Interest rate gaps and sensitivities to
various risk factors are measured and reported on a daily basis. In terms
of the VaR metric, the Group calculates a daily historical simulation VaR
to a 95% confidence level, using a one day holding period and based on
one year of historic data. In addition to VaR, Capital at Risk (‘CaR’) is
also measured to a one year(1) time horizon, a 99% confidence level and
a longer set of data.
Credit risk issues inherent in the market risk portfolios are also subject
to the credit risk framework that is described in Section 2.1.
(1)The Capital at Risk on core trading book positions is assessed using a ten day horizon, with
the exception of FX which is assessed using a one year horizon.
Monitoring, escalating and reporting (audited)
On a daily basis front office and risk functions receive a range of
valuation, sensitivity and market risk measurement reports, while ALCo
receives a monthly market risk commentary and summary risk profile.
Market risk exposures are reported to the Group Risk Committee
(‘GRC’) and Board Risk Committee (‘BRC’) on a monthly basis through
the CRO Report.
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2.3 Financial risks continued
(a) Market risk continued (audited)
The following table sets out financial assets and financial liabilities at 31 December 2023 and 2022 subject to market risk analysed between trading
and non-trading portfolios, showing the principal market risks to which the assets and liabilities are exposed:
2023
Market risk measures
Carrying
amount
Trading
portfolios
Non-trading
portfolios
(Audited)
Assets subject to market risk
Cash and balances at central banks
Trading portfolio financial assets
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities
Liabilities subject to market risk
Deposits by central banks and banks
Customer accounts
Securities financing
Trading portfolio financial liabilities
Derivative financial instruments
Debt securities in issue
(Audited)
Assets subject to market risk
Cash and balances at central banks
Trading portfolio financial assets
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities
Liabilities subject to market risk
Deposits by central banks and banks
Customer accounts
Securities financing
Trading portfolio financial liabilities
Derivative financial instruments
Debt securities in issue
€ m
38,018
93
2,377
1,329
65,491
6,466
17,353
1,780
104,782
575
139
1,902
8,423
€ m
38,138
8
2,511
1,502
59,613
6,282
16,270
514
102,359
898
4
2,982
7,203
€ m
—
93
457
—
—
—
—
—
—
—
139
448
—
—
€ m
Risk factors
38,018
Interest rate, foreign exchange
— Interest rate, foreign exchange, equity
1,920
Interest rate, foreign exchange, credit
spreads, equity, inflation swap rates
1,329
Interest rate, foreign exchange
65,491
Interest rate, foreign exchange
6,466
17,353
Interest rate, credit spreads, foreign
exchange
Interest rate, foreign exchange, credit
spreads, equity
1,780
Interest rate, foreign exchange
104,782
Interest rate, foreign exchange
575
Interest rate, credit spreads, foreign
exchange
— Interest rate, foreign exchange, equity
1,454
8,423
Interest rate, foreign exchange, credit
spreads, equity, inflation swap rates
Interest rate, credit spreads, foreign
exchange
1,473
Interest rate, credit spreads
2022
€ m
—
8
646
—
—
—
—
—
—
—
4
599
—
—
€ m
Risk factors
38,138
Interest rate, foreign exchange
— Interest rate, foreign exchange, equity
1,865
Interest rate, foreign exchange, credit
spreads, equity, inflation swap rates
1,502
Interest rate, foreign exchange
59,613
Interest rate, foreign exchange
6,282
16,270
Interest rate, credit spreads, foreign
exchange
Interest rate, foreign exchange, credit
spreads, equity
514
Interest rate, foreign exchange
102,359
Interest rate, foreign exchange
898
Interest rate, credit spreads, foreign
exchange
2,383
— Interest rate, foreign exchange, equity
Interest rate, foreign exchange, credit
spreads, equity, inflation swap rates
7,203
Interest rate, credit spreads, foreign
exchange
1,404
Interest rate, credit spreads
Subordinated liabilities and other capital instruments
1,473
Market risk measures
Carrying
amount
Trading
portfolios
Non-trading
portfolios
Subordinated liabilities and other capital instruments
1,404
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AIB Group plc
Risk Management continued
2.3 Financial risks continued
(a) Market risk continued
Interest rate sensitivity (audited)
The table below shows the sensitivity of the Group’s banking book to an immediate and sustained +/- 100 basis point, +/-25 basis point and +/-50
basis point movement in interest rates, in terms of the impact on net interest income on a forward looking basis over a twelve month period,
assuming no change in the balance sheet.
Sensitivity of projected net interest income to interest rate movements:
December 2023 (audited)
Euro
Sterling
Other (mainly US $)
Total
December 2022 (audited)
Euro
Sterling
Other (mainly US $)
Total
€ m
- 100bps
(332)
(37)
(12)
€ m
'-50bps
(145)
(19)
(6)
(381)
(170)
€ m
‘-25bps
€ m
+25bps
€ m
+50bps
€ m
+ 100bps
(53)
(9)
(3)
(65)
49
9
3
61
130
18
6
154
292
37
11
340
€ m
€ m
€ m
€ m
€ m
€ m
- 100 bps
‘-50bps
‘-25bps
+25bps
+50bps
+ 100bps
(324)
(154)
(45)
(18)
(23)
(9)
(387)
(186)
(76)
(11)
(5)
(92)
72
11
5
88
146
22
9
177
288
45
18
351
The above sensitivity table is computed under the assumption of an
unchanged balance sheet and that all market rates (Risk Free Rates/
Euribors/Swaps) move upwards or downwards in parallel. Managing
interest rate sensitivity has been a key risk management priority during
2023, given the volatile interest rate environment and the more
restrictive EBA NII Supervisory Outlier Test threshold. While the change
in NII Sensitivity year-on-year has been modest, offsetting movements
in the underlying risk dynamics has been more pronounced, including,
the significant increase in structural hedging, the slow pace of deposit
balance migration from interest insensitive to interest-bearing products
and the impact of retail rate pass-through models. Given the
composition of the balance sheet, and its expected evolution, the trade-
off between managing IRRBB earnings (NII Sensitivity) and economic
value (Capital at Risk) perspectives will continue to be a priority. In
particular, the evolution of customer deposit balance migration is closely
monitored, given the “static balance sheet” assumption underpinning
this NII Sensitivity metric.
Group interest rate and foreign exchange rate VaR are calculated to a
95% confidence level with a one day holding period, and equity VaR is
calculated to a 99% confidence level with a one day holding period. At
31 December 2023, interest rate VaR stood at € 35.52 million, foreign
exchange rate VaR at € 0.13 million and equity VaR at € 0.13 million.
The Group recognises the limitations of VaR models, and supplements
its VaR measures with stress tests which draw from a longer set of
historical data and also with sensitivity measures.
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2.3 Financial risks continued
(a) Market risk continued
Structural foreign exchange risk
Structural foreign exchange risk is the exposure of the Group’s capital
ratios to changes in exchange rates and results from net investment in
subsidiaries, associates and branches, the functional currencies being
currencies other than Euro. The Group is exposed to foreign exchange
risk as it translates foreign currencies into Euro at each reporting period
and the currency profile of the Group’s capital may not necessarily
match that of its assets and risk-weighted assets.
Exchange differences on structural exposures are recognised in ‘other
comprehensive income’ in the financial statements. The Group ALCo
monitors structural foreign exchange risk and the foreign exchange
sensitivity of consolidated capital ratios. This impact is measured in
terms of basis point sensitivities using scenario analysis.
The table below shows the sensitivity of the Group’s fully loaded CET1
ratio to a hypothetical and sustained movement in GBP/EUR and USD/
EUR foreign exchange rates.
Sensitivity of CET 1 fully loaded capital to foreign
exchange movements
+ 10% move in GBP and USD FX rates
– 10% move in GBP and USD FX rates
31 December
2023
2022
(0.14) % (0.18) %
0.13 % 0.18 %
The above analysis is subject to certain simplifying assumptions such as
GBP/EUR and USD/EUR foreign exchange rates moving in the same
direction and at the same time.
(b) Pension risk
Pension risk is the risk that:
• The funding position of the Group’s defined benefit schemes would
deteriorate to such an extent that additional contributions would be
required to cover its funding obligations towards current and former
employees;
• The capital position of the Group is negatively affected as funding
deficits will be fully deductible from regulatory capital; and
• There could be a negative impact on industrial relations if the funding
level of the scheme was to deteriorate significantly.
Risk identification and assessment
The Group maintains a number of defined benefit pension schemes for
current and former employees. All defined benefit schemes operated by
the Group closed to future accrual no later than the 31 December 2013
and staff transferred to defined contribution schemes for future pension
benefits.
Each scheme has a separate trustee board and the Group has agreed
funding plans to deal with deficits where they exist. As part of any
funding agreement, the Group engages with each trustee regarding an
appropriate investment strategy to reduce the risk in that scheme.
Irish schemes that are deemed to have a deficit under the Minimum
Funding Standard must prepare funding plans to address this situation
in a timely manner and submit them to the Pensions Authority for
approval.
The IAS 19 valuation of the pension scheme assets and liabilities may
vary which could impact on the Group’s capital. The Group works with
the Trustees of each scheme to monitor the performance of investments
and estimates of future liability to identify deficits.
Given that variability in the value of the pension scheme assets and
liabilities can impact on the Group’s capital, the key processes through
which pension risk is evaluated are the Internal Capital Adequacy
Assessment Process (“ICAAP”) as well as internal stress tests and
monthly reporting of pension risk against risk appetite.
Management and measurement (audited)
The pension risk framework and policies set out the key risk
management rules in place for this risk. The ability of the pension
schemes to meet the projected pension payments is managed by the
Trustees through the active management of the investment portfolios.
Although the Group has interaction with the trustees, it cannot direct the
investment strategy of the schemes.
The Group has developed a strategy for each of its defined benefit
schemes which include the following steps:
1. All defined benefit schemes are closed to future accrual.
2. They have funding plans (or are funded as required for the US
schemes) and each defined benefit scheme has an investment
strategy in place.
3. All schemes have a strategy of de-risking in line with their regulatory
requirements, funding positions and funding plans, taking into
account the nature of their liabilities.
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Risk Management continued
(c) Equity risk
Banking book equity investment risk refers to the possibility of losses
arising in the equity investment portfolio of the Group due to changes in
the economic value of the investments. Where the uncertainty is
expressed as a potential loss in value, it represents a risk to the income
and capital position of the Group.
Identification and assessment
All equity proposals are considered to ensure all aspects of the proposal
are fully and consistently addressed. Where a proposal for a new equity
investment or divestment opportunity arises, the business sponsor must
engage with the Equity Capital team when developing the proposal, and
liaise with Finance to assess the accounting and regulatory implications.
The business reviews and comments on all proposals and recommends
proposals for approval through the appropriate governance process. All
new investments need to adhere to relevant regulatory and
accounting requirements.
Management and measurement
Exposures are reported on in line with Risk appetite requirements. Risk
measurement is also captured through stress testing. A forward looking
stress test must be produced semi annually. The stress test is used to
assess the impact of severe but plausible shocks to underlying risk
factors on the capital requirements for the business. Management
projections of the future business mix must be factored into the analysis
and be consistent with projections included in business area plans for
equity risk.
Monitoring, escalating and reporting
The Equity Capital team reviews risk exposure levels on an on-going
basis, ensures there is no undue risk concentration and considers
whether the level of risk exposures remains appropriate. Exposures are
currently reported monthly to Risk and the Group Assets & Liabilities
Committee (“ALCo”) and any limit/policy breaches or exceptions that
arose during the period are recorded.
Risk provide management with an independent perspective on the risk-
taking activities within the equity investment portfolio monthly via the
Financial Risk ALCo report, RAS limit report and the CRO report.
Additionally, there is a quarterly valuation review process in place and
Board and segment limits are applied and reported on and an escalation
process is set out in the Equity Policy.
2.3 Financial risks continued
(b) Pension risk continued
Management and measurement continued (audited)
As part of a strategy to increase the holding in inflation linked assets, an
allocation to a Liability Driven Investment (“LDI”) portfolio is used. The
LDI fund is comprised of a mixture of nominal bonds, inflation linked
bonds and inflation derivatives. Inflation linked bond holdings are
relatively stable, accounting for 31% of assets (30% at 31st December
2022). The scheme maintained a similar weighting in equities in 2023.
Independent actuarial valuations for the AIB Group Irish Pension
Scheme and the AIB Group UK Pension Scheme are carried out on a
triennial basis by the Schemes’ actuary, Mercer. The most recent
valuation of the Irish scheme was carried out at 30 June 2021 and
reported the scheme to be in surplus. The next actuarial valuation of the
Irish scheme will be 30 June 2024. This actuarial valuation report is
provided at least every 3 years to the trustees in order to set out the
Target Funding level of the scheme along with a contribution
recommendation if one is required. No deficit funding is anticipated at
this time as the Irish scheme continues to meet the minimum funding
standard.
The most recent valuation of the UK scheme was carried out at
31 December 2020. The next actuarial valuation of the UK scheme will
be 31 December 2023. The Group and the Trustee of the UK scheme
agreed funding payments under an arrangement agreed in December
2019 which is described below.
As part of the investment strategy in the UK scheme, it was significantly
de-risked in December 2019. The Group agreed with the Scheme
Trustee a revised funding arrangement for the UK scheme to support
the purchase of the pensioner buy-in policy in respect of the pensioner
members and an assured payment policy (“APP”) in respect of the
deferred members. Under this funding arrangement, the Group expects
to make payments of £18.5 million in 2024 and £ 8.5 million in 2025.
These amounts are what is expected to be required to finalise a buy-in
of the scheme based on the latest estimates from LGAS of c. £27
million. These payments and any other related costs are subject to
change prior to finalisation.
Monitoring, escalating and reporting (audited)
Pension risk is monitored and controlled in line with the requirements of
the Group’s pension risk framework and policy. The surplus or deficit is
monitored on a monthly basis by the Group’s risk team and is currently
reported monthly in both the financial risk report to the Group Assets &
Liabilities Committee and the Group Chief Risk Officer (“CRO”) report to
Group Risk Committee and Board Risk Committee.
Pension risk is also included in the internal stress test process. The
output of these stress tests is reviewed by ALCo and on an annual basis
an ICAAP Report is produced which is a comprehensive analysis of the
Group’s capital position in base and stress scenarios over a three year
horizon. This document is reviewed and approved by the Board and is
submitted to the Joint Supervisory Team.
The pension capital at risk exposure is measured and reported monthly
in the CRO report against a Group Risk Appetite Statement watch
trigger. While the Group has taken certain risk mitigating actions, a level
of volatility associated with pension funding remains due to potential
financial market fluctuations and possible changes to pension and
accounting regulations.
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AIB Group plc
Monitoring, escalating and reporting
Performance against plan is monitored at a business level on a monthly
basis and reported to senior management teams within the business. At
an overall Group level, performance against plan is monitored as part of
the monthly CFO report which is discussed at the Executive Committee
and Board. Monitoring of the risk profile, via the CRO report, including
performance against risk appetite is presented to the Board Risk
Committee. The escalation process, as stipulated under the RAS policy,
is commenced in the event of a breach of either the RAS watch trigger
or limit for any of the metrics. This ensures Board and Regulator
notification within an approved timeframe, when appropriate.
2.5 Operational risk
Operational risk is the risk arising from inadequate or failed internal
processes, people and systems, or from external events. This includes
legal risk - the potential for loss arising from the uncertainty of legal
proceedings and potential legal proceedings, but excludes strategic and
reputational risk.
Identification and assessment
Operational risk is identified and assessed by the Group’s MRA which
also identifies the following sub risks: Information security (including
cyber risk), information technology risk, change and transformation risk,
people risk, physical safety & property risk, continuity and resilience risk,
product and proposition risk, third party risk, data risk (including data
quality risk) and legal risk. The risk and control assessment is the
Group’s core bottom-up process for the identification and assessment of
operational risk across the Group.
The risk and control assessment process serves to ensure that key
operational risks are proactively identified, evaluated, monitored and
reported, and that appropriate action is taken. Self-assessment of risks
is completed at a business unit level and is recorded on SHIELD which
is the Group’s governance, risk and compliance system. Service
assessments and risk assessments are performed on all critical or
important outsourcing arrangements and are recorded on SHIELD.
SHIELD provides all areas with one consistent view of the operational
risks, controls, actions and events across the Group. Risk and control
assessments are regularly reviewed and updated by business unit
management.
The potential impact of the identified risks are then used to inform
scenarios for each of the Basel event categories that are assessed
through the Operational risk ICAAP.
2.4 Business model risk
Business model risk is the risk of not achieving the agreed Group
Strategy and Business Plan, for example, as a result of an inadequate
implementation plan. This also includes the risk of implementing an
unsuitable Strategy, or maintaining an obsolete business model, in light
of known internal and external factors.
Identification and assessment
The Group’s MRA process identifies the key elements of business
model risk. The process includes identifying the associated sub-risks
such as strategic planning risk, strategic execution risk and governance
risk and the emerging risk drivers including inflationary pressures,
macroeconomic uncertainty and market volatility.
The Group also identifies and assesses the risk as part of its integrated
planning process, which encapsulates strategic, business and financial
planning. This process drives delivery of strategic objectives aligned to
the Group’s risk appetite and enables measurable business objectives
to be set for management aligned to the short, medium and long term
strategy of the Group. The outcomes of these processes form the basis
of the Group’s ICAAP and ILAAP.
Every year, the Group prepares three-year business plans based on
macroeconomic and market forecasts across a range of scenarios
(including a range of “downside” scenarios). The plan includes an
evaluation of planned performance against a suite of key metrics,
supported by detailed analysis and commentary on underlying trends
and drivers, across the income statement, balance sheet and business
targets. This assessment includes discussions on new lending volumes
and pricing, deposits volumes and pricing, other income, cost
management initiatives and credit performance. The plan is subject to
robust review and challenge through the governance process including
an independent second line of defence review and challenge by the Risk
function prior to approval by the Board.
The Group plan is supported by detailed business unit plans. Each
business unit plan is aligned to the Group strategy and risk appetite. The
business plan typically describes the market in which the business
operates, market and competitor dynamics, business strategy, financial
assumptions underpinning the strategy, actions/investment required to
achieve financial outcomes and any risks/opportunities to the strategy.
The Group reviews underlying assumptions on its external operating
environment to identify potential risks and, by extension, its strategic
objectives on a periodic basis. The frequency of this review is
determined by a number of factors including the speed of change of the
economic environment, changes in the financial services industry and
the competitive landscape, regulatory change and deviations in actual
business outturn from strategic targets.
Management and measurement
At a strategic level, the Group manages business model risk within its
risk appetite framework, by setting limits in respect of measures such as
financial performance, portfolio concentration and risk-adjusted return.
At a more operational level, the risk is mitigated through periodic
monitoring of variances to plan. Where performance against plan is
outside agreed tolerances or risk appetite metrics, proposed mitigating
actions are presented and evaluated, and tracked thereafter. During the
year, periodic forecast updates for the full year financial outcome may
also be produced. The frequency of forecast updates during each year
will be determined based on prevailing business conditions.
At an individual level, planning targets translate into accountable
objectives to enable performance tracking across the Group and to
facilitate formulation and review of Executive Committee performance
scorecards.
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AIB Group plc
Risk Management continued
2.5 Operational risk continued
Management and measurement
The Operational Risk Framework sets out the principles, supporting
policies, roles and responsibilities, governance arrangements and
processes for operational risk management across the Group. Each sub
risk has a supporting policy in place to outline the minimum control
standards and core policy rules that must be adhered to. The sub risks
are owned and actively monitored under the Operational Risk
Framework and underlying policies to ensure material operational risks
are managed effectively within the Group RAS limits. The Operational
Risk Framework and policies set out the process for risk and control
assessments, identification of the key non-financial risks arising from
key business processes and activities. It also includes the process for
the escalation of the relevant RAS metric limit and watch-trigger
breaches.
In addition, operational risk is partially hedged through an insurance
programme in place, including a self-insured retention, to cover a
number of risk events which would fall under the operational risk
umbrella. These include financial lines policies such as:
• comprehensive crime/computer-crime/cyber/professional indemnity/
civil liability;
• employment practices liability;
• directors’ and officers’ liability; and
• a suite of general insurance policies to cover such things as property
and business interruption, terrorism, employers and public liability and
personal accident.
Operational risk is measured through a series of risk appetite metrics
and key risk indicators. These include metrics on operational risk losses
and events, Information Security (including cyber), change initiatives,
technical risk, people risk, quality and accessibility of priority data,
service availability and third-party risks.
As part of the Group MRA approved by the Board in July 2023 People
risk was approved to be a sub risk of Operational risk as it was primarily
deemed material through its interconnectedness with Operational risk.
Aside from the operational aspect, retention risk will continue to be a
core component of the Group’s People Risk profile. Although the partial
lifting of remuneration restrictions has been helpful in this regard,
ongoing remuneration restrictions increase the risk of losing key senior
talent in the organisation, damaging market credibility and adversely
affecting strategy execution.Culture risk continues to be a material risk
but was transferred from “People and Culture risk” into “Conduct risk
and Culture risk”. These risks will continue to be managed as they are
currently monitored and reported via RAS metrics and key risk indicators
through the CRO report and at the Operational Risk Committee.
Monitoring, escalating and reporting
In addition to risk appetite measures and limits, operational risk is
monitored on a regular basis via the Group’s risk governance
committees. This provides senior management, through the Operational
Risk Committee and Group Risk Committee and the Board (through
Board Risk Committee), with timely updates on the Group’s operational
risk profile. The profile update details the current status of the Group’s
key operational risks and includes an overview of current trends. It also
includes an update on recent major risk events and any remediation
actions/lessons identified following events.
Operational risk events are identified and captured in the
SHIELD system. These are escalated through a defined process
depending on impact and severity. Root causes of events are
determined, and action plans are implemented to ensure there
are enhanced controls in place to keep customers and the business
safe.
2.6 Conduct risk and Culture risk
Conduct risk is defined as the risk that inappropriate actions or inactions
by the Group cause poor or unfair customer outcomes or negatively
impact on market integrity.
The effective management of conduct risk requires embedding of a
strong conduct culture with a customer centric approach to conduct risk
management as articulated in the Group’s values, behaviours and code
of conduct.
The conduct risk priorities for the Group include:
• A Customer First culture, as articulated by the Brand Values,
Behaviours and Code of Conduct, is embedded and demonstrated
throughout the organisation;
• A mature Group Conduct Risk Framework aligned with the Group
Strategy, is embedded in the organisation that provides oversight of
conduct risks at Executive Committee and Board level; and
• Customers, existing and new, are treated in a fair and transparent
way.
Identification and assessment
The Group’s MRA and risk and control assessment forms the basis for
identifying the key elements of Conduct risk.
The Group has identified a number of risk drivers pertaining to conduct
risk and these are reviewed on an annual basis as part of the MRA
process. These include, inter alia:
• Monitoring trends of customer complaints on a regular basis;
• The pace and complexity of changing industry best practice and
clarifications received in relation to regulatory expectations can drive
an accelerated process for changing products, practices, services and
cultures;
• Potential of unintended consequences arising from the scale and
pace of inorganic and strategic change;
• Understanding the implications of the evolving global, European and
Irish economic landscape on short to medium term interest rate
environment;
Increased competition in terms of resources, skills, industry
participants remuneration practices and customer bases;
•
• Negative macroeconomic environment can result in unexpected bank
and/or employee behaviour and potential increased market instability
could result in market conduct risk; and
• Environmental, Social and Governance risks (''ESG'') may result in
poor customer outcomes such as incorrect risk preferences or failing
to identify climate impacts on product offerings.
Conduct risks are identified during the risk and control assessment process
which provides documentary evidence of risk assessments. It determines
the risk profile of the business, drives risk management and actions plans
including key risk indicator development and reporting. A risk register of the
Group’s material risks is also maintained. The risk and control assessment
has identified a number of key conduct risks relating to customer
satisfaction and employee behaviour as well as clients, business and
product practice.
Group Conduct completes horizon scanning and benchmarking
to identify future conduct risk considerations within business and
regulatory environments. In addition, Risk, through the Compliance and
Group Risk Assurance function, identifies upstream conduct risk and
communicates to the relevant business areas.
The amalgamation of Culture risk within conduct has commenced and
further integration through frameworks, policies, procedures and metrics
is planned for 2024. Culture forms an integral part of overall conduct risk
management and is core to all customer and market facing decisions
and interactions. It is imperative that the Group maintains a strong
customer culture in order to deliver appropriate customer outcomes. The
Group’s cultural ambition is that all colleagues truly demonstrate and live
the Group’s values and the behaviours that underpin them. The
challenge is to ensure that the Group’s values are embedded
consistently across the organisation by all employees. The tone is set
from the top leaders have a critical role to play in shaping the Group’s
culture. Culture risk captures the need for the Group’s core values to be
shared by all staff, demonstrated through staff behaviour and that
consistent fully understood performance measures are in place resulting
in outcomes aligned to the Group’s strategy.
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2.6 Conduct risk and Culture risk continued
Management and measurement
The Group has a Conduct Risk Framework and Conduct Risk Policy
which applies to the Group including all subsidiaries. This Framework
and Policy, as well as other supporting policies, are in place to drive the
consistent management of this risk
This Policy includes the approach to vulnerable customers, which is
defined as recognising customers who are in need of additional care,
support or protection. The Vulnerable Customer team are in place to
ensure governance structures are in place for the oversight of the
Vulnerable Customer Programme, developing and ensuring execution of
the Group Vulnerable Customer Action Plan as well as developing and
delivering group level training for staff on customer vulnerability issues.
Where the Group engages in investment and wholesale services and
activities it must implement and maintain adequate policies and
procedures designed to detect any risk of failure by the Group with its
obligations, and put in place adequate measures and procedures
designed to minimise such risk. In particular, it is expected that the
Group is able to demonstrate awareness and management of
Wholesale Market Conduct Risk in the areas of strategy, governance,
culture, risk management and management information
Conduct risk measurement should be considered qualitatively under
normal and stressed conditions. Any new material business
development or change in strategy would also warrant an independent
assessment of conduct risks and potential impact on reputation.
The Group Head of Conduct and team provides independent oversight
and governance of conduct risk across the Group (and is a mandatory
approver of product / propositions proposals), including training and
awareness building.
An approved Group Conduct Strategy, aligned with the Group’s
Purpose, Strategy and Values, is supported by annual Business
Conduct Action plans, delivering against key strategic objectives,
ensuring continued progress on embedding conduct and meeting
evolving regulatory expectations.
The Conduct Risk RAS is recommended by the Compliance Function
and consists of qualitative statements and key risk indicator (''KRI'')
metrics. The KRIs establish specific limits, ceilings and floors that relate
to the qualitative RAS. Risk, through the Compliance & Group Risk
Assurance function, provide independent challenge of potential and
identified conduct risks and provide advice to business segments on
conduct risk issues.
Business conduct dashboards measure key management information
trends under the five key conduct risk areas, as reflected in the Group’s
conduct strategy.
The Group Head of Conduct in the first line of defence is a member of a
number of key working groups and fora regarding the management and
measurement of conduct risk, and provides challenge on RAS metrics
which are monitored monthly, customer solutions and the resolution of
materialised conduct risks.
Monitoring, escalating and reporting
The Group Conduct Committee together with Business Conduct
Committees operating to standard terms of reference actively drive the
conduct agendas and manage conduct risk within their businesses.
Conduct risks are assessed and monitored across the Group in line with
risk management procedures. Significant conduct events are assessed
and remedial actions implemented where necessary. These are
escalated based on a materiality assessment, in line with the Conduct
Risk Framework.
Conduct risks and controls are monitored on a monthly basis via the
Group’s risk governance committees. This provides the Group Risk
Committee and the Board Risk Committee with relevant updates on the
conduct risk profile. The profile update details the current status of the
Group’s key conduct risks, includes an overview of current trends, an
update on recent significant events and any remediation actions or
lessons identified following events.
From a Prudential perspective the Group reports the financial impact of
conduct risk events through the annual operational risk ICAAP, quarterly
COREP submissions and the biennial EBA Stress Testing exercise.
The Regulatory and Conduct Risk Committee (“RCR”) is the forum that
provides risk oversight of regulatory and conduct risks of the Group
including oversight of its subsidiaries. The RCR was established by, and
is accountable to, the Group Risk Committee to oversee regulatory and
conduct risks across the Group. This includes monitoring and reviewing
the Group’s regulatory and conduct risk profile, compliance with risk
appetite and other approved policy limits, reviewing risk policies and
recommending these for approval to the Group Risk Committee.
2.7 Regulatory compliance risk
Regulatory compliance risk is defined in the Regulatory Risk
Management Framework as the risk of legal or regulatory sanctions,
material financial loss, or loss to reputation which the Group may suffer
as a result of its failure to comply with principal laws, regulations, rules,
related self-regulatory codes and related supervisory expectations which
relate to the Group’s regulated banking and financial service activities
i.e., those activities which the Group is licenced to conduct business.
Identification and assessment
The Group’s MRA and RCA forms the basis for identifying the key
drivers of regulatory compliance risk. The associated sub-risks include
prudential regulation risk, conduct of business regulation risk, financial
crime risk and data protection risk. The MRA process also identified that
the complexity and volume of regulatory change and the rapidly evolving
international sanctions environment, raises the risk of regulatory
compliance failure and/or regulatory sanction.
The key areas of focus of both the Central Bank of Ireland (“CBI”) and
the Joint Supervisory Teams (“JST”) includes:
• Regulated firms, that are subject to the regulation from the CBI and
JST, are fully compliant with their obligations and are treating their
customers, existing and new, in a fair and transparent way, including
the embedding of directives and regulations;
• Continued focus on the full implementation of the suite of prudential
requirements including Capital Requirements Directive (“CRD”) and
Capital Requirements Regulation (“CRR”), and the binding technical
standards and guidelines;
• CBI Consumer Protection Outlook report and Dear CEO letters;
• Climate and ESG issues where the CBI has noted its expectations for
firms including the requirements relating to governance, risk
management frameworks, scenario analysis, disclosures as well as
strategy and business model risks.
Management and measurement
The Regulatory Compliance Risk Management Framework sets out the
principles, roles and responsibilities, and governance arrangements and
is supported by a number of key policies.
The compliance mandate aims to ensure that the Group understands
the externals rules, laws, regulations and codes which apply to the
Group’s regulated activities and the implications of any non-compliance.
In addition, the mandate supports internal compliance with the Group’s
suite of Regulatory Compliance and Conduct Policies and Standards,
promotes the Group’s ethos of acting with integrity, honesty and fairly in
all its dealings with colleagues, customers, and stakeholders.
The Group Regulatory Compliance Risk Management Framework and
the regulatory compliance risk management lifecycle commences with
upstream regulation risk management.
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Risk Management continued
2.7 Regulatory compliance risk continued
The Regulatory Change Team (''RCT'') reside within the Regulatory
Compliance Team and provide oversight and support in respect of
regulatory change risk management. The approach to regulatory change
has been designed to ensure regulatory requirements are clearly
understood from the outset with end-to-end traceability monitored by the
Regulatory Forum as part of Group Programme Board ('‘GPB'’). It
involves an up-front partnership between the Regulatory Change Team
and Change Operations to ensure business stakeholders are identified
with roles and accountabilities assigned. The process provides a
platform for clear monitoring, communication, effective oversight, robust
challenge and the pursuit of regulatory compliance in a collaborative
manner across both the first and second line of defence.
The regulatory compliance risk management lifecycle is reviewed on an
annual basis by the various teams within Compliance. In order to
produce a comprehensive holistic view of regulatory compliance risks
across the Group, detailed risk assessments are completed based on
the premise of identifying the regulatory compliance risks which pose
the most significant threat to the Group. Risk identification and
assessment is carried out through a combined top-down and bottom-up
approach. The output of this risk assessment process is to produce the
Compliance & Risk Assurance Plan.
Monitoring, escalating and reporting
Regulatory compliance risks are monitored on a monthly basis via the
Group’s risk governance committees. This occurs initially at the
Regulatory and Conduct Risk Committee (“RCR”) and key items are
brought through to Group Risk Committee (“GRC”) and Board Risk
Committee (“BRC”) for discussion and escalation where appropriate.
This includes an update on recent significant events and any
remediation actions or lessons identified following events.
The RCR is the forum that provides risk oversight of regulatory and
conduct risks of the Group including oversight of its subsidiaries. The
RCR was established by, and is accountable to, the GRC, to oversee
regulatory and conduct risks across the Group, including monitoring,
reviewing the regulatory and conduct risk profile, compliance with risk
appetite and other approved policy limits. It is also responsible for
reviewing risk policies and recommending these for approval to
the GRC.
Regulatory Compliance establish written guidance to staff on the
appropriate implementation of relevant laws, rules and standards
through relevant regulatory compliance policies and support the first line
business units in understanding and implementing their regulatory
compliance obligations and management of the associated regulatory
compliance risks in line with the Regulatory Compliance and Conduct
Risk Appetite Statements. As part of their role engaging with the first
line, Regulatory Compliance assist the business in maintaining a
positive and transparent relationship with the Regulators in respect of
regulatory compliance and conduct matters.
Group Risk Assurance (“GRA”) provides independent review and
objective assurance on the quality and effectiveness of the Group’s
internal control system, including the Risk Governance Policies and
Frameworks in accordance with a Board approved risk-based assurance
plan.
2.8 Capital adequacy risk (audited)
Capital adequacy risk is the risk that the Group breaches or may breach
regulatory capital ratios and internal targets, measured on a forward
looking basis across a range of scenarios, including a severe but
plausible stress.
Identification and assessment (audited)
An annual MRA is conducted to identify all relevant (current and
anticipated) material risks which are then assessed from a capital
perspective. The sub-risks are identified as part of the MRA process
including risks surrounding the quality and composition of capital as well
as measurement and forecasting risk. Capital adequacy risk is primarily
evaluated through the annual financial planning and the Group’s ICAAP
processes where the level of capital required to support growth plans
and meet regulatory requirements is assessed over the three year
planning horizon. Plans are assessed across a range of scenarios
ranging from base case and moderate downside scenarios to a severe
but plausible stress using the Group’s stress testing methodologies.
Management and measurement
The ICAAP is fully integrated and embedded in the strategic, financial
and risk management processes of the Group. The Business Model and
Capital Adequacy (BMCA) Framework sets out the key processes,
governance arrangements and roles and responsibilities which support
the ICAAP. The BMCA Framework was updated in 2023 to reflect the
work of the Climate Stress Testing project regarding Climate Stress
Testing models, roles and responsibilities and governance requirements
relating to climate stress testing across the Group. The climate stress
testing approach and associated models consider the impact of physical
and transition risks across a number of scenarios on the Group’s
exposures. The initial scope of climate stress testing activities and
climate modelling in the Group is primarily focused on the credit risk
implications for its loan portfolio via both transition and physical risk
(See Climate & Environmental Risk on pages 193 to 196). Embedding of
the ICAAP is facilitated through capital planning, the setting of risk
appetite and risk adjusted performance monitoring. In addition to the
capital plan, a capital contingency plan is in place which identifies and
quantifies actions which are available to the Group in order to mitigate
against the impact of a stress event. Trigger points at which these
actions will be considered are also identified. The impact of changing
regulatory requirements, changes in the risk profile of the Group’s
balance sheet, other internal factors, and changing external risks are
regularly assessed by first and second line of defence teams via regular
monitoring of performance against the agreed financial plan, monthly
capital updates to ALCo and Group Risk Committees and are also
assessed via quarterly internal stress testing. A further set of triggers
and capital options are set out in the Group’s Recovery Plan, which
presents the actions available to the Group to restore viability in the
event of extreme stress.
The Group uses risk adjusted return on capital for capital allocation
purposes and as a behavioural driver of sound risk management. The
use of risk adjusted return on capital for portfolio management and in
new lending decisions continues to be an area of focus and a key
consideration for pricing of lending products, both at portfolio level and
individually for large transactions.
The Board reviews and approves the ICAAP on an annual basis and is
also responsible for approving a capital adequacy statement attesting
that the Board has reviewed and is satisfied with the capital adequacy of
the Group.
Monitoring, escalating and reporting (audited)
The Group monitors its capital adequacy on a monthly basis through
a capital reporting pack which is presented to senior executives and
Board setting out the evolution of the Group’s capital position. The risk
profile, including performance against risk appetite, is presented to the
BRC via the CRO report which is produced independently by the second
line of defence. The escalation process, as stipulated under the RAS
policy, is commenced in the event of a breach of either the RAS watch
trigger or limit for any of the metrics. This ensures Board and Regulator
notification, where appropriate, within approved timeframes. The output
of internal stress tests is reviewed by ALCo and, on an annual basis, an
ICAAP report is produced which is a comprehensive analysis of the
Group’s capital position in base and stress scenarios over a three year
horizon. The ICAAP document is reviewed and approved by the Board
and is submitted to the Joint Supervisory Team, where it forms the basis
of their supervisory review and evaluation process.
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2.9 Model risk
Model risk is the potential loss to the Group, as a consequence of
decisions that could be principally based on the output of models, due to
errors in the development, implementation or use of such models.
Identification and assessment
The Group’s MRA and the risk and control assessment forms the basis
for identifying the key elements of the risk. The MRA identifies the key
sub-risks including oversight risk, data risk, development risk, use and
implementation risk. The RCA is the Group’s core bottom-up process in
the identification and assessment of model risk across the Group.
The RCA includes a requirement to perform a self-assessment of the
risks at each business unit level. The potential impact of model risk is
assessed through the ICAAP. Model risk is generally mitigated through
specific model adjustments. There is no explicit capital requirement
generated from this risk; it is indirectly assessed through the other risks.
Management and measurement
There is a Model Risk Framework and supporting policies in place to
drive the consistent management of this risk. This sets out the key
controls required to mitigate model risk across the model lifecycle, from
initiation of a model build through to implementation, use and ongoing
monitoring. The key controls include:
• A complete inventory of all models in the Group, with a clear tiering of
models to ensure key controls such as model validation and
monitoring are being applied on a risk-based approach;
• Requirement for clear hand-offs between each stage in the lifecycle to
mitigate the risk of issues propagating through the lifecycle of the
model;
• Models are built, validated and monitored by suitably qualified
analytical personnel, supported by relevant business, risk and finance
functions;
• The best available data, both internal and external, must be used, and
any data weaknesses are appropriately mitigated through the model
build;
• The use of industry standard techniques are applied for stages in the
model lifecycle where appropriate; and
• All material models are validated by an appropriately qualified team
which is independent of the model build process. Where issues are
identified, appropriate mitigants are applied. This can include
temporary post model adjustments which are put in place until a
model is re-developed.
Model risk is measured using a composite assessment of model
outcomes across the lifecycle for all models in the inventory.
Monitoring, escalating and reporting
The GRC and its sub-committee, the Model Risk Committee, are the
primary committees for overseeing model risk in the Group. Model
materiality is defined in the Group Model Risk Management Policy. The
outcomes of validation and other reviews are brought to the appropriate
committee(s) for oversight to ensure all models remain fit for their
intended use and that any issues are appropriately escalated.
Model monitoring on material models is reported to committee(s)
quarterly to ensure the models are performing as expected, with
appropriate actions raised when models fall below the required
performance levels.
An overall assessment of model risk is performed on a quarterly basis
and is reported to the Group Risk Committee and Board Risk
Committee. The status of model risk is reported on a monthly basis in
the CRO report, which includes an update on recent significant events
and any remediation actions that are underway.
2.10 Climate and Environmental risk
Climate risk is defined as the potential negative impacts due to climate
change on the Group. This includes risks posed by direct exposure to
climate change, and indirect exposure through customers and suppliers.
Climate Risk includes the impacts that the Group and its customers and
suppliers have on the climate and the impact from the climate on the
Group and its customers and suppliers.
Environmental risk is defined as the potential negative impact of the
activities or actions of the Group, its customers or suppliers, directly or
indirectly to the naturally occurring living and non-living components of
the Earth, together constituting the biophysical environment. Changes in
the state of nature (quality or quantity), may act as drivers on the
Group’s financial performance through risk events and could result in
changes to the capacity of nature to provide social and economic
functions.
Climate and Environmental Risk (C&E Risk) can arise from:
• Physical risk: defined as the potential negative financial impact to the
Group of a changing climate, including more frequent extreme
weather events and gradual changes in climate, as well as
environmental degradation, such as air, water and land pollution,
water stress, biodiversity loss and deforestation. Physical risk is
categorised as acute when it arises from extreme events including
droughts, floods and storms, and chronic when it arises from
progressive shifts, such as increasing temperatures, a rising sea-
level, water stress, biodiversity loss, land use change, habitat
destruction and resource scarcity. This can directly result in damage
to property or reduced productivity, or indirectly lead to subsequent
events, such as the disruption of the Group’s supply chains.
• Transition risk: defined as the potential negative financial impact to
the Group that can result, directly or indirectly, from the process of
adjustment towards a lower-carbon and more environmentally
sustainable economy. This could be triggered by the adoption of
policies and legal requirements including regulations on products and
services as well as policy support for low carbon alternatives. It
encompasses the risks associated with implementing technological
advancements to replace existing products with lower emission
options as well as changes in market sentiment relating to customer
demands and preferences.
• Liability Risk: Physical risk, transition risk and non-compliance of
regulations could potentially lead to further financial exposures for the
Group, stemming directly or indirectly from legal claims or regulatory
enforcement.
Identification and assessment
The Group’s MRA identified C&E as a new principal risk for the Group
and was approved by the Board in the second half of the year.
The MRA is an annual top-down process, identifying the Group’s
material risks in line with the Group’s Risk Management Framework,
taking into account the Group’s strategic objectives, in addition to
internal and external risk sources including climate related and
environmental factors. The material risk assessment is a key input into
the Group’s risk management processes, including the Risk Appetite
Statement (RAS), which sets out the maximum amount of risk the Group
is willing to accept.
The impact and likelihood of potential climate risks have been assessed
in the short (<3 years), medium (>=3-10 years), and long-term (10+
years) time horizons. There were several factors assessed to determine
the materiality of these impacts across the Group’s material risks
including reputation, regulatory, financial losses and impact on business
objectives. The Group is continuing to develop its risk management
approach on the assessment of climate risks impacting other risks,
supported by appropriate tools and methodologies.
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Risk Management continued
2.10 Climate and Environmental risk continued
The RCA process is the detailed bottom-up risk assessment identifying
the risks arising from the Group’s processes and business activities. The
risks are recorded on SHIELD which is the Group’s governance, risk
and compliance system. During 2023, SHIELD’s capability was
enhanced to capture the environmental, social and governance (ESG)
risks, providing an understanding of the Group’s climate risk profile.
Climate and Environmental risk is also assessed within other risk
management tools including the Physical Risk and ESG Sectoral
Risk heatmaps.
The Group uses these heatmaps to align its business practices with
sustainable and environmentally standards and to identify the short
(<3 years), medium (>=3-10 years), and long-term (10+ years) risks that
are facing the Group.
The Group’s Physical Risk and the ESG Sectorial Risk Heatmaps are
outlined as follows:
• Physical Risk Heatmap serves as a visual tool used to identify the
physical impact of C&E risks on the Group, including its own buildings
and customers across Ireland and the UK. The heatmap supports the
qualitative approach to assess the Group’s exposure of physical risks
across various geographies. The main physical risk impacting the
Group pertains to the increased frequency and intensity around
flooding. The Group has prioritised the assessment of flood risk when
considering its exposure. In this regard, the Group continues to
progress work to enhance its flood risk management capabilities. In
addition, the heatmap is also used to identify and assess the physical
flood risk as part of the Group’s assessment of collateral under Pillar
3 CRR Article 449a, showing “sensitivity” to physical risk for non-
financial corporate’s secured by immovable property under an
adverse climate scenario.
• ESG Sectoral Risk Heatmap is a qualitative approach to identifying
priority risk sectors areas for ESG impact assessment. The ESG
Questionnaire has been incorporated into the credit application
process for customers in high risk transition sectors on new lending
over €/£300k, which have been identified as carrying increased
transitional environmental, social and governance related risk. The
ESG sectoral heat-map is used to identify the high risk sectors in
scope for the questionnaire. The questionnaire has both generic and
sector specific questions on a range of topics from Climate &
Environmental risk specific matters to social considerations such as
human rights and diversity to determine an ESG risk rating. The ESG
questionnaire output is an additional factor for consideration in the
credit decisioning process.
Stress Testing
The impact of C&E risk is incorporated in the Group’s stress testing
framework by conducting a comprehensive scenario analysis to
evaluate the potential impact of various climate-related events on the
Group’s portfolios, operations and overall financial position. Scenario
testing enables the Group to assess the interconnectedness of risks,
considering not only direct physical risks but transition risks arising from
shifts in market dynamics, investor sentiment and regulatory
landscapes. The Group participated in the ECB Climate Stress Tests in
early 2022 where it was evident that the scale of the economic shocks
applied was quite modest compared to those applied in non-climate
stress testing for ICAAP and ECL calculations. In 2024, the Group is
also participating in the European Banking Authority (“EBA”) “Fit-for-55”
climate risk scenario analysis exercise, which aims to assess the
resilience of the financial sector in line with the “Fit-for-55” EU plan for
green transition.
The Business Model and Capital Adequacy Framework and the Stress
Testing Policy were updated in 2023 to reflect the outcome of the Climate
Stress Testing project. As such, these outcomes included changes to
climate stress testing models, roles and responsibilities and governance
requirements relating to climate stress testing across the Group. The
Group’s Stress Testing Policy sets out the key processes, governance
arrangements and roles and responsibilities around stress testing.
The climate stress testing approach and associated models consider the
impact of physical and transition risks across a number of scenarios on
the Group’s exposures. The initial scope of climate stress testing
activities and climate modelling in the Group is primarily focused on the
credit risk implications for the loan portfolio via both transition and
physical risk. This is where the most material impact of climate stresses
impacts the Group with the approach covering all customer loans and
advances on the balance sheet.
The Group has identified that flooding is the most material physical risk to
the Group. The Group is exposed to the risk that flooding will adversely
affect the value of properties collateralising the Group’s lending. The
Group’s physical risk model assess the potential impact of this risk. In
2023, the Group completed the development of an enhanced flood-risk
model to support the quantification of flood-related risks. The newly
developed model represents a significant step forward in terms of both
granularity and flexibility relative to previous approaches which were
based on the 2022 ECB Climate Stress test methodology.
As a first step, the new model locates individual properties and overlays
a series of flood maps corresponding to river, coastal and surface water
flood events. This is repeated for a range of return periods (1-in-20-year,
1-in-100 year) allowing for a probability distribution of flood levels to be
calibrated for each property. The damage to each property for a given
level of flooding is estimated based on building type and flood type.
Estimates of rebuild costs and insurance coverage are overlaid to
calculate the net cost of repair. Additional property price adjustments are
applied to reflect the reduced desirability of properties that are prone to
flooding. The model is used to determine both average and expected
flood damage costs and the impact of hypothetical acute flood events.
This approach can be applied to reflect current climate conditions or
climate conditions as they are projected to be in the future under a
range of science-based scenarios.
The Group is exposed to risk through the potential negative impact on
the credit worthiness of its customers associated with the uncertainties
and challenges associated with a transition to a more sustainable low-
carbon economy. The Group quantifies this potential impact using
transition risk models with carbon emissions charges. In 2023, the
Group developed two new transition risk models, one for Retail
(Mortgages) and one for Non-Retail. The newly developed models
represent a significant step forward in terms of balance sheet coverage,
risk groupings, data sources and macroeconomic scenarios relative to
previous approaches based on the 2022 ECB Climate Stress test
methodology.
The Retail Model transition risk focused scenario focuses on the impacts
of additional (hypothetical) carbon emissions charges. This tax would
affect disposable incomes which in turn may present challenges for
customers and the Group, depending on how unexpected they are and
how punitive the taxes. The stress test output is an analysis of the
potential impacts of this scenario to the mortgage book, where charges
are applied based on the carbon emissions of homes.
The Non-Retail transition risk focused scenario proposes carbon
emissions charges to other non-retail borrowers. This tax will affect
borrower’s affordability by reducing profits, which in turn may present
challenges for the Group, depending on how unexpected and punitive
they are. Charges are applied in this model, based on the scope of
carbon emissions of the NACE sector in which the borrower operates.
A sub-section, covering Agricultural borrowers, is stressed separately,
due to differences in cost structures in farms and SMEs. The data
available regarding carbon emissions, and the measures borrowers can
take to reduce the impact of the emissions tax, also differ for Agricultural
borrowers versus Corporates and SMEs. The stress test output provides
an analysis of the potential impacts of this scenario to the Non-Retail
borrowers.
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Monitoring, escalating and reporting
C&E risk is monitored through internal and external reporting across the
Group. The primary internal risk report, the CRO report, dedicates a
section to C&E risk providing the Group Risk Committee and the Board
Risk Committee with relevant updates on the C&E risk profile. The
profile encompasses the key developments around the risk, planned
initiatives and reports on the performance against risk appetite.
The monitoring and reporting of the C&E quantitative RAS metrics are
conducted monthly. The escalation process, as stipulated under the
RAS policy, is commenced in the event of a breach of either the RAS
watch trigger or limit for any of the metrics. This ensures Board and
Regulator notification within an approved timeframe, when appropriate.
The Group has stated clear ambition for 70% of new lending to be green
or in transition by 2030 and has a target to achieve Net Zero in financed
emissions by 2040 for the lending portfolio (2050 including Agriculture).
To support these net zero ambitions, the emissions of the Group’s
lending across Corporate Lending, Residential Property, Commercial
Real Estate and Electricity Generation have been benchmarked and
targets adopted.
Annual financed emission targets for 75% of the Group’s lending
portfolio (as at 31 December 2021), outlining what the Group needs to
achieve by 2030 in terms of a reduction in emissions relating to its
lending portfolio, have been adopted by the Board and externally
validated by the Science Based Targets Initiative (SBTi). For each of the
financed emissions targets, the key business actions that support these
emission reductions have been identified and are incorporated into
annual business planning process.
The Group actively monitors the progress of achieving the Board
approved sustainability targets via the Climate Dashboard. The metrics
contained in the dashboard are reported in the CRO report, to the Group
Sustainability Committee (GSC) and the Sustainable Business Advisory
Committee (SBAC).
2.10 Climate and Environmental risk continued
Risk Models
Group models are being enhanced for climate risk including
redeveloped physical risk and transition risk models mentioned above.
These are governed by the Model Risk Committee (MRC) see page 193
for further information.
Data management
Data management is a key element of the Group’s C&E risk identification,
risk management and internal risk reporting. In line with supervisory
expectations the Group has a data governance framework allowing for the
identification, management, monitoring and reporting of these risks.
Management and measurement
In December 2023, Board Risk Committee approved the Climate &
Environmental (C&E) Risk Framework. It sets out the principles, roles
and responsibilities, governance arrangements and processes for C&E
risk management across the Group. The C&E Risk Framework sits
within the overall group risk architecture and is one of the material risk
frameworks supporting the Group’s Risk Management Framework.
The C&E Risk Framework is underpinned by the C&E risk policy (which
was also approved in December), ensuring that the C&E risk is
managed in line with the Group’s overall purpose, the five key strategic
pillars as well as the Group’s strategic objectives.
Due to the pervasive nature of C&E risk and its impact on other principal
risks, the C&E risk management aspects for these principal risks are
incorporated within their relevant risk frameworks and policies, including
environmental sector specific considerations within the Group’s credit
risk policies and regulatory related risks within the regulatory compliance
policies, see table on Page 196.
The ESG Framework, which was launched in December 2022, ensured
that the Group’s approach to the management of ESG was clearly
defined and well understood, from the Board and down through all
operations. In line with our continued progress, the ESG Framework will
be retired over the course of 2024 and the agenda will be managed
through the C&E Risk Framework and policy, as well as other existing
Frameworks and governance structures in place.
Articulation of the Group’s C&E risk appetite and tolerance is expressed
through the qualitative statements about the nature and type of risk that
the Group is willing to accept, and quantitative RAS metrics that define
the range of acceptable risk. For 2024, there are seven C&E qualitative
statements that help articulate appropriate areas of climate-related risk
appetite. In addition the Group has approved two new quantitative C&E
RAS metrics with escalation measures in place in case of breaching the
relevant thresholds.
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Risk Management continued
2.10 Climate and Environmental risk continued
In line with TCFD requirements, the table below sets out the risks identified as being impacted by climate-related risks (physical and transition risks)
as well as the processes for identifying, assessing and managing these risks across the short, medium, and long-term horizons.
Principal Risks
Risks
Conduct risk and
Culture risk
Credit risk
Liquidity and
Funding risk
Model risk
Operational risk
Conduct risk can emerge from interruptions to
customer services as a result of acute or chronic
climate conditions. In addition, in managing the
Group's exposure to physical risk, underwriting
standards (and/or changes thereof) have the
potential to have an adverse impact on
customers.
The risk of a decrease in value of the properties
collateralising the Group’s lending or that these
properties become stranded assets as a result of
physical risk, impacting the ability to dispose of
assets which may result in increased loan defaults
and losses.
The risk of liquidity loss through deposit outflows
or erosion of the liquidity buffer due to disruptions
or damages to assets (including property) and
businesses, impacting negatively on the Group’s
liquidity and funding risk profile.
The risk that the adverse effects of climate
change are not correctly incorporated into the
Group's climate risk models thereby impacting the
accuracy and reliability of these models.
The risk of disruptions to the Group's operations,
property damage, power outages and the impact
of third party supply chain interruptions due to the
increasing frequency and severity of extreme
weather events.
Time Horizon
Short
<3
years
Medium
>=3-10
years
Long
10+
years
Short Medium
Long
How are we responding?
Ensuring consideration of C&E risk within the conduct
risk and culture risk processes.
Long
Long
The Group utilises a physical risk heatmap to identify
the primary physical risks it faces. Considerations in
respect of the main physical risk identified from the
heatmap is included in guidance for collateral
valuation instructions, and in 2023 investment was
made into a tool to assist identification of flood risk for
new large commercial collateral property assets.
Liquidity and funding risk includes C&E risk
considerations to ensure that that the liquidity and
funding profile is appropriate for its asset mix and a
sufficient liquid buffer of appropriate quality is provided
to protect the Group from any liquidity stresses.
Short Medium
Long Model risk management ensures that climate model
risk is appropriately managed within each stage of the
model risk management lifecycle.
Long
Business model
risk
The failure to execute the Board's sustainability
commitments could result in potential damage to
the Group's reputation and the imposition of
regulatory penalties.
Short Medium
Long
Conduct risk and
Culture risk
The failure to deliver sufficient supports to
customers where transition to new services,
upgrades etc are required as part of the
organisations transition to a low carbon economy.
Credit risk
Model risk
Regulatory
Compliance risk
The challenges and uncertainties associated with
the transition to a more sustainable and low-
carbon economy can potentially impact the Group
if is exposed to customers in high and medium
risk sectors as their creditworthiness may decline
(e.g.by higher carbon taxes affecting costs etc).
The risk may emerge due to the absence of
standardised tools and methodologies for
incorporating the transition risk linked with climate
and environmental risk into the Group's models.
The failure to implement regulatory and strategic
changes may lead to non compliance resulting in
regulatory sanctions, reputational damage and
legal consequences.
Medium
Long
Medium
Long
Short Medium
Long
The management of C&E risk takes place via the
oversight and assurance of third-party suppliers,
continuity and operational resilience risk management
as well as the protection of staff, customers, visitors,
contractors, consultants, agents, third parties and
assets (including property) in all its locations and
operations. This ensures adherence to statutory
obligations with respect to health and safety as well
as security industry standards and practices.
C&E risk is considered as a risk of not achieving the
agreed Group’s Strategy or approved business plan.
This can be either as a result of an inadequate
implementation of the plan, or the inability to secure
the required investment.
Conduct risk and Culture risk includes the
consideration of C&E risk when reviewing potential
changes to services or propositions to ensure
customer segments are not unfairly disadvantaged or
negatively impacted as a result.
The integration of C&E risk as a consideration within
credit risk management policies and processes. For
example the Group's ESG Questionnaire is
incorporated into credit applications for customers in
high C&E Risk transition sectors where new lending is
over €/£300k.
On an ongoing basis, Group models are enhanced for
climate risk including redevelopment of physical risk
and transition risk models.
Long
Regulatory compliance risk consider C&E risk when
ensuring effective compliance with the applicable
obligations which protects the Group's customers and
its business.
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AIB Group plc
Financial statements
1.
2.
3.
4.
5.
6.
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated financial statements
Notes to the consolidated financial statements
AIB Group plc company financial statements
Notes to AIB Group plc company financial statements
199
200
210
216
315
318
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AIB Group plc
Statement of Directors’ Responsibilities
The following statement which should be read in conjunction with the Statement of Auditor’s Responsibilities set out in their Audit Report, is made
with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the Auditors in relation to the financial
statements.
The Directors are responsible for preparing the Annual Financial Report and the Group and Company financial statements, in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law, the Directors are
required to prepare the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the EU
and Article 4 of the IAS Regulation and have elected to prepare the Company financial statements in accordance with IFRSs as adopted by the EU
and as applied in accordance with the provisions of the Companies Act 2014.
In preparing both the Group and Company financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State that the financial statements comply with IFRSs as adopted by the EU; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that its financial statements comply with the Companies Act 2014. They are also responsible for taking
such steps as are reasonably open to them to safeguard the assets of the Group and Company and to prevent and detect fraud and other
irregularities. Under applicable law and corporate governance requirements, the Directors are also responsible for preparing the Directors’ Report
and the reports relating to the Directors’ remuneration and corporate governance that comply with that law and the relevant listing rules of Euronext
Dublin (the Irish Stock Exchange) and the UK Listing Authority.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors whose names and functions are listed on pages 70 to 73 confirm, to the best of their knowledge and belief, that:
• They have complied with the above requirements in preparing the financial statements;
• The Group financial statements, prepared in accordance with IFRSs as adopted by the EU as applied in accordance with the provisions of the
Companies Act 2014 and Article 4 of the IAS Regulation, give a true and fair view of the state of the Group’s affairs as at 31 December 2023 and
of its profit for the year then ended;
• The Company financial statements prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of
the Companies Act 2014, give a true and fair view of the state of the Company’s affairs as at 31 December 2023;
• The Directors’ report provides a fair review of the development and performance of the business and the financial position of the Group, together
with a description of the principal risks and uncertainties faced by the Group; and
• The Annual Financial Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to
assess the Group’s and the Company’s position and performance, business model and strategy.
For and on behalf of the Board
Jim Pettigrew
Chair
5 March 2024
Colin Hunt
Chief Executive Officer
Donal Galvin
Chief Financial Officer
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AIB Group plc
Independent auditors’ report
Independent auditors’ report to the members of AIB Group plc
Report on the audit of the financial statements
Opinion
In our opinion, AIB Group plc’s consolidated financial statements and Company financial statements (the “financial statements”):
• give a true and fair view of the Group’s and the Company’s assets, liabilities and financial position as at 31 December 2023 and of the Group’s
profit and the Group’s and the Company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and,
as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2014; and
• have been properly prepared in accordance with the requirements of the Companies Act 2014 and, as regards the consolidated financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Financial Report (the “Annual Report”), which comprise:
•
•
•
•
•
the Consolidated and Company Statement of Financial Position as at 31 December 2023;
the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year then ended;
the Consolidated and Company Statement of Cash Flows for the year then ended;
the Consolidated and Company Statement of Changes in Equity for the year then ended; and
the Notes to the Consolidated and Company financial statements, which include a description of the accounting policies.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are
cross-referenced from the financial statements and are identified as audited.
Our opinion is consistent with our reporting to the Board Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (“ISAs (Ireland)”) and applicable law. Our responsibilities
under ISAs (Ireland) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in
Ireland, which includes IAASA’s Ethical Standard as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by IAASA’s Ethical Standard were not provided to the Group
or the Company.
Other than those disclosed in note 13 to the financial statements, we have provided no non-audit services to the Group or the Company in the
period from 1 January 2023 to 31 December 2023.
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Our audit approach
Overview
Materiality
Overall materiality
• €57.5 million - Consolidated financial statements.
• Based on c. 2.4% of profit before tax.
• €57.0 million - Company financial statements.
• Based on c. 0.4% of total equity.
Performance materiality
• €43.2 million - Consolidated financial statements.
• €42.8 million - Company financial statements.
Audit scope
• We completed a full scope audit of the financial information of Allied Irish Banks, p.l.c., EBS d.a.c. and AIB
Mortgage Bank Unlimited Company. In addition, we directly instructed PwC UK to conduct and report to us on a full
scope audit of the consolidated financial information of AIB Group (UK) p.l.c.
• Specific audit procedures on selected account balances, classes of transactions or disclosures were performed for
other entities within the Group based on our assessment of the risk of material misstatement and of the materiality
of the Group’s operations in these entities.
• The significant components subject to full scope audit accounted for in excess of 90% of both of Profit before Tax
and Total Assets.
Key audit matters
• Expected credit loss (i) completeness and valuation of the post model adjustments (ii) judgements taken on
individually assessed exposures
IT (Privileged User Access)
•
• Recoverability of the Deferred Tax Assets
• Recoverability of investment in subsidiary (Company only)
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override
of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due
to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not
a complete list of all risks identified by our audit.
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Independent auditor’s report continued
Key audit matter
Expected credit loss (i) completeness and valuation
of the post model adjustments (ii) judgements taken
on individually assessed exposures
How our audit addressed the key audit matter
Controls
In conjunction with our credit modelling specialists, we performed end-
to-end process walkthroughs to understand and identify the key
systems, applications and key controls used in the ECL processes.
Refer to Note 1 (q) “Impairment of financial assets” within Note 1
“Accounting policies”, “Impairment of financial assets” within Note 2
“Critical accounting judgements and estimates”, Note 12 “Net credit
impairment charge”, Note 19 “Loans and advances to customers” and
Section 2.1 “Risk management - Credit risk” of the Risk management
report.
At 31 December 2023, the Group reported total gross loans to
customers classified at amortised cost of €67.0bn and €1.52bn of
expected credit loss (ECL).
The measurement of expected credit losses is required to reflect an
unbiased probability-weighted range of possible future outcomes.
Complex models and significant judgements are used to estimate the
probability of default (PD), loss given default (LGD) and exposure at
default (EAD) as well as in applying the staging criteria under IFRS 9.
The calculation of ECL requires a high degree of judgement to reflect
recent developments in credit quality, arrears experience and / or
emerging macroeconomic risks.
The two key areas where we identified greater levels of management
judgement and therefore increased levels of audit focus in the Group's
compliance with IFRS 9 were
1. Completeness and valuation of post model adjustments (PMAs)
The judgement surrounding the completeness and valuation of PMA’s
represents a significant estimation risk. The modelling methodologies
used to estimate ECL are developed using historical experience.
Adjustments are made to model outcomes to address known model
and data limitations, and emerging or non-modelled risks. In addition,
modelling methodologies do not incorporate all factors that are relevant
to estimating ECL. The current economic environment continues to be
uncertain and differs from recent experience, which is characterised
by elevated inflation, increased cost of living and increasing costs of
financing, which affects the debt servicing capability for borrowers.
As a result, the judgements around if and when the Group recognise
adjustments to model outcomes to account for potential model
weaknesses in coping with the current economic environment and
outlook are highly judgemental and inherently uncertain.
2. Individually assessed ECL (Stage 3)
The judgements applied with respect to the measurement of
impairment of Stage 3 individually assessed loans represents
a significant estimation risk. For individual provision assessments of
larger exposures in Stage 3, the significant judgements in determining
provisions are the completeness and appropriateness of the potential
workout scenarios identified, the probability assigned to each identified
potential workout scenario and the valuation assumptions used in
determining expected recoveries.
Other assumptions
Management makes other assumptions which are less judgemental or
for which variations have a less significant impact on ECL. These
assumptions include:
• Conceptual soundness of the modelling methodologies;
• Quantitative and qualitative criteria used to assess significant
increases in credit risk which drives the allocation of assets to Stage
1, 2, or 3 using criteria in accordance with the accounting standards;
• Accounting interpretations, modelling assumptions and data used to
build and run the ECL models; and
•
Inputs and assumptions used to reflect the impact of multiple economic
scenarios, including any changes to the forward looking scenarios.
We tested the design and operating effectiveness of key controls
across the processes relevant to management’s ECL calculation,
including those relating to the key judgements and estimates involving
our credit modelling specialists where appropriate. We also tested
the design and operating effectiveness of key controls over the
governance of the estimation of ECL. We attended key executive
finance and risk committee meetings where the inputs, assumptions
and adjustments to the ECL were discussed and approved and
observed management’s review and challenge in these governance
forums including the assessment of model limitations and any
resulting judgemental post model adjustments.
Conceptual Soundness
We performed a risk assessment on the models involved in the ECL
calculation to determine the models to test and the nature of the
testing required in respect of the individual models. We involved credit
modelling specialists to assist us in testing the ECL models by testing
the assumptions, inputs and implementation of model formulae. This
included a combination of assessing the appropriateness of model
design, challenger/sensitivity analyses, recalculating the Probability
of Default and Loss Given Default and testing model implementation.
In conjunction with our credit modelling specialists, we assessed
model governance including model validation and monitoring. This
included assessing model performance by evaluating variations
between observed data and model predictions and developing an
understanding and assessment of model limitations and remedial
actions. We enquired of the model development and validation teams
to assess whether the basis for significant model enhancements
introduced were reasonable.
Post Model Adjustments
In conjunction with our credit modelling specialists, we evaluated
the conceptual soundness of the PMAs by critically assessing
management’s rationale and methodology, including the limitation
and / or risk that the PMA is seeking to address.
We inspected the PMA calculation methodology and tested, on
a sample basis, the completeness and accuracy of key data inputs
into the PMA calculation.
We challenged the overall completeness and reasonableness of
post model adjustments by comparing the PMAs recognised by
management to the key model limitations and / or data limitations
that we considered to exist in the portfolio.
Individually assessed stage 3 assets
For a sample of credit-impaired loans, we assessed the exposures
to determine if they met the definition of credit impaired under IFRS 9.
We challenged the forecasts of future cash flows prepared by
management to support the calculation of the impairment loss
allowance by challenging the key assumptions and corroborating
estimates to external support where available. Where appropriate,
our work involved inspecting valuations of collateral, internal valuation
guidelines and/or externally prepared reports to determine whether
appropriate valuation methodologies and assumptions were
employed. Our selection of credit impaired loans was based on
a number of factors, including higher risk sectors identified with
reference to external sources, such as commercial real estate, retail
and leisure, as well as materiality.
We enquired of Divisional and Group management and reviewed
relevant management information to understand the emerging and
potential issues across the relevant portfolios.
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Key audit matter
How our audit addressed the key audit matter
Quantitative and Qualitative criteria in determining specific
increases in credit risk
We challenged the appropriateness and application of the quantitative
and qualitative criteria used to assess significant increases in credit
risk which determine the allocation of an asset to Stage 1, 2 or 3 in
accordance with IFRS 9.
For a selection of performing loans, we critically assessed, by
reference to the underlying documentation and through inquiries with
management, whether the trigger for credit impaired classification
had occurred.
In conjunction with our credit modelling specialists, we reperformed
key aspects of the models underlying the calculation of expected
credit losses, including independent recalculation of the PD and LGD
for a sample of models and independent recalculation of ECL model
outcomes for a sample of models.
Economic Scenarios
In conjunction with our credit modelling specialists, we considered
the base case and alternative economic scenarios. We challenged
and assessed the reasonableness of the significant assumptions
underpinning management’s economic scenarios which we
determined to be GDP, unemployment and property prices by
comparing to independent and observable economic forecasts,
leveraging a number of external data points. We assessed
whether forecasted macroeconomic variables were reasonable
and supportable.
With the support of our credit modelling specialists, we evaluated
the overall impact of the macroeconomic factors to the ECL. This
assessment considered the sensitivity of ECL to variations in the
severity and probability weighting of the economic forecasts.
We challenged the reasonableness of management’s forward-looking
information (FLI) upside / downside scenario weightings, having
regard to relevant available information. Specifically, we challenged
the appropriateness of management’s change in the severe downside
scenario weight in the current year.
Overall standback
We performed an overall assessment of ECL provision levels by
IFRS 9 stage to determine if they were reasonable by considering the
overall credit quality of the Group’s portfolios, risk profile, credit risk
management practices and the macroeconomic environment by
considering trends in the economy and sectors to which the Group is
exposed. We performed peer benchmarking where available to assess
overall staging and provision coverage levels.
Disclosures
We assessed the adequacy and appropriateness of disclosures
for compliance with the accounting standards and the process and
controls management had in place to prepare and approve
the disclosures.
Conclusion
On the basis of the work performed we have concluded the stock of
Expected Credit Loss reserves at year end is within the range of
acceptable outcomes.
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Independent auditor’s report continued
Key audit matter
IT (Privileged User Access)
The IT environment is complex and pervasive to the operations of the
Group due to the multiplicity of systems and the large volume of
transactions processed and its reliance on automated and IT
dependent manual controls. Appropriate IT controls are required to
ensure that applications process data as expected and that changes
are made in a controlled manner.
Our audit approach includes reliance on automated and IT dependent
manual controls and therefore on the effectiveness of controls over IT
systems impacting financial reporting. Privileged user access
management controls are an integral part of the IT environment to
ensure both system access and changes made to systems are
authorised and appropriate. An integral part of our audit testing is
therefore on the effectiveness of privileged user access management
controls.
In the context of our audit scope, we consider privileged user access
management controls at the application layer to be critical to ensuring
that only appropriately authorised changes are made to IT systems
deemed relevant to our audit. Moreover, appropriate privileged user
access management controls contribute to mitigating the risk of
potential fraud or error.
We considered this to be a key audit matter owing to the high level of
reliance on IT operations within the Group as well as the risk that key
IT Audit Dependencies such as automated controls and system
generated reports are not designed and operating effectively.
Recoverability of the Deferred Tax Assets
Refer to Note 1 (i) “Income tax, including deferred income tax”
within Note 1 “Accounting policies”, “Deferred taxation” within Note 2
“Critical accounting judgements and estimates” and Note 27
“Deferred taxation”.
The Group has deferred tax assets of €2.58bn that primarily arise due
to historical operating losses. A key judgement in the recognition of
deferred tax assets is whether there is convincing evidence of
sufficient future taxable profits against which those losses can be
utilised. This judgement relies on the assessment of the probability
and the sufficiency of future taxable profits, which in turn is based on
assumptions concerning future economic conditions and business
performance.
The Group’s considerations in respect of the recognition of the
deferred tax assets are outlined in the key accounting judgements and
estimates section within the financial statements, which also provides
an overview of the key assumptions underpinning the financial
projections. In particular, the deferred tax asset relating to the UK
business (amounting to €185m or 7% of the total) has been limited to
a recognition period of 15 years as management believe the degree of
estimation uncertainty beyond that period is high.
We regard the recoverability of the DTA as a key audit matter owing to
the degree of uncertainty given the length of recovery periods
involved. These recovery periods are driven by management
judgement over the quantum and timing of future profitability which
are, by their nature, subject to estimation uncertainty.
How our audit addressed the key audit matter
Through enquiries with management and inspection of internal
governance documents, we obtained an understanding of the Group’s
IT environment.
In conjunction with our Digital Audit specialists, we;
• Tested the design, implementation and where relevant, the
operating effectiveness of preventative and detective IT General
Controls (ITGC) over privileged user access management (i.e.
those relating to privileged user access provisioning, revocation,
recertification and authentication).
•
Inquired of Group Internal Audit (GIA) and inspected IT related GIA
reports produced during the period to understand the nature of
findings, if any, and consider the impact on our audit.
• Where control deficiencies were identified at the design level we
considered the compensating controls in place and sought to obtain
additional evidence for the in scope IT Dependencies to obtain
reasonable assurance that there were no unauthorised changes
made to these during the financial year.
• Our risk assessment procedures included an assessment of those
deficiencies to determine the impact on our audit plan and designed
and executed additional procedures where required.
Conclusion
Having completed the additional audit procedures we concluded that
we obtained sufficient evidence for the purposes of our audit.
We performed an end-to-end walkthrough of the process for the
forecasting of profits used to support the recognition of the deferred
tax assets, including the approval process.
Management prepares a Financial Plan to forecast financial
performance over a three year period. The projections are then
extrapolated at 2% based on estimated annual long term growth rates
for the Irish economy for the purposes of projecting future taxable
profits beyond three years.
We assessed whether estimated future profits used within the
forecasts were reasonable by reference to recent performance and
challenged the key assumptions underpinning the Group's future
forecasts using our knowledge of the business, the Group’s strategy
and wider initiatives within the Group.
We assessed and challenged the reasonableness of the external
economic assumptions applied in the future forecast assessment with
reference to observable market data.
We considered whether the forecast of taxable profits provides
convincing evidence that sufficient taxable profits will be available to
utilise unused tax losses.
We assessed the basis for management’s conclusion that the recovery
period for trading losses carried forward in the UK subsidiary should
be restricted to fifteen years being the period over which the Directors
can conclude that it is probable that future taxable profits will be
available in the UK entity.
Conclusion
On the basis of the work performed we have concluded the
recognition of the deferred tax asset is reasonable.
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AIB Group plc
Key audit matter
Recoverability of investment in subsidiary
(Company only)
Refer to Note e “Investment in subsidiary undertaking” to the
Company financial statements.
The Company balance sheet includes a €13.7bn investment in Allied
Irish Banks, p.l.c., the main trading entity of the Group.
The accounting policy followed by the Company is to carry the
investment at cost less impairment. Impairment testing includes the
comparison of the carrying value with its recoverable amount. The
recoverable amount is the higher of the investment’s fair value less
costs of disposal or its value in use (“VIU”). The calculation of VIU is
dependent on certain key assumptions around the future cash flows
which have been forecasted using the Group’s three-year plan, the
discount rates and the terminal growth rates. These assumptions,
which are judgemental, are derived from a combination of
management estimates, market data and other information obtained
from external sources.
The significant assumptions that we focused on were those with
greater levels of management judgement and for which variations had
the most significant impact on the recoverable amount. Specifically,
these included the business plan for 2024 to 2026, regulatory capital
requirements, long term growth rates and discount rates.
During 2023, a gain of €0.58bn was recognised in the entity only
income statement, being a reversal of impairment previously
recognised. Following this reversal, the investment held by the
company in Allied Irish Banks, p.l.c. stands at its original cost (as
adjusted for subsequent share buybacks).
We considered this to be a key audit matter due to the judgement
associated with the assessment of the recoverable amount of the
investment at 31 December 2023 including, in particular, the expected
cash flows, the discount rates and the terminal value calculations.
How our audit addressed the key audit matter
We performed an end-to-end process walkthrough over the
recoverability of the carrying value of the investment by AIB Group plc
in Allied Irish Banks, p.l.c. We tested the design and operating
effectiveness of the key controls relating to the process.
We involved our valuation specialists to assist us in evaluating the
appropriateness of the discount rate used by independently
developing discount rate ranges using external data sources and peer
bank data and assessing whether the methodology over
management’s calculation of the VIU is compliant with the
requirements of the accounting standard.
We compared key assumptions including those underlying certain
estimated future cash flows, the discount rate and the terminal growth
rate to externally derived data including, peer bank data and projected
economic growth.
We assessed the sensitivity of the VIU to reasonable variations in
discount rate and terminal growth rate.
We assessed the adequacy of the financial statement disclosures in
respect of the investment in the AIB Group plc company only financial
statements.
Conclusion
On the basis of the work performed we have concluded the carrying
value is reasonable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
We were appointed as Auditor of the Group on 4 May 2023. Prior to the commencement of the current financial year and our formal appointment, we
met with management across the Group to understand the business and plan our first audit effectively. We met with the former Auditor and attended
the Board Audit Committees during the 2022 year end cycle. We also reviewed the audit work papers of the former Auditor to gain sufficient audit
evidence about whether the opening balances contained misstatements which could materially impact the current year financial statements.
In establishing the overall approach to scoping the Group audit engagement, we identified components based on the Group’s legal entities and
determined that an audit of the complete financial information (a ‘full scope’ audit) should be performed by us on three legal entities due to their size
or risk characteristics and to ensure appropriate coverage. These are Allied Irish Banks, p.l.c., EBS d.a.c. and AIB Mortgage Bank Unlimited
Company.
The significant majority of Group activity outside Ireland is in the UK and PwC UK was engaged to perform a full scope audit on AIB Group (UK)
p.l.c.. No other PwC network firm was engaged for the Group audit. In relation to audit procedures that were performed by PwC UK, we arranged
joint planning meetings and regular physical and virtual meetings throughout the audit and reviewed certain audit working papers in PwC UK’s audit
file to corroborate that their audit plan was appropriately executed. The meetings also involved discussing and understanding the significant audit
risk areas and other relevant matters. We interacted regularly with PwC UK during all stages of the audit. In addition to their formal audit report, we
received a detailed memorandum of examination on work performed and relevant findings that supplemented our understanding of the individual
component. The Group Engagement Leader also physically attended a number of the AIB Group (UK) p.l.c. Audit Committee meetings.
In order to achieve the desired level of audit evidence on each account balance in the Consolidated and Company financial statements, specific
audit procedures on selected account balances, classes of transactions or disclosures were performed at two other legal entities within the Group.
The nature and extent of audit procedures was determined by our risk assessment.
Together with additional procedures performed at the Group level, this gave us the evidence we needed for our opinion on the financial statements
as a whole.
The significant components subject to full scope audit accounted for in excess of 90% of both of Profit before Tax and Total Assets.
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AIB Group plc
Independent auditor’s report continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
Consolidated financial statements
€57.5 million
Company financial statements
€57.0 million
c.2.4% of profit before tax.
c.0.4% of total equity.
We applied this benchmark because in our
view this is a metric against which the
recurring performance of the Group is
commonly measured by its stakeholders to
assess its performance.
The Company is the ultimate holding company
of the Group and its activities are limited to its
investment in Allied Irish Banks, p.l.c. and the
issue of debt securities, subordinated liabilities
and other capital instruments. Hence a
benchmark based on total equity reflects the
focus of the users of the financial statements.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to c. €43.2 million (Group audit) and €42.8 million (Company audit).
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk
and our assessment of the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Board Audit Committee that we would report to them misstatements identified during our audit above €2.75 million (Group audit)
and €2.75 million (Company audit) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern basis of accounting included:
• Obtaining management’s going concern assessment;
• Performing a risk assessment to identify factors that could impact the going concern assessment;
• Considering the Group’s Financial Plan approved by the Board in December 2023. In evaluating management’s base case forecasts and
alternative stress scenarios we considered the Group’s financial position, historic performance, its past record of achieving strategic objectives
and management’s assessment of the likely impact on financial performance, capital and liquidity for a period of 12 months from the date on
which the financial statements are authorised for issue;
• Considering whether the assumptions underlying the base cases were consistent with related assumptions used in other areas of the Group’s and
Company’s business activities, for example, in testing for non-financial asset impairment;
• Reading relevant correspondence from the Central Bank of Ireland and the ECB Joint Supervisory Team with regards to regulatory capital and
liquidity requirements of the Group; and
• Considering the adequacy of relevant disclosures made in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern for a period of at least twelve months
from the date on which the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s or the Company’s ability
to continue as a going concern.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going
concern basis of accounting.
We are required to report if the directors’ statement relating to going concern in accordance with Rule 6.1.82 (3) (a) of the Listing Rules for Euronext
Dublin and Rule 9.8.6R(3) of the Listing Rules of the UK Financial Conduct Authority is materially inconsistent with our knowledge obtained in the
audit. We have nothing to report in respect of this responsibility.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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AIB Group plc
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The
directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Directors’ Report, we also considered whether the disclosures required by the Companies Act 2014 (excluding the information
included in the “Non Financial Statement” as defined by that Act on which we are not required to report) have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (Ireland) and the Companies Act 2014
require us to also report certain opinions and matters as described below.
•
In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors’ Report (excluding the information
included in the “Non Financial Statement” on which we are not required to report) for the year ended 31 December 2023 is consistent with the
financial statements and has been prepared in accordance with the applicable legal requirements.
• Based on our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Directors’ Report (excluding the information included in the “Non Financial Statement” on which we are
not required to report).
•
In our opinion, based on the work undertaken in the course of the audit of the financial statements,
– the description of the main features of the internal control and risk management systems in relation to the financial reporting process; and
– the information required by Section 1373(2)(d) of the Companies Act 2014;
included in the Corporate Governance Statement, is consistent with the financial statements and has been prepared in accordance with section
1373(2) of the Companies Act 2014.
• Based on our knowledge and understanding of the Company and its environment obtained in the course of the audit of the financial statements,
we have not identified material misstatements in the description of the main features of the internal control and risk management systems in
relation to the financial reporting process and the information required by section 1373(2)(d) of the Companies Act 2014 included in the Corporate
Governance Statement.
•
In our opinion, based on the work undertaken during the course of the audit of the financial statements, the information required by section
1373(2)(a),(b),(e) and (f) of the Companies Act 2014 and regulation 6 of the European Union (Disclosure of Non-Financial and Diversity
Information by certain large undertakings and groups) Regulations 2017 is contained in the Corporate Governance Statement.
Corporate Governance Statement
The Listing Rules and ISAs (Ireland) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code and the Irish
Corporate Governance Annex (the “Code”) specified for our review. Our additional responsibilities with respect to the Corporate Governance
Statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements and our knowledge obtained during the audit and we have nothing material to add or draw
attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting
in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over a period of
at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the period
is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and
our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit.
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AIB Group plc
Independent auditor’s report continued
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Board Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the Code
does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements in
accordance with the applicable framework and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
breaches of banking laws and regulations, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the
Companies Act 2014. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including
the risk of override of controls), and determined that the principal risks were related to the potential for management bias through judgement and
assumptions in significant accounting estimates and manual journal entries being recorded in order to affect performance. Audit procedures
performed by the engagement team included:
• Discussions with the Board Audit Committee, management and Group Legal including consideration of known or suspected instances of non-
compliance with laws and regulations or fraud;
• Reading the meeting minutes of the Board of Directors, Board Audit Committee, Board Risk Committee, Board Remuneration Committee and the
Board Nomination & Corporate Governance Committee;
• Consideration of the results of reporting from PwC UK relating to compliance with applicable laws and regulations and procedures performed to
address assessed fraud risk;
• Discussions with Group Internal Audit and consideration of internal audit reports in so far as they related to the financial statements;
• Evaluating whether there was evidence of management bias that represents a risk of material misstatement due to fraud;
•
Inspection of relevant regulatory correspondence from the Central Bank of Ireland and the ECB Joint Supervisory Team;
• Challenging assumptions and judgements made by management in their accounting estimates, in particular in relation to the matters set out in
our key audit matters;
• Applying risk-based criteria to journal entries posted in the audit period to determine journal entries for testing purposes; and
• Designing audit procedures to incorporate elements of unpredictability around the nature and extent of audit procedures performed.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the IAASA website at:
https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf
This description forms part of our auditors’ report.
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AIB Group plc
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with section 391 of the
Companies Act 2014 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2014 opinions on other matters
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
•
In our opinion the accounting records of the Company were sufficient to permit the Company financial statements to be readily and properly
audited.
• The Company Statement of Financial Position is in agreement with the accounting records.
Other exception reporting
Directors’ remuneration and transactions
Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions
specified by sections 305 to 312 of that Act have not been made. We have no exceptions to report arising from this responsibility.
We are required by the Listing Rules to review the six specified elements of disclosures in the report to shareholders by the Board on directors’
remuneration. We have no exceptions to report arising from this responsibility.
Prior financial year Non Financial Statement
We are required to report if the Company has not provided the information required by Regulation 5(2) to 5(7) of the European Union (Disclosure of
Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 in respect of the prior financial year. We have
nothing to report arising from this responsibility.
Prior financial year Remuneration Report
We are required to report if the Company has not provided the information required by Section 1110N of the Companies Act 2014 in respect of the
prior financial year. We have nothing to report arising from this responsibility.
Appointment
We were appointed by the members at the Annual General Meeting on 4 May 2023 to audit the financial statements for the year ended
31 December 2023 and subsequent financial periods. This is therefore our first year of uninterrupted engagement.
Ronan Doyle
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Dublin
5 March 2024
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AIB Group plc
Consolidated Income Statement
for the financial year ended 31 December 2023
Interest income calculated using the effective interest rate method
Other interest income and similar income
Interest and similar income
Interest and similar expense(1)
Net interest income
Fee and commission income
Fee and commission expense
Net trading income(1)
Net gain on other financial assets measured at FVTPL
Net (loss)/gain on derecognition of financial assets measured at amortised cost
Other operating income(1)
Other income
Total operating income
Operating expenses
Impairment and amortisation of intangible assets
Impairment and depreciation of property, plant and equipment
Total operating expenses
Operating profit before impairment losses
Net credit impairment charge
Operating profit
Income from equity accounted investments
Loss on disposal of business
Profit before taxation
Income tax charge
Profit for the year
Attributable to:
– Equity holders of the parent
– Non-controlling interests
Profit for the year
Earnings per share
Basic earnings per ordinary share
Diluted earnings per ordinary share
(1) Refer to note 1(c) for further information about the change in presentation for certain line items in the primary statements.
Notes
4
4
4
5
6
6
7
8
9
10
2023
€ m
4,549
96
4,645
(804)
3,841
806
(173)
210
30
(9)
17
881
4,722
2022
€ m
2,432
80
2,512
(417)
2,095
765
(177)
100
102
18
10
818
2,913
11
(1,847)
(1,722)
24
25
(221)
(74)
(228)
(113)
(2,142)
(2,063)
2,580
12
(172)
23
15
2,408
12
(26)
2,394
14
(336)
2,058
2,061
(3)
2,058
850
(7)
843
37
—
880
(115)
765
767
(2)
765
36
36
75.7 c
75.7 c
26.1 c
26.1 c
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Annual Financial Report 2023
211
Consolidated Statement
of Comprehensive Income
for the financial year ended 31 December 2023
Profit for the year
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit asset/(liability), net of tax
Total items that will not be reclassified subsequently to profit or loss
Items that will be reclassified subsequently to profit or loss when specific conditions are met
Net change in foreign currency translation reserves, net of tax
Net change in cash flow hedges, net of tax
Net change in fair value of investment debt securities at FVOCI, net of tax
Total items that will be reclassified subsequently to profit or loss when specific conditions are met
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Attributable to:
– Equity holders of the parent
– Non-controlling interests
Total comprehensive income/(loss) for the year
Notes
14
14
14
14
2023
€ m
2,058
(2)
(2)
57
1,182
(41)
1,198
1,196
3,254
2022
€ m
765
(8)
(8)
(71)
(1,619)
(188)
(1,878)
(1,886)
(1,121)
3,257
(1,119)
(3)
(2)
3,254
(1,121)
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AIB Group plc
Consolidated Statement
of Financial Position
as at 31 December 2023
Assets
Cash and balances at central banks
Trading portfolio financial assets
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities
Investments accounted for using the equity method
Intangible assets and goodwill
Property, plant and equipment
Other assets
Current taxation
Deferred tax assets
Prepayments and accrued income
Retirement benefit assets
Total assets
Liabilities
Deposits by central banks and banks
Customer accounts
Securities financing
Trading portfolio financial liabilities
Derivative financial instruments
Debt securities in issue
Lease liabilities
Current taxation
Deferred tax liabilities
Retirement benefit liabilities
Other liabilities
Accruals and deferred income
Provisions for liabilities and commitments
Subordinated liabilities and other capital instruments
Total liabilities
Equity
Share capital
Reserves
Total shareholders’ equity
Other equity interests
Non-controlling interests
Total equity
Total liabilities and equity
Notes
2023
€ m
2022
€ m
45 38,018
38,138
16
17
18
93
2,377
1,329
8
2,511
1,502
19 65,491
59,613
20
6,466
6,282
22 17,353
16,270
23
24
25
26
310
925
558
260
17
173
940
536
296
15
27
2,581
3,032
28
540
31
423
13
136,349
129,752
29
1,780
514
30 104,782
102,359
20
16
17
31
32
27
28
33
34
35
575
139
1,902
8,423
282
1
23
14
898
4
2,982
7,203
257
1
30
16
1,082
1,106
607
197
377
340
1,473
1,404
121,280
117,491
36
1,637
12,323
1,671
9,478
13,960
11,149
37
1,115
1,115
(6)
(3)
15,069
12,261
136,349
129,752
Jim Pettigrew
Chair
Colin Hunt
Chief Executive Officer
Donal Galvin
Chief Financial Officer
Conor Gouldson
Group Company Secretary
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Annual Financial Report 2023 213
AIB Group plc
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2023
Share
capital
Other
equity
interests
Capital
reserves
Merger
reserve
Capital
redemption
reserves
Revaluation
reserves
Investment
securities
reserves
Cash flow
hedging
reserves
Revenue
reserves
Attributable to equity holders of parent
Foreign
currency
translation
reserves
Total
Non-
controlling
interests
Total
equity
At 1 January 2023
1,671
1,115
1,133
(3,622)
€ m
€ m
€ m
€ m
Total comprehensive income for the year
Profit for the year
Other comprehensive income (note 14)
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners of
the Group
Dividends paid on ordinary shares (note 51)
Distributions paid to other equity interests
(note 37)
Buyback of ordinary shares (note 36)
Other movements
Total contributions by and distributions
to owners of the Group
—
—
—
—
—
(34)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(34)
—
—
—
At 31 December 2023
1,637
1,115
1,133
(3,622)
€ m
39
—
—
—
—
—
34
—
34
73
€ m
13
—
—
—
—
—
—
(1)
(1)
12
€ m
€ m
€ m
€ m
€ m
€ m
€ m
(36)
(1,470)
14,004
(583)
12,264
(3)
12,261
—
(41)
(41)
—
2,061
1,182
(2)
1,182
2,059
—
57
57
2,061
1,196
3,257
(3)
—
(3)
2,058
1,196
3,254
—
—
—
—
—
(77)
—
(166)
—
(166)
—
(166)
—
—
—
(65)
(215)
1
—
—
—
(65)
(215)
—
—
—
—
(65)
(215)
—
—
(445)
—
(446)
—
(446)
(288)
15,618
(526)
15,075
(6)
15,069
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Annual Financial Report 2023 214
AIB Group plc
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2022
Share
capital
Other
equity
interests
Capital
reserves
Merger
reserve
Capital
redemption
reserves
Revaluation
reserves
Investment
securities
reserves
Cash flow
hedging
reserves
Revenue
reserves
Foreign
currency
translation
reserves
Total
Non-
controlling
interests
Total equity
Attributable to equity holders of parent
At 1 January 2022
1,696
1,115
1,133
(3,622)
€ m
€ m
€ m
€ m
Total comprehensive loss for the year
Profit for the year
Other comprehensive loss (note 14)
Total comprehensive loss for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners of
the Group
Dividends paid on ordinary shares (note 51)
Distributions paid to other equity interests
(note 37)
Buyback of ordinary shares (note 36)
Total contributions by and distributions
to owners of the Group
—
—
—
—
—
(25)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(25)
—
—
—
At 31 December 2022
1,671
1,115
1,133
(3,622)
€ m
14
—
—
—
—
—
25
25
39
€ m
13
—
—
—
—
—
—
—
13
€ m
€ m
€ m
€ m
€ m
€ m
€ m
152
149
13,523
(512)
13,661
(1)
13,660
—
—
(188)
(1,619)
(188)
(1,619)
767
(8)
759
—
(71)
(71)
767
(1,886)
(1,119)
(2)
—
(2)
765
(1,886)
(1,121)
—
—
—
—
(122)
—
(122)
—
(122)
—
—
(65)
(91)
—
—
(65)
(91)
—
—
(65)
(91)
—
—
(278)
—
(278)
—
(278)
(36)
(1,470)
14,004
(583)
12,264
(3)
12,261
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Annual Financial Report 2023 215
AIB Group plc
Consolidated Statement of Cash Flows
for the financial year ended 31 December 2023
Cash flows from operating activities
Profit before taxation for the year
Adjustments for:
– Non-cash and other items
– Change in operating assets
– Change in operating liabilities
– Taxation paid
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of investment securities
Proceeds from sales, redemptions and maturity of investment securities
Additions to property, plant and equipment
Disposal of property, plant and equipment
Additions to intangible assets
Acquisition of subsidiaries
Proceeds of disposal of investment in associated undertaking
Investments accounted for using the equity method
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds on issue of debt securities(1)
Maturity of debt securities(1)
Repurchase of debt securities(1)
Dividends paid on ordinary shares
Buyback of ordinary shares
Distributions paid to other equity interests
Repayment of lease liabilities
Interest paid on debt securities(1)
Interest paid on subordinated liabilities and other capital instruments
Net cash inflow from financing activities
Change in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange translation adjustments
Closing cash and cash equivalents
(1) Relates to debt securities classified at origination as MREL.
Notes
2023
€ m
2022
€ m
2,394
880
46
984
312
46
(6,291)
(5,623)
46
2,146
(71)
3
(19)
(838)
(4,447)
22
(3,199)
(3,823)
22
25
2,713
2,696
(34)
7
(32)
10
24
(206)
(174)
(6)
—
—
36
23
(125)
(45)
(850)
(1,332)
31
2,431
3,231
51
36
37
(382)
—
(166)
(215)
(65)
(35)
—
(844)
(122)
(91)
(65)
(89)
(204)
(108)
(38)
(38)
1,326
1,874
(362)
(3,905)
39,316
43,557
87
(336)
45 39,041
39,316
Net cash outflow from operating activities includes interest received of € 4,499 million (2022: € 2,332 million) and interest paid of € 137 million (2022:
€ 156 million).
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Annual Financial Report 2023 216
AIB Group plc
Notes to the Consolidated Financial Statements
Note
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
Accounting policies
Critical accounting judgements and estimates
Segmental information
Interest and similar income
Interest and similar expense
Net fee and commission income
Net trading income
Net gain on other financial assets measured at FVTPL
Net (loss)/gain on derecognition of financial assets measured at amortised cost
Other operating income
Operating expenses
Net credit impairment charge
Auditor's remuneration
Taxation
Loss on disposal of business
Trading portfolio
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
ECL allowance on financial assets
Investment securities
Investments accounted for using the equity method
Intangible assets and goodwill
Property, plant and equipment
Other assets
Deferred taxation
Retirement benefits
Deposits by central banks and banks
Customer accounts
Debt securities in issue
Lease liabilities
Other liabilities
Provisions for liabilities and commitments
Subordinated liabilities and other capital instruments
Share capital
Other equity interests
Capital reserves, merger reserve and capital redemption reserves
Offsetting financial assets and financial liabilities
Contingent liabilities and commitments
Subsidiaries and structured entities
Off-balance sheet arrangements and transferred financial assets
Classification and measurement of financial assets and financial liabilities
Fair value of financial instruments
Cash and cash equivalents
Statement of cash flows
Related party transactions
Employees
Regulatory compliance
Financial and other information
Dividends
Non-adjusting events after the reporting period
Approval of financial Statements
217
235
238
242
242
243
243
243
244
244
244
245
245
246
247
247
248
259
260
261
261
262
263
264
265
267
268
270
275
275
276
277
277
278
280
281
283
284
284
288
290
291
294
296
303
304
305
313
313
313
314
314
314
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Annual Financial Report 2023 217
AIB Group plc
1 Accounting policies
Index
(a) Reporting entity
(b) Statement of compliance
(c)
Basis of preparation
(d) Basis of consolidation
(e)
(f)
(g)
Foreign currency translation
Interest income and expense recognition
Fee and commission income
(h) Employee benefits
(i)
(j)
(k)
(l)
Income tax, including deferred income tax
Financial assets
Financial liabilities and equity
Leases
(m) Determination of fair value of financial instruments
(n) Sale and repurchase agreements (including securities borrowing and lending)
(o) Derivatives and hedge accounting
(p) Derecognition
(q)
(r)
(s)
(t)
(u)
Impairment of financial assets
Collateral and netting
Financial guarantees and loan commitment contracts
Property, plant and equipment
Intangible assets
(v) Non-credit risk provisions
(w) Equity
(x) Cash and cash equivalents
(y)
Prospective accounting changes
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Annual Financial Report 2023 218
AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies
The material accounting policies that the Group applied in the preparation of the financial statements are set out in this section.
(a) Reporting entity
AIB Group plc (‘the parent company’ or ‘the Company’) is a company domiciled in Ireland. The address of the Company’s registered office is 10
Molesworth Street, Dublin 2, Ireland. AIB Group plc is registered under the Companies Act 2014 as a public limited company under the company
number 594283 and is the holding company of the Group.
The consolidated financial statements for the year ended 31 December 2023 include the financial statements of AIB Group plc and its subsidiary
undertakings, collectively referred to as ‘AIB Group’ or ‘the Group’, where appropriate, including certain structured entities and the Group’s interest in
associates/joint ventures using the equity method of accounting and are prepared to the end of the financial period. The Group is and has been
primarily involved in retail and corporate banking.
(b) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Accounting Standards and International Financial
Reporting Standards (collectively 'IFRSs') as adopted by the European Union ('EU') and applicable for the financial year ended 31 December 2023.
The consolidated financial statements also comply with those parts of the Companies Act 2014 and the European Union (Credit Institutions:
Financial Statements) Regulations 2015 applicable to companies reporting under IFRS, and the Asset Covered Securities Acts 2001 and 2007 and
Article 4 of the IAS Regulation. The accounting policies have been consistently applied by Group entities and are consistent with the previous year,
unless otherwise described.
(c) Basis of preparation
Functional and presentation currency
The financial statements are presented in euro, which is the functional currency of the parent company and a significant number of its subsidiaries,
rounded to the nearest million.
Basis of measurement and presentation
The financial statements have been prepared under the historical cost basis, with the exception of the following assets and liabilities which are
stated at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss, certain hedged financial assets and
financial liabilities and investment securities at fair value through other comprehensive income ('FVOCI'). The carrying values of recognised assets
and liabilities that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value
attributable to the risks that are being hedged.
The financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and
the holding company’s separate statements of financial position, the consolidated and the holding company’s separate statements of cash flows,
and the consolidated and the holding company’s separate statements of changes in equity together with the related notes. The financial statements
include the information that is described as being an integral part of the audited financial statements contained in: (i) Sections 2.1, 2.2, 2.3 and 2.8 of
the Risk Management Report as described further on page 122 and (ii) the Directors' remuneration section of the Corporate Governance
Remuneration Statement as described further on page 106.
Change in presentation for certain items in the primary statements
(i) Dividend income
Dividend income was previously presented on the face of the consolidated income statement but is now reported within 'other operating income'.
The Group changed the presentation of 'dividend income' to this more appropriate presentation as this line item is no longer material. The
comparative for 2022 of € 2 million has been restated accordingly.
(ii) Interest income and expense for certain derivatives
The Group has changed the presentation of interest income and expense on certain derivatives. In prior periods interest income and expense on
derivatives that are held with hedging intent, but for which hedge accounting is not applied (economic hedges) was presented within net trading
income. To enable a more relevant and enhanced understanding of business performance, the Group has adopted an amended accounting policy
whereby the interest income and expense on those derivatives is now included within the applicable components of net interest income in 2023 with
all other fair value movements recognised in net trading income.
The Group believes this revised accounting policy provides reliable and more relevant information as it better reflects the Group’s net interest
income position which is the basis upon which the underlying businesses are managed. The Group has restated the comparatives for interest and
similar expense by € 64 million and net trading income by € 64 million.
Change in presentation for certain notes to the financial statements
The Group has changed the presentation of certain tables in the notes to the financial statements. For further information please refer to note 34
‘Provisions for liabilities and commitments’, ‘Loans and advances to customers - property and construction’ on page 168 and ‘Loans and advances
to customers - non-property business’ on page 171.
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Annual Financial Report 2023 219
AIB Group plc
1 Accounting policies continued
(c) Basis of preparation continued
Use of judgements and estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies
and reported amounts of certain assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. The estimates and
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Since
management’s judgement may involve making estimates concerning the likelihood of future events, the actual results could differ from those
estimates. The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised and in any future period affected. The judgements that have a significant effect on the consolidated financial
statements and estimates with a significant risk of material adjustment in the next year relate to expected credit losses on financial instruments; the
recoverability of deferred tax; retirement benefit obligations; and provisions for liabilities and commitments. A description of these judgements and
estimates is set out in note 2.
Consideration of climate change
In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context of the risks identified in
the TCFD disclosure in this annual financial report. There has been no material impact identified on the financial reporting judgements and estimates
of the Group. In particular, the Directors considered the impact of climate change in respect of the following areas:
• Credit risk: The impact of climate risk on the management, escalating and reporting of credit risk was considered by the Group. There is currently
no reasonable and supportable information that indicates a material impact of climate change on estimated credit losses ('ECL') and the Group’s
approach to individual counterparty risk assessment adequately captures climate risk where appropriate.
• Going concern and viability: The assessment of the group’s going concern and viability over the next three years did not identify material
climate-related risks, both in terms of commitment to being Net Zero and the physical risks from climate change. This is set out in further detail on
page 113.
• Provisions and contingent liabilities: The Group’s publicly announced commitment to being Net Zero on its own operations on Scope 1 and
Scope 2 emissions by 2030 is not considered a constructive obligation or a contingent liability. The timeframe to 2030 allows opportunities for the
Group to evolve its plans for how the Net Zero commitment will be met and therefore the Group should not currently recognise a provision or a
contingent liability in relation to its Net Zero commitment (i.e. as the Group does not have an obligation as a result of a past event). IAS 37
Provisions, Contingent Liabilities and Contingent Assets sets out that it is only those obligations arising from past events existing independently of
an entity's future actions that are recognised as provisions or disclosed as contingent liabilities.
Impairment of non-financial assets: The Group applies the requirements of IAS 36 Impairment of Assets in assessing whether impacted assets
are impaired at a reporting date. The Group has a robust process to identify assets which may be impaired which requires the identification of all
material potential impairment triggers including identification of climate related impairment triggers. In addition, the Group’s published commitment
to be Net Zero on its own operations does not impact the useful lives of the Group’s impacted assets as the Group proposes to replace impacted
assets as their useful lives expire.
•
Going concern
The financial statements for the year ended 31 December 2023 have been prepared on a going concern basis as the Directors are satisfied, having
considered the risks and uncertainties impacting the Group, that it has the ability to continue in business for the period of assessment. In making this
assessment, the Directors have considered a wide range of information relating to present and future conditions. This includes capital forecasts and
internally generated stress scenarios to take account of the impacts of persistent inflation, disruptions to energy supplies, increased interest rates
and significant impacts on unemployment and property prices. The period of assessment used by the Directors is at least 12 months from the date
of approval of these annual financial statements.
Adoption of new accounting standards/amendments to standards
The following new standards and amendments to standards have been adopted by the Group for the year ended 31 December 2023:
•
•
•
•
•
IFRS 17 Insurance Contracts;
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements: Disclosure of Accounting Policies;
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates;
IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction; and
IAS 12 Income Taxes: International Tax Reform - Pillar Two Model Rules.
The impact of these are set out below.
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts (‘IFRS 17’) is an accounting standard for insurance contracts covering recognition, measurement, presentation and
disclosure. In concluding that the adoption of IFRS 17 had no material impact on the Group's financial statements, the following considerations were
noted:
• The Group considered whether its personal and business credit cards, which provide insurance coverage in accordance with existing legislative
requirements, were within the scope of IFRS 17. The Group concluded that these insurance coverage clauses were not part of the contractual
terms of the credit cards as those clauses acknowledged the existence of the insurance coverage legislation and therefore do not create
additional rights or obligations that would not have existed in the absence of those clauses.
• The Group offers certain insurance products where the insurance contract is between the customer and the insurer and hence the Group has no
insurance risk.
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Annual Financial Report 2023 220
AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(c) Basis of preparation continued
IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements: Disclosure of Accounting Policies
The amendments to IAS 1 Presentation of Financial Statements (‘IAS 1’) and IFRS Practice Statement 2 Making Materiality Judgements provide
guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide
accounting policy disclosures which are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a
requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions
about accounting policy disclosures. In considering which accounting policies to disclose as material, the Group considered both quantitative and
qualitative factors including considering the broad range of users of the Group’s financial statements.
The amendments had the following impact on the Group’s disclosure of accounting policies:
• The Group removed the following policies on the basis that the related balances, transactions, events or conditions was quantitatively immaterial:
dividend income, impairment of property, plant and equipment, impairment of tangible and intangible assets and disposal groups and non-current
assets held for sale.
• The Group amended the following policies by condensing or removing information from those policies which were qualitatively immaterial: basis of
consolidation, interest income and expense recognition, fee and commission income, employee benefits, leases, financial assets, operating
segments, non-credit risk provisions and equity; and removed the policy on net trading income on the same basis.
The amendments had no impact on the measurement, recognition or presentation of any items in the Group’s financial statements.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
The amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (‘IAS 8’) clarify the distinction between changes in
accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and
inputs to develop accounting estimates.
The amendments had no impact on the Group's financial statements.
IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The amendments to IAS 12 Income Taxes (‘IAS 12’) narrow the scope of the initial recognition exception, so that it no longer applies to transactions
that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.
The amendments had no material impact on the Group's financial statements.
Amendments to IAS 12 Income Taxes: International Tax Reform - Pillar Two Model Rules
The amendments to IAS 12 have been introduced in response to the OECD’s BEPS Pillar Two rules and include:
• A mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation of the Pillar
Two model rules; and
• Disclosure requirements for affected entities to help users of the financial statements better understand an entity’s exposure to Pillar Two income
taxes arising from that legislation, particularly before its effective date.
See accounting policy (i) and note 14 for the Group’s disclosure related to this amendment.
The Group has not early adopted any standard or amendment that has been issued but is not yet effective.
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries including controlled structured entities.
Subsidiary undertakings
Subsidiary undertakings are all entities (including structured entities) over which the group has control. The Group controls an entity where the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
to direct the activities of the entity. Subsidiary undertakings are fully consolidated from the date on which control is transferred to the Group. They
are derecognised from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also
eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been
updated where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of
comprehensive income, statement of changes in equity and consolidated statement of financial position respectively.
If the Group loses control over a subsidiary undertaking, it derecognises the related assets (including goodwill), liabilities, non-controlling interest
and other components of equity, while any resultant gain or loss is recognised in profit or loss.
Investments accounted for using the equity method
The Group’s investments accounted for using the equity method comprise its investments in associates and joint ventures.
An associated undertaking is an entity over which the Group has significant influence, but not control, over the entity’s operating and financial policy
decisions. If the Group holds 20% or more of the voting power of an entity, it is presumed that the Group has significant influence, unless it can be
clearly demonstrated that this is not the case.
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Annual Financial Report 2023 221
AIB Group plc
1 Accounting policies continued
(d) Basis of consolidation continued
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the
post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the
investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the
carrying amount of the investment.
Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured
long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other
entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in
these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Since goodwill that forms part of the carrying amount of the investment in an associate is not recognised separately, it is, therefore, not tested for
impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is
objective evidence that the investment in an associate may be impaired.
Parent Company financial statements: Investment in subsidiary, joint ventures and associated undertakings
The Company accounts for investments in subsidiary, joint ventures and associated undertakings, that are not classified as held for sale at cost less
provisions for impairment. If the investment is classified as held for sale, the Company accounts for it at the lower of its carrying value and fair value
less costs to sell.
The Company reviews its equity investment for impairment at the end of each reporting period if there are indications that impairment may have
occurred.
The testing for possible impairment involves comparing the estimated recoverable amount of an investment with its carrying amount. Where the
recoverable amount is less than the carrying amount, the difference is recognised as an impairment provision in the Company’s financial
statements. The recoverable amount is the higher of fair value less costs to sell and value-in-use ('VIU').
Dividends from a subsidiary, joint venture or an associated undertaking are recognised in the income statement when the Company’s right to receive
the dividend is established.
(e) Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using their functional currency, being the currency of the
primary economic environment in which the entity operates.
Transactions and balances
Foreign currency transactions are translated into the respective entity’s functional currency using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rate prevailing at the period end. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the re-translation at period end exchange rates of the
amortised cost of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Exchange differences on equities and similar non-monetary items held at fair value through profit or loss are reported as part of the fair value gain or
loss. Exchange differences on a financial instruments designated as a hedge of the net investment in a foreign operation are reported in other
comprehensive income.
Foreign operations
The results and financial position of all Group entities that have a functional currency different from the euro are translated into euro as follows:
• Assets and liabilities including goodwill and fair value adjustments arising on consolidation of foreign operations are translated at the closing rate;
Income and expenses are translated into euro at the average rates of exchange during the period where these rates approximate to the foreign
•
exchange rates ruling at the dates of the transactions;
• Foreign currency translation differences are recognised in other comprehensive income; and
• Since 1 January 2004, the Group’s date of transition to IFRS, all such exchange differences are included in the foreign currency cumulative
translation reserve within shareholders’ equity. When a foreign operation is disposed of in full, the relevant amount of this reserve is transferred to
the income statement. When a subsidiary is partly disposed, the relevant proportion of foreign currency translation reserve is re-attributed to the
non-controlling interest. In the case of a partial disposal, a pro-rata amount of the foreign currency cumulative translation reserve is transferred to
the income statement. A partial disposal is also considered to have occurred when a formal decision has been made to wind down an entity and
where capital is being repaid but there has not been a reduction in the overall percentage holding.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(f) Interest income and expense recognition
Interest income and expense is recognised in the income statement using the effective interest rate method.
Effective interest rate
The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial
instrument to:
• The gross carrying amount of the financial asset; or
• The amortised cost of the financial liability.
The application of the method has the effect of recognising income receivable and expense payable on the instrument evenly in proportion to the
amount outstanding over the period to maturity or repayment. In calculating the effective interest rate for financial instruments, other than credit
impaired assets, the Group estimates cash flows (using projections based on its experience of customers’ behaviour) considering all contractual
terms of the financial instrument but excluding expected credit losses. The calculation takes into account all fees, including those for any expected
early redemption, and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums and discounts.
All costs associated with mortgage incentive schemes are included in the effective interest rate calculation. Fees and commissions payable to third
parties in connection with lending arrangements, where these are direct and incremental costs related to the issue of a financial instrument, are
included in interest income as part of the effective interest rate.
Amortised cost and gross carrying amount
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial
recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest rate method of any difference
between the initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised cost before adjusting for any loss allowance.
Calculation of interest income and interest expense
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not
credit impaired) or to the amortised cost of the liability.
For financial assets that have become credit impaired subsequent to initial recognition, interest income is calculated by applying the effective interest
rate to the amortised cost of the financial asset. If the asset is no longer credit impaired, the calculation of interest income reverts to the gross basis.
However, for financial assets that were credit impaired on initial recognition, interest income is calculated by applying the credit adjusted effective
interest rate to the amortised cost of the financial asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of
the asset improves.
When a financial asset is no longer credit impaired or has been repaid in full (i.e. cured without financial loss), the Group presents previously
unrecognised interest income as a reversal of credit impairment/recovery of amounts previously written-off.
Interest income and expense on financial assets and liabilities classified as held for trading or at FVTPL is recognised in ‘other interest income and
similar income’ or ‘interest expense’ in the income statement, as applicable.
Presentation
Interest income and expense presented in the consolidated income statement include:
•
•
• Net interest income and expense on qualifying hedge derivatives designated as cash flow hedges or fair value hedges which are recognised in
Interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest rate basis;
Interest on investment debt securities measured at FVOCI calculated on an effective interest rate basis;
interest income or interest expense;
• Net interest income or expense on derivatives that are held with hedging intent, but for which hedge accounting is not applied;
•
• Other interest income and similar income includes interest income on finance leases and hire purchase contracts and interest income on financial
Interest income and funding costs of trading portfolio financial assets; and
assets at FVTPL.
The Group policy for the recognition of leasing income is set out in Accounting policy (l).
Targeted Long Term Refinancing Operation III (‘TLTRO III’)
Eurosystem refinancing operations are credit facilities from the Eurosystem secured by a fixed charge over securities and relates to Targeted Long
Term Refinancing Operation III (‘TLTRO III’).
TLTRO III has specific terms attached to it which are different from other sources of funding available to banks including other sources of funds
provided by the European Central Bank (‘ECB’). The financial conditions incorporated into TLTRO III reflect ECB monetary policy initiatives to
prospectively reduce the cost of funding for banking institutions. Accordingly, the Group has concluded that the ECB has established a separate
market for TLTRO programmes and TLTRO III transactions are at market rates and the requirements of IAS 20 Accounting for Government Grants
do not apply.
The borrowing rate applicable to the TLTRO III loans is linked to the lending patterns of the Group and are subject to the achievement of predefined
lending performance thresholds based on the eligible net lending of the Group in certain specified periods.
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AIB Group plc
1 Accounting policies continued
(f) Interest income and expense recognition continued
The amount of interest income recognised during the period on TLTRO III depends on whether the Group had a reasonable expectation of meeting
the relevant lending performance thresholds. The Group interprets reasonable expectations as highly probable (i.e. the probability of meeting the
lending targets is substantially greater than the probability that it will not). As a result, if interest income is recognised during the period based on the
expectation of meeting the targets, there should be only a limited possibility that the interest may need to be reversed in future periods.
If the Group does not have a reasonable expectation that the lending targets will be met but subsequently determines it will meet the relevant
lending performance thresholds, it revises its estimates of receipts and recalculates the present value of the estimated future contractual cash flows
that are discounted at the original effective interest rate and recognises the adjustment in the Group’s consolidated income statement as negative
interest on financial liabilities at amortised cost.
(g) Fee and commission income
The measurement and timing of recognition of fee and commission income is based on the core principles of IFRS 15 Revenue from Contracts with
Customers.
Fee and commission income is recognised when the performance obligation in the contract has been performed, either at a ‘point in time’ or ‘over
time’ if the performance obligation is performed over a period of time unless the income has been included in the effective interest rate calculation.
The Group includes in the transaction price, some or all of an amount of variable consideration estimated only to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
The majority of the Group’s fee and commission income arises from retail banking activities. Loan syndication fees are recognised as revenue when
the syndication has been completed and the Group has retained no part of the loan package for itself or retained a part at the same effective interest
rate as applicable to the other participants.
Foreign exchange income is fee income that is derived from arranging foreign exchange transactions on behalf of customers. Such income is
recognised when the individual performance obligation has been fulfilled.
Portfolio and other management advisory and service fees are recognised based on the applicable service contracts. Asset management fees
relating to investment funds are recognised over time in line with the performance obligation. The same principle is applied to the recognition of
income from wealth management, financial planning and custody services that are continuously provided over an extended period of time.
Commitment fees together with related direct costs, for loan facilities where drawdown is probable, are deferred and recognised as an adjustment to
the effective interest rate on the loan once drawn. Commitment fees in relation to facilities where drawdown is not probable are recognised over the
term of the commitment on a straight line basis. Other credit related fees are recognised over time in line with the performance obligation except
arrangement fees where it is likely that the facility will be drawn down, and which are included in the effective interest rate calculation.
Fee income and fee expenses in respect of services and prepaid credits for cellular phone and utilities sold to third parties are classified as
specialised payment services and are recognised when the performance obligation is satisfied.
(h) Employee benefits
Retirement benefit obligations
The Group provides employees with post-retirement benefits mainly in the form of pensions.
The Group provides a number of retirement benefit schemes including defined benefit and defined contribution as well as a hybrid scheme that has
both defined benefit and defined contribution elements. In addition, the Group contributes, according to local law in the various countries in which it
operates, to governmental and other schemes which have the characteristics of defined contribution schemes. The majority of the defined benefit
schemes are funded.
Full actuarial valuations of defined benefit schemes are undertaken every three years and are updated to reflect current conditions at each year end
reporting date.
Scheme assets are measured at fair value determined by using current bid prices, except for insurance policies acquired as part of a buy in. If the
policies are qualifying policies under IAS 19 Employee Benefits and if the timing and amount of payments under the policies exactly match some or
all of the benefits payable under the scheme, then the present value of the related obligation is determined and is deemed to be the fair value of the
insurance policies to be included in plan assets.
Scheme liabilities are measured on an actuarial basis by estimating the amount of future benefit that employees have earned for their service in
current and prior periods and discounting that benefit at the market yield on a high quality corporate bond of equivalent term and currency to the
liability. The calculation is performed by a qualified actuary using the projected unit credit method. The difference between the fair value of the
scheme assets and the present value of the defined benefit obligation at the year end reporting date is recognised in the statement of financial
position. Schemes in surplus are shown as assets and schemes in deficit, together with unfunded schemes, are shown as liabilities. A surplus is
only recognised as an asset to the extent that it is recoverable through a refund from the scheme or through reduced contributions in the future.
Actuarial gains and losses are recognised immediately in other comprehensive income.
The cost of providing defined benefit pension schemes to employees, comprising the net interest on the net defined benefit liability/(asset),
calculated by applying the discount rate to the net defined benefit liability/(asset) at the start of the annual reporting period, taking into account
contributions and benefit payments during the period, is charged to the income statement within personnel expenses.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(h) Employee benefits continued
Remeasurements of the net defined benefit liability/(asset), comprising actuarial gains and losses and the return on scheme assets (excluding
amounts included in net interest on the net defined benefit liability/(asset)) are recognised in other comprehensive income. Amounts recognised in
other comprehensive income in relation to remeasurements of the net defined benefit liability/(asset) will not be reclassified to profit or loss in a
subsequent period.
In early 2017, the Board reassessed its obligation to fund increases in pensions in payment. The Board confirmed that funding of increases in
pensions in payment is a decision to be made by the Board each year where increases are discretionary. This was based on actuarial and external
legal advice obtained. Accordingly, a decision by the Board to fund a pension increase does not constitute a constructive obligation to fund future
pension in payment increases.
The Group recognises the effect of an amendment to a defined benefit scheme when the plan amendment occurs, which is when the Group
introduces or withdraws a defined benefit scheme, or changes the benefits payable under existing defined benefit schemes. A curtailment is
recognised when a significant reduction in the number of employees covered by a defined benefit scheme occurs. A settlement is a transaction that
eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit scheme. Gains or losses on plan
amendments, curtailments and settlements are recognised in the income statement.
Changes with regard to benefits payable to retirees which represent a constructive obligation under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets are accounted for as a past service cost. These are recognised in the income statement.
The costs of managing the defined benefit scheme assets are deducted from the return on scheme assets. All costs of running the defined benefit
schemes are recognised in the income statement when they are incurred.
The cost of the Group’s defined contribution schemes is charged to the income statement in the accounting period in which it is incurred. Any
contributions unpaid at the year end reporting date are included as a liability. The Group has no further obligation under these schemes once these
contributions have been paid.
Short term employee benefits
Short term employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period during which employees
have provided services. Bonuses are recognised to the extent that the Group has a legal or constructive obligation to its employees that can be
measured reliably.
(i) Income tax, including deferred income tax
Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items
recognised in other comprehensive income, in which case it is recognised in other comprehensive income. Income tax relating to items in equity is
recognised directly in equity. However, the income tax consequences of payments on financial instruments that are classified as equity but treated
as liabilities for tax purposes are recognised in profit or loss if those payments are distributions of profits previously recognised in profit or loss.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at the reporting date
and any adjustment to tax payable in respect of previous years.
Deferred income tax is provided, using the balance sheet liability method, on temporary differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes. Deferred income tax is determined using tax rates based on legislation enacted or
substantively enacted at the reporting date and expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised when it is probable that future taxable profits will be available against which the temporary differences
will be utilised. The deferred tax asset is reviewed at the end of each reporting period and the carrying amount will reflect the extent that it is
probable that sufficient taxable profits will be available to allow all of the asset to be recovered.
The tax effects of income tax losses available for carry forward are recognised as an asset to the extent that it is probable that future taxable profits
will be available against which these losses can be utilised.
Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right
and the intention to settle the current tax assets and liabilities on a net basis or to realise the asset and settle the liability simultaneously.
The principal temporary differences arise from depreciation of property, plant and equipment, revaluation of certain financial assets and financial
liabilities including derivative contracts, provisions for pensions and other post-retirement benefits, and in relation to acquisitions, on the difference
between the fair values of the net assets acquired and their tax base.
Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. In
addition, temporary differences are not provided for assets and liabilities the initial recognition of which, in a transaction that is not a business
combination, affects neither accounting nor taxable profit. Income tax payable on profits, based on the applicable tax law in each jurisdiction, is
recognised as an expense in the period in which the profits arise.
The Group has adopted the amendments to IAS 12 by the IASB (International Tax Reform – Pillar Two Model Rules), issued in May 2023 and
endorsed by the European Commission on 8 November 2023. The amendments provide a mandatory temporary exception from the requirement to
recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules.
Accordingly, the Group has not recognised any changes to its deferred tax assets or liabilities in respect of Pillar Two. (See Note 14).
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AIB Group plc
1 Accounting policies continued
(j) Financial assets
Recognition and initial measurement
The Group initially recognises financial assets on the trade date, being the date on which the Group commits to purchase the assets. Loan assets
are recognised when cash is advanced to borrowers. In a situation where the Group commits to purchase financial assets under a contract which is
not considered a regular-way transaction, the assets to be acquired are not recognised until the acquisition contract is settled. In this case, the
contract to acquire the financial asset is a derivative that is measured at FVTPL in the period between the trade date and the settlement date.
Recognition and initial measurement continued
Financial assets measured at amortised cost or at fair value through other comprehensive income (‘FVOCI’) are recognised initially at fair value
adjusted for direct and incremental transaction costs. Financial assets measured at fair value through profit or loss (‘FVTPL’) are recognised initially
at fair value and transaction costs are taken directly to the income statement.
Derivatives are measured initially at fair value on the date on which the derivative contract is entered into. The best evidence of the fair value of a
derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or received) unless the fair value of that instrument is
evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based
on a valuation technique whose variables include only data from observable markets. Profits or losses are only recognised on initial recognition of
derivatives when there are observable current market transactions or valuation techniques that are based on observable market inputs.
Classification and subsequent measurement
On initial recognition, a financial asset is classified and subsequently measured at amortised cost, FVOCI or FVTPL.
The classification and subsequent measurement of financial assets depend on:
• The Group’s business model for managing the asset; and
• The cash flow characteristics of the asset (for assets in a ‘hold-to-collect’ or ‘hold-to-collect-and-sell’ business model).
Based on these factors, the Group classifies its financial assets into one of the following categories:
– Amortised cost
Assets that have not been designated as at FVTPL, and are held within a ‘hold-to-collect’ business model whose objective is to hold assets to collect
contractual cash flows; and whose contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest. The
carrying amount of these assets is calculated using the effective interest rate method and is adjusted on each measurement date by the expected
credit loss allowance for each asset, with movements recognised in profit or loss.
– Fair value through other comprehensive income (‘FVOCI’)
Assets that have not been designated as at FVTPL, and are held within a ‘hold-to-collect-and-sell’ business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and whose contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest (‘SPPI’). Movements in the carrying amount of these assets are taken through other comprehensive
income (‘OCI’), except for the recognition of credit impairment gains or losses, interest revenue or foreign exchange gains and losses, which are
recognised in profit or loss. When a financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss other than in the case of equity instruments designated at FVOCI.
– Fair value through profit or loss (‘FVTPL’)
Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. Gains or losses (excluding interest income or
expense) on such assets are recognised in profit or loss on an ongoing basis.
In addition, the Group may irrevocably designate a financial asset as at FVTPL that otherwise meets the requirements to be measured at amortised
cost or at FVOCI if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Business model assessment
The Group makes an assessment of the objective of the business model at a portfolio level, as this reflects how portfolios of assets are managed to
achieve a particular objective, rather than management’s intentions for individual assets.
The assessment considers the following:
• The strategy for the portfolio as communicated by management;
• How the performance of the portfolio is evaluated and reported to senior management;
• The risks that impact the performance of the business model, and how those risks are managed;
• How managers of the business are compensated (i.e. based on fair value of assets managed or on the contractual cash flows collected); and
• The frequency, value and timing of sales in prior periods, reasons for those sales, and expectations of future sales activity.
Financial assets that are held for trading or managed within a business model that is evaluated on a fair value basis are measured at FVTPL
because the business objective is neither hold-to-collect contractual cash flows nor hold-to-collect-and-sell contractual cash flows.
Characteristics of the contractual cash flows
An assessment (‘SPPI test’) is performed on all financial assets at origination that are held within a ‘hold-to-collect’ or ‘hold-to-collect-and-sell’
business model to determine whether the contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal outstanding. For the purposes of this assessment, ‘principal’ is defined as the fair value of the
financial asset at initial recognition. ‘Interest’ is defined as consideration for the time value of money, for the credit risk associated with the principal
amount outstanding, for other basic lending risks and costs (i.e. liquidity, administrative costs) and profit margin.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(j) Financial assets continued
Characteristics of the contractual cash flows continued
The SPPI test requires an assessment of the contractual terms and conditions to determine whether a financial asset contains any terms that could
modify the timing or amount of contractual cash flows of the asset, to the extent that they could not be described as solely payments of principal and
interest. In making this assessment, the Group considers:
• Features that modify the time value of money element of interest (e.g. tenor of the interest rate does not correspond with the frequency within
which it resets);
• Terms providing for prepayment and extension;
• Leverage features;
• Contingent events that could change the amount and timing of cash flows;
• Terms that limit the Group’s claim to cash flows from specified assets; and
• Contractually linked instruments.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not
give rise to contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
Investments in equity instruments
Equity instruments are classified and measured at FVTPL with gains and losses reflected in profit or loss.
(k) Financial liabilities and equity
The Group categorises financial liabilities as at amortised cost or as at fair value through profit or loss.
The Group recognises a financial liability when it becomes party to the contractual provisions of the contract.
Issued financial instruments or their components are classified as liabilities where the substance of the contractual arrangement results in the Group
having a present obligation to either deliver cash or another financial asset to the holder, to exchange financial instruments on terms that are
potentially unfavourable or to satisfy the obligation otherwise than by the exchange of a fixed amount of cash or another financial asset for a fixed
number of equity shares.
Financial liabilities are initially recognised at fair value, being their issue proceeds (fair value of consideration received), net of transaction costs
incurred. Financial liabilities are subsequently measured at amortised cost, with any difference between the proceeds net of transaction costs and
the redemption value recognised in the income statement using the effective interest rate method.
Where financial liabilities are classified as trading they are also initially recognised at fair value with the related transaction costs taken directly to the
income statement. Gains and losses arising from subsequent changes in fair value are recognised directly in the income statement within net
trading income.
Preference shares which carry a mandatory coupon are classified as financial liabilities. The dividends on these preference shares are recognised in
the income statement as interest expense using the effective interest rate method.
Issued financial instruments are classified as equity when the Group has no contractual obligation to transfer cash, or other financial assets or to
issue a variable number of its own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown as a
deduction from the proceeds of issue, net of tax.
(l) Leases
The Group applies a single recognition and measurement approach for all leases, except for short-term leases of 12 months or less or leases of low-
value assets (i.e. the value of the underlying asset, when new, is less than € 5,000/ £ 5,000). The Group recognises lease liabilities that represent the
present value of lease payments to be made over the lease term and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (less any lease incentives receivable), variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects exercising the
option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event
or condition that triggers the payment occurs.
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AIB Group plc
1 Accounting policies continued
(m) Determination of fair value of financial instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group has
access at that date. The Group considers the impact of non-performance risk when valuing its financial liabilities.
Financial instruments are initially recognised at fair value and, with the exception of financial assets at fair value through profit or loss, the initial
carrying amount is adjusted for direct and incremental transaction costs. In the normal course of business, the fair value on initial recognition is the
transaction price (fair value of consideration given or received). If the Group determines that the fair value at initial recognition differs from the
transaction price and the fair value is determined by a quoted price in an active market for the same financial instrument, or by a valuation technique
which uses only observable market inputs, the difference between the fair value at initial recognition and the transaction price is recognised as a
gain or loss. If the fair value is calculated by a valuation technique that features significant market inputs that are not observable, the difference
between the fair value at initial recognition and the transaction price is deferred. Subsequently, the difference is recognised in the income statement
on an appropriate basis over the life of the financial instrument, but no later than when the valuation is supported by wholly observable inputs; the
transaction matures; or is closed out.
Subsequent to initial recognition, the methods used to determine the fair value of financial instruments include quoted prices in active markets where
those prices are considered to represent actual and regularly occurring market transactions. Where quoted prices are not available or are unreliable
because of market inactivity, fair values are determined using valuation techniques.
Quoted prices in active markets
Quoted market prices are used where those prices are considered to represent actual and regularly occurring market transactions for financial
instruments in active markets.
Valuations for negotiable instruments such as debt and equity securities are determined using bid prices for asset positions and ask prices for
liability positions.
Where securities are traded on an exchange, the fair value is based on prices from the exchange. The market for debt securities largely operates on
an ‘over-the-counter’ basis which means that there is not an official clearing or exchange price for these security instruments. Therefore, market
makers and/or investment banks (‘contributors’) publish bid and ask levels which reflect an indicative price that they are prepared to buy and sell
a particular security. The Group’s valuation policy requires that the prices used in determining the fair value of securities quoted in active markets
must be sourced from established market makers and/or investment banks.
Valuation techniques
In the absence of quoted market prices, and in the case of over-the-counter derivatives, fair value is calculated using valuation techniques. These
valuation techniques maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The valuation techniques used
incorporate the factors that market participants would take into account in pricing a transaction. Valuation techniques include the use of recent
orderly transactions between market participants, reference to other similar instruments, option pricing models, discounted cash flow analysis and
other valuation techniques commonly used by market participants.
Fair value may be estimated using quoted market prices for similar instruments, adjusted for differences between the quoted instrument and the
instrument being valued. Where the fair value is calculated using discounted cash flow analysis, the methodology is to use, to the extent possible,
market data that is either directly observable or is implied from instrument prices, such as interest rate yield curves, equities and commodities
prices, credit spreads, option volatilities and currency rates. In addition, the Group considers the impact of own credit risk and counterparty risk
when valuing its derivative liabilities.
The valuation methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to
a present value. The assumptions involved in these valuation techniques include:
• The likelihood and expected timing of future cash flows of the instrument. These cash flows are generally governed by the terms of the
instrument, although management judgement may be required when the ability of the counterparty to service the instrument in accordance with
the contractual terms is in doubt. In addition, future cash flows may also be sensitive to the occurrence of future events, including changes in
market rates; and
• Selecting an appropriate discount rate for the instrument, based on the interest rate yield curves including the determination of an appropriate
spread for the instrument over the risk-free rate. The spread is adjusted to take into account the specific credit risk profile of the exposure.
All adjustments in the calculation of the present value of future cash flows are based on factors market participants would take into account in
pricing the financial instrument. Certain financial instruments (both assets and liabilities) may be valued on the basis of valuation techniques that
feature one or more significant market inputs that are not observable. When applying a valuation technique with unobservable data, estimates are
made to reflect uncertainties in fair values resulting from a lack of market data, for example, as a result of illiquidity in the market. For these
instruments, the fair value measurement is less reliable. Inputs into valuations based on non-observable data are inherently uncertain because there
is little or no current market data available from which to determine the price at which an orderly transaction between market participants would
occur under current market conditions. However, in most cases there is some market data available on which to base a determination of fair value,
for example historical data, and the fair values of most financial instruments will be based on some market observable inputs even where the non-
observable inputs are significant. All unobservable inputs used in valuation techniques reflect the assumptions market participants would use when
fair valuing the financial instrument.
The Group tests the outputs of the valuation model to ensure that it reflects current market conditions. The calculation of fair value for any financial
instrument may require adjustment of the quoted price or the valuation technique output to reflect the cost of credit risk and the liquidity of the
market, if market participants would include one, where these are not embedded in underlying valuation techniques or prices used.The choice of
contributors, the quality of market data used for pricing and the valuation techniques used are all subject to internal review and approval procedures.
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Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(m) Determination of fair value of financial instruments continued
Transfers between levels of the fair value hierarchy
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred.
(n) Sale and repurchase agreements (including securities borrowing and lending)
Financial assets may be lent or sold subject to a commitment to repurchase them (‘repos’). Such securities are retained on the statement of financial
position when substantially all the risks and rewards of ownership remain with the Group. The liability to the counterparty is included separately on
the statement of financial position. The exception to this is where these are sold to third parties, at which point the obligation to repurchase the
securities is recorded as a trading liability at fair value and any subsequent gain or loss included in trading income. Similarly, when securities are
purchased subject to a commitment to resell (‘reverse repos’), or where the Group borrows securities, but does not acquire the risks and rewards of
ownership, the transactions are treated as collateralised loans, and the securities are not usually included in the statement of financial position. The
difference between the sale and repurchase price is accrued over the life of the agreements using the effective interest rate method. Securities lent
to counterparties are also retained in the financial statements.
(o) Derivatives and hedge accounting
Derivatives, such as interest rate swaps, options and forward rate agreements, futures, currency swaps and options, and equity index options are
used for trading purposes whereas interest rate swaps, currency swaps, cross currency interest rate swaps and credit derivatives are used for
hedging purposes.
The Group maintains trading positions in a variety of financial instruments including derivatives. Trading transactions arise both as a result of activity
generated by customers and from proprietary trading with a view to generating incremental income.
Non-trading derivative transactions comprise transactions held for hedging purposes as part of the Group’s risk management strategy against
assets, liabilities, positions and cash flows.
Derivatives are measured initially at fair value on the date on which the derivative contract is entered into and subsequently remeasured at fair
value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and from valuation techniques
using discounted cash flow models and option pricing models as appropriate. Derivatives are included in assets when their fair value is positive, and
in liabilities when their fair value is negative, unless there is the legal ability and intention to settle an asset and liability on a net basis.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or
received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same
instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets.
Profits or losses are only recognised on initial recognition of derivatives when there are observable current market transactions or valuation
techniques that are based on observable market inputs.
Hedging
The Group has opted to remain with the IAS 39 Financial Instruments: Recognition and Measurement ('IAS 39') hedge accounting requirements until
macro hedge accounting is addressed by the IASB as part of a separate project. This is an accounting policy choice allowed by IFRS 9 Financial
Instruments.
All derivatives are carried at fair value and the accounting treatment of the resulting fair value gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. Where derivatives are held for risk management purposes, and
where transactions meet the criteria specified in IAS 39 Financial Instruments: Recognition and Measurement, the Group designates certain
derivatives as either:
• Hedges of the fair value of recognised assets or liabilities or firm commitments (‘fair value hedge’); or
• Hedges of the exposure to variability of cash flows attributable to a recognised asset or liability, or a highly probable forecasted Transaction (‘cash
flow hedge’); or
• Hedges of a net investment in a foreign operation.
When a financial instrument is designated as a hedge, the Group formally documents the relationship between the hedging instrument and hedged
item as well as its risk management objectives and its strategy for undertaking the various hedging transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows of the hedged items.
The Group discontinues hedge accounting when:
a) it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;
b) the derivative expires, or is sold, terminated, or exercised;
c) the hedged item matures or is sold or repaid; or
d) a forecast transaction is no longer deemed highly probable.
To the extent that the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged risk in the hedged item,
or the cumulative change in the fair value of the hedging derivative differs from the cumulative change in the fair value of expected future cash flows
of the hedged item, ineffectiveness arises. The amount of ineffectiveness, (taking into account the timing of the expected cash flows, where
relevant) provided it is not so great as to disqualify the entire hedge for hedge accounting, is recorded in the income statement.
In certain circumstances, the Group may decide to cease hedge accounting even though the hedge relationship continues to be highly effective by
no longer designating the financial instrument as a hedge.
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AIB Group plc
1 Accounting policies continued
(o) Derivatives and hedge accounting continued
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the fair value hedging adjustment cumulatively made to the carrying value of the
hedged item is, for items carried at amortised cost, amortised over the period to maturity of the previously designated hedge relationship using the
effective interest rate method. For debt securities measured at FVOCI, the fair value adjustment for hedged items is recognised in the income
statement using the effective interest rate method. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised
immediately in the income statement.
Cash flow hedge accounting
The Group enters into macro cash flow hedges. The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges is initially recognised directly in other comprehensive income and included in the cash flow hedging reserve in the statement of
changes in equity. The amount recognised in other comprehensive income is reclassed to profit or loss as a reclassification adjustment in the same
period as the hedged cash flows affect profit or loss, and in the same line item in the statement of comprehensive income. Any ineffective portion of
the gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
recognised in other comprehensive income from the time when the hedge was effective remains in equity and is reclassified to the income
statement as a reclassification adjustment as the forecast transaction affects profit or loss. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was recognised in other comprehensive income from the period when the hedge was effective is reclassified
to the income statement.
Net investment hedge
Hedges of net investments in foreign operations, including monetary items that are accounted for as part of the net investment, are accounted for
similarly to cash flow hedges. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income and
the ineffective portion is recognised immediately in the income statement. The cumulative gain or loss previously recognised in other comprehensive
income is recognised in the income statement on the disposal or partial disposal of the foreign operation. Hedges of net investments may include
non-derivative liabilities as well as derivative financial instruments.
Derivatives that do not qualify for hedge accounting
Certain derivative contracts entered into as economic hedges do not qualify for hedge accounting. Changes in the fair value of these derivative
instruments are recognised immediately in the income statement.
(p) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are
transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of
the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of (i) the consideration received
(including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is
recognised in profit or loss. Relevant costs incurred with the disposal of a financial asset are deducted in computing the gain or loss on disposal.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit or loss on
derecognition of such securities. However, the amount held in investment securities reserves is transferred to revenue reserves on derecognition. Any
interest in transferred financial assets that qualify for derecognition, that is created or retained by the Group, is recognised as a separate asset or liability.
The Group enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially
all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Examples of
such transactions are securities lending and sale-and-repurchase transactions.
In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it
retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to
which it is exposed to changes in the value of the transferred asset.
In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognised if it
meets the derecognition criteria. An asset or liability is recognised for the servicing contract if the servicing fee is more than adequate or is less than
adequate for performing the servicing.
The write-off of a financial asset constitutes a derecognition event. Where a financial asset is partially written-off, and the portion written-off
comprises specifically identified cash flows, this will constitute a derecognition event for that part written-off.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. Any gain or loss on the
extinguishment or remeasurement of a financial liability is recognised in profit or loss.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
Accounting policies continued
(q) Impairment of financial assets
The Group recognises loss allowances for expected credit losses at each balance sheet date for the following financial instruments that are not
measured at FVTPL:
• Financial assets at amortised cost;
• Financial assets at FVOCI (except for equity instruments);
• Lease receivables;
• Financial guarantee contracts issued; and
• Loan commitments issued.
Investments in equity instruments are recognised at fair value and accordingly, expected credit losses (‘ECLs’) are not recognised separately for
equity instruments.
ECLs are the weighted average of credit losses. When measuring ECLs, the Group takes into account:
• Probability-weighted outcomes;
• The time value of money so that ECLs are discounted to the reporting date; and
• Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions
and forecasts of future economic conditions.
The amount of ECLs recognised as a loss allowance depends on the extent of credit deterioration since initial recognition. There are two
measurement bases:
• 12-month ECLs (Stage 1), which applies to all items as long as there is no significant deterioration in credit quality since initial recognition; and
• Lifetime ECLs (Stages 2 and 3), which applies when a significant increase in credit risk has occurred on an individual or collective basis.
The 12 month ECL is the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a
financial instrument that are possible within the 12 months after the reporting date. Lifetime ECL is the expected credit losses that result from all
possible default events over the expected life of a financial instrument.
In the case of Stage 2, credit risk on the financial instrument has increased significantly since initial recognition but the instrument is not considered
credit impaired. For a financial instrument in Stage 3, credit risk has increased significantly since initial recognition and the instrument is considered
credit impaired.
Financial assets are allocated to stages dependent on credit quality relative to when the asset was originated.
A financial asset can only originate in either Stage 1 or as purchased or originated credit impaired (‘POCI’). The ECL held against an asset depends
on a number of factors, one of which is its stage allocation. Assets allocated to Stage 2 and Stage 3 have lifetime ECLs. Collateral and other credit
enhancements are not considered as part of stage allocation. Collateral is reflected in the Group’s loss given default models (‘LGD’).
Purchased or originated credit impaired
POCI financial assets are those that are credit-impaired on initial recognition. The Group may originate a credit-impaired financial asset following a
substantial modification of a distressed financial asset that resulted in derecognition of the original financial asset.
POCIs are financial assets originated credit impaired that have a discount to the contractual value when measured at fair value. The Group uses an
appropriate discount rate for measuring ECL in the case of POCIs which is the credit-adjusted EIR. This rate is used to discount the expected cash
flows of such assets to fair value on initial recognition.
POCIs remain outside of the normal stage allocation process for the lifetime of the obligation. The ECL for POCIs is always measured at an amount
equal to lifetime expected credit losses. The amount recognised as a loss allowance for these assets is the cumulative changes in lifetime expected
credit losses since the initial recognition of the assets rather than the total amount of lifetime expected credit losses.
At each reporting date, the Group recognises the amount of the change in lifetime expected credit losses as a credit impairment gain or loss in the
income statement. Favourable changes in lifetime expected credit losses are recognised as a credit impairment gain, even if the favourable changes
exceed the amount previously recognised in profit or loss as a credit impairment loss.
Modification
From time to time, the Group will modify the original terms of a customer’s loan either as part of the ongoing relationship or arising from changes in
the customer’s circumstances such as when that customer is unable to make the agreed original contractual repayments.
A modification refers to either:
• A change to the previous terms and conditions of a debt contract; or
• A total or partial refinancing of a debt contract.
Modifications may occur for both customers in distress and for those not in distress. Any financial asset that undergoes a change or renegotiation of
cash flows and is not derecognised is a modified financial asset.
When modification does not result in derecognition, the modified assets are treated as the same continuous lending agreement and a modification
gain or loss is taken to profit or loss immediately. The gross carrying amount of the financial asset is recalculated as the present value of the
renegotiated or modified contractual cash flows discounted at the financial asset’s original effective interest rate. Any costs or fees incurred adjust
the carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
The stage allocation for modified assets which are not derecognised is by reference to the credit risk at initial recognition of the original, unmodified
contractual terms i.e. the date of initial recognition is not reset.
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AIB Group plc
1 Accounting policies continued
(q) Impairment of financial assets continued
Where renegotiation of the terms of a financial asset leads to a customer granting equity to the Group in exchange for any loan balance outstanding,
the new instrument is recognised at fair value with any difference to the loan carrying amount recognised in the income statement.
Derecognition occurs if a modification or restructure is substantial on a qualitative or quantitative basis. Accordingly, certain forborne assets are
derecognised. The modified/restructured asset (derecognised forborne asset (‘DFA’)) is considered a ‘new financial instrument’ and the date that the
new asset is recognised is the date of initial recognition from this point forward. DFAs are allocated to Stage 1 on origination and follow the normal
staging process thereafter.
If there is evidence of credit impairment at the time of initial recognition of a DFA, the asset is deemed to be a POCI. POCIs are not allocated to
stages but are assigned a lifetime PD and ECL for the duration of the obligation’s life. Where the modification/restructure of a non-forborne credit
obligation results in derecognition, the new loan is originated in Stage 1 and follows the normal staging process thereafter.
Collateralised financial assets – Repossessions
The ECL calculation for a collateralised financial asset reflects the cash flows that may result from foreclosure, costs for obtaining and settling the
collateral, and whether or not foreclosure is probable.
For loans that are credit impaired, the Group may repossess collateral previously pledged as security in order to achieve an orderly realisation of the
loan. The Group will then offer this repossessed collateral for sale. However, if the Group believes the proceeds of the sale will comprise only part of
the recoverable amount of the loan with the customer remaining liable for any outstanding balance, the loan continues to be recognised and the
repossessed asset is not recognised. However, if the Group believes that the sale proceeds of the asset will comprise all or substantially all of the
recoverable amount of the loan, the loan is derecognised and the acquired asset is accounted for in accordance with the applicable accounting
standard. Any further impairment of the repossessed asset is treated as an impairment of that asset and not as a credit impairment of the
original loan.
Financial assets at FVOCI
The ECL allowance for financial assets measured at FVOCI does not reduce the carrying amount in the statement of financial position because the
carrying amount of these assets is fair value. However, an amount equal to the ECL allowance that would arise if the assets were measured at
amortised cost is recognised in other comprehensive income (‘OCI’) as an accumulated credit impairment amount, with a corresponding charge to
profit or loss. The accumulated loss recognised in OCI is recycled to the profit or loss upon derecognition of the assets (together with other
accumulated gains and losses in OCI).
Write-offs and debt forgiveness
The Group reduces the gross carrying amount of a financial asset either partially or fully when there is no reasonable expectation of recovery.
Where there is no formal debt forgiveness agreed with the customer, the Group may write off a loan either partially or fully when there is no
reasonable expectation of recovery. This is considered a non-contracted write-off. In this case, the borrower remains fully liable for the credit
obligation and is not advised of the write-off.
Once a financial asset is written-off either partially or fully, the amount written-off cannot subsequently be recognised on the balance sheet. It is only
when cash is received in relation to the amount written-off that income is recognised in the income statement as a ‘recovery of bad debt previously
written-off.
Debt forgiveness arises where there is a formal contract agreed with the customer for the write-off of a loan.
(r) Collateral and netting
The Group enters into master netting agreements with counterparties, to ensure that if an event of default occurs, all amounts outstanding with
those counterparties will be settled on a net basis.
Collateral
The Group obtains collateral in respect of customer advances where this is considered appropriate. The collateral normally takes the form of a lien
over the customer’s assets and gives the Group a claim on these assets for both existing and future customer liabilities. The collateral is, in general,
not recorded on the statement of financial position.
The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as securities borrowing contracts and
derivative contracts in order to reduce credit risk. Collateral received in the form of securities is not recorded on the statement of financial position.
Collateral received in the form of cash is recorded on the statement of financial position with a corresponding liability. Therefore, in the case of cash
collateral, these amounts are assigned to deposits received from banks or other counterparties. Any interest payable or receivable arising is
recorded as interest expense or interest income respectively.
In certain circumstances, the Group will pledge collateral in respect of its own liabilities or borrowings. Collateral pledged in the form of securities or
loans and advances continues to be recorded on the statement of financial position. Collateral paid away in the form of cash is recorded in loans
and advances to banks or customers. Any interest payable or receivable arising is recorded as interest expense or interest income respectively.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(r) Collateral and netting continued
Netting
Financial assets and financial liabilities are offset and the net amount reported on the statement of financial position if, and only if, there is a
currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle
the liability simultaneously. This is not generally the case with master netting agreements, therefore, the related assets and liabilities are presented
gross on the statement of financial position.
(s) Financial guarantees and loan commitment contracts
Financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking
facilities (‘facility guarantees’) and to other parties in connection with the performance of customers under obligations relating to contracts, advance
payments made by other parties, tenders, retentions and the payment of import duties. In its normal course of business, Allied Irish Banks, p.l.c. (the
principal operating company) issues financial guarantees to other Group entities.
A loan commitment is a contract with a borrower to provide a loan or credit on specified terms at a future date. The contract may or may not be
cancelled unconditionally at any time without notice depending on the terms of the contract.
The origination date for financial guarantees and loan commitment contracts is the date when the contracts become irrevocable. The credit risk at
this date is used to determine if a significant increase in credit risk has subsequently occurred.
Financial guarantees and loan commitments are initially recognised in the financial statements at fair value on the date that the guarantee is given.
Subsequent to initial recognition, the Group applies the impairment provisions of IFRS 9 Financial Instruments and calculates an ECL allowance for
financial guarantees and loan commitment contracts (i.e. those that are not measured at FVTPL).
The ECL allowance calculated on financial guarantees and loan commitment contracts is reported within Provisions for liabilities and commitments.
(t) Property, plant and equipment
Property, plant and equipment are stated at cost, or deemed cost, less accumulated depreciation and provisions for impairment, if any. Additions and
subsequent expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the asset.
No depreciation is provided on freehold land. Property, plant and equipment are depreciated on a straight line basis over their estimated useful
economic lives. Depreciation is calculated based on the gross carrying amount, less the estimated residual value at the end of the assets’ economic
lives.
The Group uses the following useful lives when calculating depreciation:
Freehold buildings and long-leasehold property
Short leasehold property
Costs of adaptation of freehold and leasehold property
Branch properties
Office properties
Computers and similar equipment
Fixtures and fittings and other equipment
50 years
life of lease, up to 50 years
up to 10 years(1)
up to 15 years(1)
3 – 7 years
5 – 10 years
The Group depreciates right-of-use assets arising under lease obligations from the commencement date of a lease to the earlier of the end of the
useful life of the right-of-use asset and the end of the lease term on a straight line basis.
The Group reviews its depreciation rates regularly, at least annually, to take account of any change in circumstances. When deciding on useful lives
and methods, the principal factors that the Group takes into account are the expected rate of technological developments and expected market
requirements for, and the expected pattern of usage of, the assets. When reviewing residual values, the Group estimates the amount that it would
currently obtain for the disposal of the asset, after deducting the estimated cost of disposal if the asset was already of the age and condition
expected at the end of its useful life.
Gains and losses on disposal of property, plant and equipment are included in the income statement. It is Group policy not to revalue its property,
plant and equipment.
(1) Subject to the maximum remaining life of the lease.
(u) Intangible assets
Computer software and other intangible assets
Computer software and other intangible assets are stated at cost, less amortisation on a straight line basis and provisions for impairment, if any. The
identifiable and directly associated external and internal costs of acquiring and developing software are capitalised where the software is controlled
by the Group, and where it is probable that future economic benefits that exceed its cost will flow from its use over more than one year. Costs
associated with maintaining software are recognised as an expense when incurred. Capitalised computer software is amortised over 3 to 9 years.
Other intangible assets are amortised over the life of the asset. Computer software and other intangible assets are reviewed for impairment when
there is an indication that the asset may be impaired. Intangible assets not yet available for use are reviewed for impairment on an annual basis.
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AIB Group plc
1 Accounting policies continued
(u) Intangible assets continued
Acquired intangible assets
Customer related intangible assets and brands acquired in a business combination are recognised at fair value at acquisition date.
Customer related intangible assets and brands have a finite useful life and are carried at cost less accumulated amortisation and provision for
impairment, if any. Amortisation is calculated using the straight line basis to allocate the cost over their estimated useful life (6 years).
(v) Non-credit risk provisions
Provisions are recognised for present legal or constructive obligations arising as consequences of past events where it is probable that a transfer of
economic benefit will be necessary to settle the obligation, and it can be reliably estimated.
When the effect is material, provisions are determined by discounting expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability. Payments are deducted from the present value of
the provision, and interest at the relevant discount rate is charged annually to interest expense using the effective interest rate method. These are
reported within Provisions for liabilities and commitments in the statement of financial position.
(w) Equity
Issued financial instruments, or their components, are classified as equity where they meet the definition of equity and confer on the holder a
residual interest in the assets of the Group.
On extinguishment of equity instruments, gains or losses arising are recognised net of tax directly in the statement of changes in equity.
Share capital
Share capital represents funds raised by issuing shares in return for cash or other consideration. Share capital comprises ordinary shares of the
entity.
Dividends and distributions
Final dividends on ordinary shares are recognised as a liability in the Group’s financial statements in the period in which they are approved by the
shareholders of the Company. Proposed dividends that are declared after the end of the reporting date are not recognised as a liability, they
disclosed in note 51.
Other equity interests
Other equity interests include:
• Additional Tier 1 Perpetual Contingent Temporary Write-down Securities (AT1s) (note 37); and
• Warrants to acquire a fixed number of the company shares for a fixed amount of currency are classified as equity instruments and are recognised
on initial recognition at the fair value of consideration received.
Distributions on the AT1s are recognised in equity when approved for payment by the Board of Directors.
Capital contributions
Capital contributions represent the receipt of non-refundable considerations arising from transactions with the Irish Government (note 47). These
contributions comprise both financial and non-financial net assets. The contributions are classified as equity and may be either distributable or non-
distributable. Capital contributions are distributable if the assets received are in the form of cash or another asset that is readily convertible to cash,
otherwise, they are treated as non-distributable. Capital contributions in the statement of financial position arose during 2011 from (a) EBS
transaction and (b) non-refundable receipts from the Irish Government and the NPRFC.
The capital contribution from the EBS transaction is treated as non-distributable as the related net assets received were largely non-cash in nature.
Non-refundable receipts of € 6,054 million from the Irish Government and the NPRFC are distributable. These are included in revenue reserves.
Investment securities reserves
Investment securities reserves represent the net unrealised gain or loss, net of tax, arising from the recognition in the statement of financial position
of investment securities at FVOCI.
On disposal of equity securities which had been designated at FVOCI on initial recognition, any amounts held in the investment securities reserves
account is transferred directly to revenue reserves without recycling through profit or loss.
Cash flow hedging reserves
Cash flow hedging reserves represent the net gains or losses, net of tax, on effective cash flow hedging instruments that will be reclassified to the
income statement when the hedged transaction affects profit or loss.
Revenue reserves
Revenue reserves include the following:
• Retained earnings of the parent company, subsidiaries and associated undertakings;
• Amounts transferred from issued share capital, share premium and capital redemption reserves following Irish High Court approval;
• Amounts arising from the capital reduction which followed the ‘Scheme of Arrangement’ undertaken by the Group in December 2017;
• Remeasurements of defined benefit pension schemes; and
• Transactions with owners including distributions and buybacks.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
1 Accounting policies continued
(w) Equity continued
Merger reserve
The merger reserve arose following the Scheme of Arrangement approved by the Irish High Court in December 2017 where a new company,
AIB Group plc (‘the Company’), was introduced as the holding company of AIB Group (note 38).
In the consolidated financial statements of AIB Group plc, the carrying value of the investment in Allied Irish Banks, p.l.c. by AIB Group plc was
eliminated against the share capital and share premium account in Allied Irish Banks, p.l.c. and the merger reserve in AIB Group plc resulting in
a negative merger reserve.
In AIB Group plc’s company financial statements, impairment losses which arise from AIB Group plc’s investment in Allied Irish Banks, p.l.c. will be
charged to the profit or loss account and transferred to the merger reserve in so far as a credit balance remains in the merger reserve. Reversal of
impairments will be credited to the profit or loss account and transferred to the merger reserve in so far as it does not exceed the impairment charged.
(x) Cash and cash equivalents
For the purposes of the cash flow statement, cash comprises cash on hand and demand deposits, and cash equivalents comprise highly liquid
investments that are convertible into cash with an insignificant risk of changes in value and with a maturity of less than three months from the date of
acquisition.
(y) Prospective accounting changes
The following amendments to existing standards which have been approved by the IASB, but not early adopted by the Group, will impact the
Group’s financial reporting in future periods. The Group will consider the impact of these amendments as the situation requires. The amendments
which are most relevant to the Group are detailed below.
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
In September 2022, the IASB issued amendments to IFRS 16 Leases (‘IFRS 16’) to specify the requirements that a seller-lessee uses in measuring
the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that
relates to the right of use it retains.
Effective date: Annual reporting periods beginning on or after 1 January 2024. These amendments are not expected to have a material impact on
the Group.
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Non-current Liabilities with
Covenants
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 Presentation of Financial Statements (‘IAS 1’) to
specify the requirements for classifying liabilities as current or non-current. The amendments clarify:
• What is meant by a right to defer settlement;
• That a right to defer must exist at the end of the reporting period;
• That classification is unaffected by the likelihood that an entity will exercise its deferral right; and
• That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.
In addition, a requirement has been introduced to require disclosure when a liability arising from a loan agreement is classified as non-current and
the entity’s right to defer settlement is contingent on compliance with future covenants within twelve months.
Effective date: Annual reporting periods beginning on or after 1 January 2024. These amendments are not expected to have a material impact on
the Group.
Amendments to IFRS 7 Financial Instruments: Disclosures and IAS 7 Statement of Cash Flows: Disclosures: Supplier Finance Arrangements
In May 2023, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures (‘IFRS 7’) and IAS 7 Statement of Cash Flows (‘IAS 7’) to
clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements. The disclosure requirements in
the amendments are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s
liabilities, cash flows and exposure to liquidity risk.
The amendments are subject to EU endorsement.
Effective date: Annual reporting periods beginning on or after 1 January 2024. These amendments are not expected to have a material impact on
the Group.
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
In August 2023, the IASB issued amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates (‘IAS 21’) to clarify how an entity
should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking, as well as
require the disclosure of information that enables users of financial statements to understand the impact of a currency not being exchangeable.
The amendments are subject to EU endorsement.
Effective date: Annual reporting periods beginning on or after 1 January 2025. These amendments are not expected to have a material impact on
the Group.
Other
The IASB has published a number of minor amendments to IFRSs through standalone amendments. None of the other amendments are expected
to have a significant impact on reported results or disclosures.
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AIB Group plc
2 Critical accounting judgements and estimates
The accounting judgements that have the most significant effect on the amounts recognised in the financial statements, and the estimates that have
a significant risk of material adjustment in the next year are set out below.
Significant judgements
The significant judgements made by the Group in applying its accounting policies are as follows:
• Deferred taxation;
•
• Provisions for liabilities and commitments.
Impairment of financial assets; and
The application of certain of these judgements also involves estimations which are discussed separately.
Deferred taxation
The Group’s accounting policy for deferred tax is set out in accounting policy (i) in note 1. Details of the Group’s deferred tax assets and liabilities
are set out in note 27.
A key judgement in relation to the recoverability of deferred tax assets is that it is probable that there will be sufficient future taxable profits
against which the losses can be used:
• The estimated utilisation period for such losses in Ireland is within the timeframe that taxable profits are considered probable; and
• Taxable profits are considered more likely than not in the UK for a period of 15 years.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that there will be sufficient future taxable profits against
which the losses can be used. For a company with a history of recent losses, there must be convincing other evidence to underpin this assessment.
The recognition of these deferred tax assets relies on the assessment of future profitability and the sufficiency of those profits to absorb losses
carried forward. It requires significant judgements to be made about the projection of long-term future profitability because of the period over which
recovery extends.
In assessing the future profitability of the Group, the Board has considered a range of positive and negative evidence for this purpose. Among this
evidence, the principal positive factors include:
• AIB as a pillar bank with a strong Irish franchise;
• The absence of any expiry dates for Irish and UK tax losses;
• The changing banking landscape in Ireland;
• External economic forecasts for Ireland, with growth forecasted for 2024;
• The recent inorganic activity of the Group including the Group’s joint venture AIB life;
• The turnaround evident in the Group's financial performance over the years 2021-2023;
• The introduction of the bank resolution framework under the BRRD and the establishment in 2017 of AIB Group plc as the new holding company
of the Group. This provides greater confidence in relation to the future viability of Allied Irish Banks, p.l.c. (as the principal operating bank
subsidiary) as there are now effective tools in place that should facilitate its recapitalisation in a future crisis; and
• The non-enduring nature of the loan impairments at levels which resulted in the losses in the 2009 to 2013 prior years.
The Board considered negative evidence and the inherent uncertainties in any long-term financial assumptions and projections, including:
• The absolute level of deferred tax assets compared to the Group’s equity;
• The quantum of profits required to be earned and the extended period over which it is projected that the tax losses will be utilised;
• The slowdown in the Irish economy in 2023;
• The challenge of forecasting over a long period, taking account of the changing level of competition, and the evolving interest rate environment;
• Potential instability arising from macroeconomic headwinds and geopolitical issues over an extended period; and
• Taxation changes (including Organisation for Economic Co-operation and Development ('OECD') tax reform) and the likelihood of future
developments and their impact on profitability and utilisation.
Taking account of all relevant factors, and in the absence of any expiry date for tax losses in Ireland, it is more likely than not that there will be future
profits in the medium term, and beyond, in the relevant Irish Group companies against which to use the tax losses. In this regard, the Group has
carried out an exercise to determine the likely number of years required to utilise the deferred tax asset under the following scenario. Using the
Group’s financial plan 2024 to 2026 as a base and a profit growth rate of 2% from 2027, it was assessed that it will take less than 13 years for the
Irish deferred tax asset (€ 2.3 billion) to be utilised. Furthermore, under this scenario, it is expected that c. 80% will be utilised within 10 years. If the
growth rate assumption was decreased by 1%, then the utilisation period increases by a further c.1 year. The Group’s analysis of this and other
scenarios examined would not alter the basis of recognition or the current carrying value. In 2022, the Group reported that it expected that it would
take less than 15 years for the deferred tax asset to be utilised with 65% being utilised within 10 years.
Given the relative size of the Group’s operations in the UK compared to the role that the Irish operations play in supporting a functioning banking
environment, a different judgement has been applied to the period that taxable profits are considered more likely than not in the UK. Despite the
absence of any expiry date for tax losses in the UK, the Group has concluded that the recognition of deferred tax assets in its UK subsidiary be
limited to the amount projected to be realised within a time period of 15 years. This is the timescale within which the Group believes that it can
assess the likelihood of its UK profits arising as being more likely than not.
However, for certain other subsidiaries and branches, the Group has also concluded that it is more likely than not that there will be insufficient profits
to support the recognition of deferred tax assets.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
2 Critical accounting judgements and estimates continued
Impairment of financial assets
The Group’s accounting policy for impairment of financial assets is set out in accounting policy (q) in note 1. Details of the Group’s ECL allowance
are set out in note 21.
The calculation of the ECL allowance is complex and requires the use of a number of accounting judgements.
The most significant judgements applied by the Group in determining the ECL allowance are as follows:
• Determining the criteria for a significant increase in credit risk and for being classified as credit impaired; and
• Determining the need for and an appropriate methodology for post-model adjustments.
The significant management judgement and the governance process, relating to ECL, are set out on pages 127 to 141 in the Risk Management
section.
Provisions for liabilities and commitments
The Group’s accounting policy for provisions for liabilities and commitments is set out in accounting policy (v) in note 1. Details of the Group’s
provision for liabilities and commitments are shown in note 34.
Significant management judgement is required to determine whether the Group has a present obligation as a result of a past event and whether
it is probable an outflow of resources will be required to settle the obligation.
The Group recognises liabilities where it has present legal or constructive obligations as a result of past events and it is more likely than not that
these obligations will result in an outflow of resources to settle the obligations and the amount can be reliably estimated.
Judgement is required in determining whether the Group has a present obligation and whether it is probable that an outflow of economic benefits will
be required to settle this obligation. This judgement is applied to information available at the time of determining the provision including, but not
limited to, judgements around interpretations of legislation, regulations and case law depending on the nature of the provision.
Critical accounting estimates
The accounting estimates with a significant risk of material adjustment to the carrying amounts of assets and liabilities within the next financial year
were in relation to:
Impairment of financial assets;
•
• Retirement benefit obligations; and
•
Investment in subsidiary in the separate financial statements.
Impairment of financial assets
The Group’s accounting policy for impairment of financial assets is set out in accounting policy (q) in note 1. Details of the Group’s expected credit
loss ('ECL') allowance are set out in note 21.
The key estimates and assumptions that the Group has used in determining the ECL allowance are as follows:
Inputs into discounted cash-flows (‘DCFs’) for certain stage 3 credit impaired obligors;
• Establishing the number and relative weightings for forward looking scenarios;
•
• The assumptions for measuring ECL (e.g. PD, LGD and EAD and the parameters to be included within the models for modelled ECL); and
• The estimation of post model adjustments where required.
The calculation of the ECL allowance is complex and therefore the Group must consider large amounts of information in its determination. This
process requires significant use of estimates and assumptions, some of which by their nature, are highly subjective and very sensitive to risk factors
such as changes to economic conditions. Changes in the ECL allowance can materially affect net income.
On an ongoing basis, the various estimates and assumptions are reviewed in light of differences between actual and previously calculated expected
losses. These are then recalibrated and refined to reflect current and evolving economic conditions. The ECL allowance is, in turn, reviewed and
approved by the Group Credit Committee on a quarterly basis with final Group levels being approved by the Board Audit Committee. Further detail
on the ECL governance process is set out on page 127.
The macroeconomic variables used in models to calculate ECL allowance are based on assumptions, forecasts and estimates against a backdrop of
an evolving economic landscape. Accordingly, developments in local and international factors could have a material bearing on the ECL allowance
within the next financial year. The Group’s sensitivity to a range of macroeconomic factors under (i) base forecast; (ii) upside; and (iii) downside
scenarios is set out on pages 134 to 138 of the Risk Management section of this report.
DCFs are the most significant input to the ECL calculation for Stage 3 credit impaired borrowers where the gross credit exposure is greater than or
equal to € 1 million for Ireland or greater than or equal to £ 500,000 for the UK. Collateral valuations and the estimated time to realisation of
collateral is a key component of the DCF model. The DCF assessment produces a base case ECL which is then adjusted, considering all relevant
and supportable information, including but not limited to, historical data analysis, predictive modelling and management judgement, to incorporate
the impact of multiple scenarios on the base ECL.
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AIB Group plc
2 Critical accounting judgements and estimates continued
Impairment of financial assets continued
The Group has developed a standard approach for the measurement of ECL for the majority of the Group’s exposures where each ECL input
parameter (e.g. PD, LGD and EAD) is developed in line with standard modelling methodology. These are discussed further on pages 131 to 133 of
the Risk Management section. When considering changes in these assumptions collectively, there is a significant risk of a material adjustment to the
Group’s ECL allowance within the next financial year.
Where the estimate of ECL does not adequately capture all available forward looking information about the range of possible outcomes, or where
there is a significant degree of uncertainty, management may consider it appropriate for an adjustment to ECL. These are referred to as post model
adjustments and are set out in detail on pages 140 and 141.
The sensitivity of the carrying amounts of the ECL to changes in assumptions and estimates relating to inputs into DCFs for certain Stage 3 credit
impaired obligors; the assumptions for measuring ECL; and the estimation of post model adjustments where required have not been provided given
their diverse nature, their interrelationship and the number of estimates and assumptions involved.
Retirement benefit obligations
The Group’s accounting policy for retirement benefit obligations is set out in accounting policy (h) in note 1. Details of the Group’s retirement benefit
obligations are set out in note 28.
The key estimates and assumptions that the Group has used in determining the retirement benefit obligation are as follows:
•
In a situation where the Group believes the Trustee has the ability to grant discretionary increases without any funding being provided by the
Group, the Group has assumed that the Trustee will grant increases and as a result the scheme’s liabilities include an estimate for this matter;
and
• The significant actuarial assumptions used to determine the present value of the retirement benefit obligation.
The Trustee of the Irish Scheme has awarded an increase, in certain years, in respect of pensions eligible for discretionary pension in payment
increases notwithstanding a decision by the Group not to fund such increases. This reflected the ability of the Trustee to grant an increase when the
financial position of the scheme would enable such an increase at that point in time. Taking these decisions by the Trustee into consideration, the
long term assumption for future increases in pension in payment reflects an assessment of the Trustee’s ability to grant further increases without any
funding from the Group, capped at a long-term inflation assumption.
Having taken actuarial advice, the Group has adopted a rate of 2.05% (31 December 2022: 2.6%) for the long-term assumption for future
discretionary increases in pensions in payment (which is the lower of the surplus available to the Trustee to distribute or the long-term inflation
assumption). This increased the scheme liabilities by € 822 million at 31 December 2023 (31 December 2022: € 886 million).
The actuarial valuation of the schemes’ liabilities is dependent upon a number of financial and demographic assumptions which are inherently
uncertain. Changes to those assumptions could materially impact the reported amount for schemes’ liabilities and the actuarial gains/losses reported in
equity. Details of the assumptions adopted by the Group in calculating the schemes’ liabilities and a sensitivity analysis for the principal assumptions
used to measure the schemes’ liabilities are set out in note 28 to the financial statements.
Investment in subsidiary in the separate financial statements
The Group’s accounting policy for the impairment of investment in subsidiary undertakings is set out in accounting policy (d) in note 1 of the Group
financial statements. Details of the Company’s investment in subsidiary are shown in note (e) to the Company’s financial statements.
The key estimates and assumptions that the Group has used in assessing the value-in-use (‘VIU’) of its investment in subsidiary undertakings
are as follows:
• The estimation of expected cash flows based on the financial plan for 2024-2026;
• The assumption of an appropriate growth rate; and
• The estimation of an appropriate discount rate including the assumption of an appropriate risk-free rate and the assumption of an appropriate
credit spread.
The investment in subsidiary in the separate financial statements of the Company are reviewed for impairment when there are indications that
impairment losses may have occurred. If any such indications exist, the Company undertakes an impairment review by comparing the carrying value
of the investment in the subsidiary with its estimated recoverable amount with any shortfall being reported as an impairment charge in the
Company’s financial statements. The estimated recoverable amount is based on VIU calculations.
The Company tested its investment in Allied Irish Banks, p.l.c. at 31 December 2023 to determine whether the impairment losses recognised in
previous periods no longer existed or may have decreased. In determining the VIU, the estimated pre-tax cash flow projections in the Company’s
financial plan for the period 2024 to 2026 were used as a base and a growth rate of 2% from 2026 was assumed into perpetuity. These projections
were discounted at a risk adjusted interest rate of 12.1%. The VIU was calculated at € 14,385 million which resulted in a reversal of € 588 million of
previous impairments.
Given the uncertainties and the high level of subjectivity involved in the estimation process, it is possible that the outcomes in the next financial year
could differ from the expectations on which the Company’s estimates are based resulting in the recognition and measurement of materially different
amounts from those estimated in these financial statements.
Details of the VIU calculation and the sensitivity of the carrying amount of the investment to possible changes in key variables are set out in note (e)
to the Company’s financial statements.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
3 Segmental information
Segment overview
The Group has identified reportable segments on the basis of internal reports about components of the Group that are regularly reviewed by the
Chief Operating Decision Maker (‘CODM’) in order to allocate resources to the segment and assess its performance. Based on this identification,
the reportable segments are the operating segments within the Group, the head of each being a member of the Executive Committee. The
Executive Committee is the CODM and it relies primarily on the management accounts to assess performance of the reportable segments and when
making resource allocation decisions.
Transactions between operating segments are on normal commercial terms and conditions, with internal charges and transfer pricing adjustments
reflected in the performance of each operating segment. Revenue sharing agreements are used to allocate external customer revenues to an
operating segment on a reasonable basis. The geographical distribution of total revenue is based primarily on the location of the office recording the
transaction.
The Group’s performance in 2023 was managed and reported across the Retail Banking, AIB Capital Markets (Capital Markets), AIB UK and Group
segments. Segment performance excludes exceptional items.
Retail Banking
Our leading Irish retail franchise provides a comprehensive range of products and services to over 3.2 million customers delivered through our
branch, digital and phone banking channels; with an expanded reach into the retail customer base via EBS, Haven, AIB Merchant Services,
Payzone, Nifti and AIB life.
• Homes & Consumer are responsible for meeting the everyday banking needs of customers in Ireland by delivering innovative products,
propositions and services and for growing our market leading positions. Our aim is to achieve a seamless and transparent customer experience
across all our products and services including mortgages, current accounts, personal lending, payments and credit cards, deposits, insurance and
wealth.
• SME serves our micro and small SME customers through our sector-led strategy and local expertise with an extensive product and services
offering. Our aim is to help our customers create and build sustainable businesses in their communities.
• Financial Solutions Group (FSG) is our dedicated centre of excellence for the management of the vast majority of the Group’s non-performing
exposures (NPEs), with the objective of supporting our customers in difficulty and delivering the Group’s strategy to reduce NPEs.
Capital Markets
Capital Markets provides institutional, corporate and business banking services to the Group’s larger customers and customers requiring specific
sector or product expertise. Capital Markets’ relationship driven model serves customers through sector specialist teams including: corporate
banking, real estate finance, business banking and energy, climate action & infrastructure.
In addition to traditional credit products, Capital Markets offers customers foreign exchange and interest rate risk management products, cash
management products, trade finance, mezzanine finance, structured and specialist finance and equity investments, as well as private banking
services and advice. Capital Markets also has syndicated and international finance teams based in Dublin and in New York. Goodbody offers further
capabilities in wealth management, corporate finance, asset management and wider capital market propositions.
AIB UK
AIB UK offers corporate, retail and business banking services in two distinct markets:
• a sector-led corporate bank with a comprehensive range of lending and deposit products, offering specific sector expertise across both
Great Britain and Northern Ireland; and
• a full service retail bank in Northern Ireland (AIB NI) to personal and business customers with a focus on mortgage and business lending.
Group
Group comprises wholesale treasury activities and Group control and support functions. Treasury manages the Group’s liquidity and funding
positions and provides customer treasury services and economic research. The Group’s control and support functions in the period included
Technology, Operations, Finance, Risk, Legal, Corporate Governance & Customer Care, Human Resources, Sustainability and Corporate Affairs,
Enterprise Development and Group Internal Audit.
Segment allocations
Under the Group’s cost allocation methodology, substantially all of the costs of the Group’s control, support and Treasury functions are allocated to
Retail Banking, Capital Markets and AIB UK. In addition, certain Bank levies and regulatory fees, such as the Irish bank levy, are allocated to the
Retail Banking and Capital Markets segments.
Funding and liquidity income/charges are based on each segment’s funding requirements and the Group’s funding cost profile, which is informed by
wholesale and retail funding costs. Income attributable to capital is allocated to segments based on each segment’s capital requirement.
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AIB Group plc
3 Segmental information continued
Operations by business segment
Net interest income
Net fee and commission income*
Other
Other income
Total operating income
Other operating expenses
Of which: Personnel expenses
General and administrative expenses
Depreciation, impairment and amortisation
Bank levies and regulatory fees
Total operating expenses
Net credit impairment charge
Operating profit/(loss)
Income/(loss) from equity accounted investments
Profit/(loss) on disposal of business
Profit/(loss) before taxation
Retail
Banking
Capital
Markets
AIB UK
Group
Total
€ m
€ m
€ m
€ m
€ m
Excep-
tional
items
€ m
(1)
2023
Total
€ m
2,409
438
224
662
896
150
42
192
425
111
3,841
—
3,841
40
5
45
5
(4)
1
633
267
900
—
(19) (2)(5)
(19)
3,071
1,088
470
112
4,741
(19)
(1,253)
(373)
(185)
(15) (1,826)
(131)
(564)
(233)
(465)
(224)
(51)
(97)
(43)
(12)
(99)
(62)
(24)
(6)
(902)
(5)
(629)
(4)
(295)
(10) (3)
(121) (4)(6)
—
(1)
(121)
(185)
—
(1,304)
(385)
(186)
(136) (2,011)
(131)
(150)
(57)
(88)
(26)
(1)
(172)
—
1,710
7
—
1,717
615
—
2
617
258
(25) 2,558
(150)
2,408
6
—
(1)
(28)
12
(26)
—
—
12
(26)
264
(54) 2,544
(150)
2,394
633
248
881
4,722
(1,957)
(912)
(750)
(295)
(185)
(2,142)
2,580
(172)
Operating profit/(loss) before impairment losses
1,767
703
284
(24) 2,730
(1) Exceptional items are shown separately above. These are items that Management view as distorting comparability of performance year-on-year. Exceptional items are set out in (2) to (6) below.
(2) Loss on disposal of loan portfolios.
(3) Termination benefits.
(4) Restitution costs.
(5) Restructuring costs.
(6) Inorganic transaction costs.
*Analysis of net fee and commission income
Customer accounts
Card income
Foreign exchange fees
Credit related fees
Specialised payment services fees
Stockbroking client fees and commissions
Asset management and advisory fees
Other fees and commissions
Fee and commission income
Specialised payment services expenses
Card expenses
Other fee and commission expenses
Fee and commission expense
€ m
202
166
47
8
138
—
—
36
597
(119)
(34)
(6)
(159)
26
9
33
32
—
46
4
6
156
—
(1)
(5)
(6)
Further information on ‘Net fee and commission income’ is set out in note 6.
438
150
Retail
Banking
Capital
Markets
AIB UK
Group
€ m
€ m
€ m
2023
Total
€ m
240
187
88
54
138
46
4
49
806
(119)
(39)
(15)
(173)
633
12
12
6
14
—
—
—
—
44
—
(4)
—
(4)
40
—
—
2
—
—
—
—
7
9
—
—
(4)
(4)
5
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AIB Group plc
Notes to the Consolidated Financial Statements continued
3 Segmental information continued
Operations by business segment
Net interest income
Net fee and commission income*
Other
Other income
Total operating income
Other operating expenses
Of which: Personnel expenses
General and administrative expenses
Depreciation, impairment and amortisation
Bank levies and regulatory fees
Total operating expenses
Operating profit/(loss) before impairment losses
Net credit impairment writeback/(charge)
Operating profit/(loss)
Income from equity accounted investments
Profit/(loss) before taxation
Retail
Banking
Capital
Markets
AIB UK
Group
Total
€ m
€ m
€ m
€ m
€ m
Excep-
tional
items
€ m
(1)
1,186
387
31
418
1,604
565
149
84
233
798
294
46
10
56
50
2,095
5
88
93
587
213
800
—
1 (7)
17 (2)(5)
18
350
143
2,895
18
(1,151)
(325)
(172)
(11) (1,659)
(502)
(196)
(414)
(235)
(50)
(87)
(42)
(12)
(80)
(67)
(25)
(1)
(2)
(7)
(2)
(92)
(780)
(575)
(304)
(155)
(249)
(17) (3)-(5)
(195) (4)-(7)
(37) (5)
—
(1,201)
(337)
(173)
(103) (1,814)
403
144
547
7
554
461
(102)
177
(49)
359
25
384
128
5
133
40
—
40
—
40
1,081
(7)
1,074
37
1,111
(231)
(249)
(231)
—
(231)
—
2022
Total
€ m
2,095
588
230
818
2,913
(1,908)
(797)
(770)
(341)
(155)
(2,063)
850
(7)
843
37
880
(1) Exceptional items are shown separately above. These are items that Management view as distorting comparability of performance year-on-year. Exceptional items are set out in (2) to (7) below.
(2) Gain on disposal of loan portfolios.
(3) Termination benefits.
(4) Restitution costs.
(5) Restructuring costs.
(6) Inorganic transaction costs.
(7) Other.
*Analysis of net fee and commission income
Customer accounts
Card income
Foreign exchange fees
Credit related fees
Specialised payment services fees
Stockbroking client fees and commissions
Asset management and advisory fees
Other fees and commissions
Fee and commission income
Specialised payment services expenses
Card expenses
Other fee and commission expenses
Fee and commission expense
Total net fee and commission income
(1) Includes € 1 million reported under exceptional items.
Further information on ‘Net fee and commission income’ is set out in note 6.
Retail
Banking
Capital
Markets
AIB UK
Group
2022
Total
€ m
€ m
€ m
€ m
€ m
176
134
44
7
137
—
—
51
549
(120)
(37)
(5)
(162)
18
9
30
29
—
47
12
11
156
—
(2)
(5)
(7)
387
149
14
13
10
14
—
—
—
2
53
—
(5)
(1)
(6)
47 (1)
18
—
2
—
—
—
—
(13)
7
—
—
(2)
(2)
5
226
156
86
50
137
47
12
51
765
(120)
(44)
(13)
(177)
588
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AIB Group plc
3 Segmental information continued
Other amounts - statement of financial position
Loans and advances to customers:
– measured at amortised cost
– measured at FVTPL
Total loans and advances to customers
Customer accounts
Other amounts - statement of financial position
Loans and advances to customers:
– measured at amortised cost
– measured at FVTPL
Total loans and advances to customers
Customer accounts
Geographic information(1)
Gross external revenue
Inter-geographical segment revenue
Total revenue
Geographic information(1)
Gross external revenue
Inter-geographical segment revenue
Total revenue
31 December 2023
Retail
Banking
Capital
Markets
AIB UK
Group
€ m
€ m
€ m
€ m
Total
€ m
39,227
19,326
6,868
—
42
39,227
80,454
19,368
15,171
—
6,868
8,004
28
—
28
65,449
42
65,491
1,153
104,782
31 December 2022
Retail
Banking
Capital
Markets
AIB UK
Group
€ m
€ m
€ m
€ m
Total
€ m
34,165
18,215
6,969
—
34,165
75,798
249
18,464
16,240
—
6,969
9,097
15
—
15
59,364
249
59,613
1,224
102,359
Year to 31 December 2023
Ireland
United
Kingdom
Rest of the
World
€ m
642
(115)
527
€ m
38
(43)
(5)
Total
€ m
4,722
—
4,722
Year to 31 December 2022
United
Kingdom
Rest of the
World
€ m
64
292
356
€ m
(19)
24
5
Total
€ m
2,913
—
2,913
€ m
4,042
158
4,200
Ireland
€ m
2,868
(316)
2,552
Revenue from external customers comprises interest and similar income (note 4) and interest and similar expense (note 5), and all other items of
income (notes 6 to 10).
Geographic Information
Non-current assets(2)
Geographic Information
Non-current assets(2)
(1) For details of significant geographic concentrations, see the Risk management section.
(2) Non-current assets comprise intangible assets and goodwill and property, plant and equipment.
Ireland
€ m
1,429
Ireland
€ m
1,426
31 December 2023
United
Kingdom
Rest of the
World
€ m
53
€ m
1
Total
€ m
1,483
31 December 2022
United
Kingdom
Rest of the
World
€ m
48
€ m
2
Total
€ m
1,476
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AIB Group plc
Notes to the Consolidated Financial Statements continued
4 Interest and similar income
Interest on loans and advances to customers at amortised cost
Interest on loans and advances to banks at amortised cost
Interest on securities financing at amortised cost
Interest on investment securities
Interest income on financial assets
Negative interest on financial liabilities
Interest income calculated using the effective interest rate method
Interest income on finance leases and hire purchase contracts
Interest income on financial assets at FVTPL
Other interest income and similar income
Total interest and similar income
2023
€ m
2,295
1,267
273
714
2022
€ m
1,877
237
42
193
4,549
2,349
—
83
4,549
2,432
80
16
96
70
10
80
4,645
2,512
The Group presents interest resulting from negative effective interest rates on financial liabilities as interest income rather than as offset against
interest expense.
Interest income includes a debit of € 607 million (2022: a credit of € 70 million) transferred from other comprehensive income in respect of cash flow
hedges which is included in ‘Interest on loans and advances to customers at amortised cost’.
Included in negative interest on financial liabilities in 2022 is interest of € 25 million relating to the TLTRO III programme. The Group repaid its
TLTRO borrowing in December 2022.
5 Interest and similar expense
Interest on customer accounts
Interest on deposits by central banks and banks
Interest on securities financing
Interest on debt securities in issue
Interest on lease liabilities
Interest on subordinated liabilities and other capital instruments
Interest expense on financial liabilities
Negative interest on financial assets
Interest expense calculated using the effective interest rate method
Non-trading derivatives (not in hedge accounting relationships - economic hedges)(1)
Other interest and similar expense
Total interest and similar expense
(1) Refer to note 1(c) for further information about the change in presentation for certain line items in the primary statements.
2023
€ m
175
19
23
436
9
97
759
2
761
43
43
804
2022
€ m
46
5
11
134
11
50
257
96
353
64
64
417
The Group presents interest resulting from negative effective interest rates on financial assets as interest expense rather than as offset against
interest income.
Interest expense includes a credit of € 42 million (2022: a credit of € 4 million) transferred from other comprehensive income in respect of cash flow
hedges which is included in ‘Interest on customer accounts’.
Interest expense reported above, calculated using the effective interest rate method, relates to financial liabilities not carried at fair value through
profit or loss.
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AIB Group plc
6 Net fee and commission income
Customer accounts
Card income
Foreign exchange fees
Credit related fees
Specialised payment services fees(1)
Stockbroking client fees and commissions
Asset management and advisory fees
Other fees and commissions
Fee and commission income
Specialised payment services expenses(1)
Card expenses
Other fee and commissions expenses
Fee and commission expense
Total net fee and commission income
2023
€ m
240
187
88
54
138
46
4
49
2022
€ m
226
156
86
50
137
47
12
51
806
765
(119)
(120)
(39)
(15)
(44)
(13)
(173)
(177)
633
588
(1) Specialised payment services: fee income and fee expenses in respect of services and prepaid credits for cellular phone and utilities sold to third parties.
Fees and commissions which are an integral part of the effective interest rate are recognised as part of interest and similar income (note 4) or
interest and similar expense (note 5).
7 Net trading income
Foreign exchange contracts(1)
Interest rate contracts and debt securities(2)
Credit derivative contracts
Equity investments, index contracts and warrants
Forward contracts to acquire loans(3)
Total net trading income
2023
€ m
(3)
6
(3)
(13)
223
210
2022
€ m
(5)
35
3
5
62
100
(1) Refer to note 1(c) for further information about the change in presentation for certain line items in the primary statements.
(2) Includes a gain of € 4 million (2022: gain of € 12 million) in relation to XVA adjustments. XVA comprises counterparty valuation adjustments (“CVA”) and funding valuation adjustments (“FVA”).
(3) Includes a gain of € 20 million (2022: gain of € 62 million) relating to the forward contract to acquire Ulster Bank corporate and commercial loans and a gain of € 203 million (2022: Nil) relating to
the forward contract to acquire Ulster Bank tracker (and linked) mortgages. See note 44 for further information.
The total hedging ineffectiveness on cash flow hedges reflected in the consolidated income statement amounted to Nil in 2023 (2022: Nil).
8 Net gain on other financial assets measured at FVTPL
Loans and advances to customers(1)
Investment securities – equity
Total net gain on other financial assets measured at FVTPL
(1) Excludes interest income (note 4).
2023
€ m
3
27
30
2022
€ m
14
88
102
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AIB Group plc
Notes to the Consolidated Financial Statements continued
9 Net (loss)/gain on derecognition of financial assets measured at amortised cost
Loans and advances to customers
2023
Loss from
derecognition
Carrying value
of derecognised
financial assets
measured at
amortised cost
Carrying value of
derecognised
financial assets
measured at
amortised cost
2022
Gain from
derecognition
€ m
204
€ m
(9)
€ m
595
€ m
18
Derecognition relates to the sale of portfolios of non-performing loans, small and medium enterprise (“SME”) loans in AIB UK and the sale of
individual loans (for credit management purposes) from a specific loan portfolio where credit deterioration had occurred.
(1) The majority of the gain on termination of hedging swaps relates to the disposal of debt securities at FVOCI. In addition, it includes debit of € 8 million (2022: Nil) transferred from other
comprehensive income in respect of cash flow hedges.
(2) Refer to note 1(c) for further information about the change in presentation of certain line items in the primary statements.
10 Other operating income
Loss on disposal of investment securities at FVOCI – debt
Gain on termination of hedging swaps(1)
Dividend income(2)
Miscellaneous operating income
Total other operating income
11 Operating expenses
Personnel expenses:
Wages and salaries
Termination benefits(1)
Retirement benefits(2)
Social security costs
Other personnel expenses(3)
Less: staff costs capitalised(4)
Total personnel expenses
General and administrative expenses(5)
Restitution and associated costs(6)
Bank levies and regulatory fees
Total operating expenses
2023
€ m
2022
€ m
(22)
(7)
14
2
23
17
4
2
11
10
2022
€ m
620
7
93
69
30
819
(22)
797
676
94
770
155
2023
€ m
711
7
105
79
36
938
(26)
912
688
62
750
185
(1) Includes charges for voluntary severance programmes of € 7 million (2022: € 7 million).
(2) Comprises a defined contribution charge of € 89 million (2022: a charge of € 80 million), a charge of € 5 million in relation to defined benefit expense (2022: a charge of € 4 million), and a long
term disability payments/death in service benefit charge of € 11 million (2022: a charge of € 9 million). For details of retirement benefits, see note 28.
(3) Other personnel expenses include staff training, recruitment and various other staff costs.
(4) Staff costs capitalised relate to intangible assets.
(5) 2022 included € 27 million relating to the CBI Tracker Mortgage Examination fine.
(6) 2023 includes a charge for the Belfry provision (including associated costs) and a partial release for other customer provisions. 2022 included a charge for the Belfry provision and a partial
release of other provisions.
The average number of employees for 2023 and 2022 is set out in note 48.
1,847
1,722
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AIB Group plc
12 Net credit impairment charge
The following table analyses the income statement net credit impairment charge on financial instruments for the years to 31 December 2023
and 2022.
Credit impairment charge
on financial instruments
Net remeasurement of ECL allowance
Loans and advances to banks
Loans and advances to customers
Securities financing
Loan commitments
Financial guarantee contracts
Investment securities – debt
Credit impairment charge
Recoveries of amounts previously written-off
Total net credit impairment charge
Measured
at amortised
cost
Measured
at FVOCI
2023
Total
Measured
at amortised
cost
Measured
at FVOCI
2022
Total
€ m
€ m
€ m
€ m
€ m
€ m
—
(216)
—
15
2
—
(199)
27
(172)
—
—
—
—
—
—
—
—
—
—
(216)
—
15
2
—
(199)
27
(172)
—
(50)
—
(7)
7
(2)
(52)
45
(7)
—
—
—
—
—
—
—
—
—
—
(50)
—
(7)
7
(2)
(52)
45
(7)
13 Auditor's remuneration
The disclosure of auditor’s remuneration is in accordance with Section 322 of the Companies Act 2014. This mandates disclosure of remuneration
paid/payable to the Group Auditor only, for services relating to the audit of the Group and relevant subsidiary financial statements in the categories
set out below. PricewaterhouseCoopers, Chartered Accountants and Statutory auditors, were appointed as the Group's independent auditor
following the Group's AGM in May 2023. Deloitte Ireland LLP was the Group’s auditor for 2022.
Auditor’s remuneration (excluding VAT):
Audit of Group financial statements
Other assurance services
Other non-audit services
Total auditor’s remuneration
2023
2022
Ireland
Overseas
Ireland
Overseas
€ m
2.9
0.7
—
3.6
€ m
0.9
0.1
—
1.0
€ m
3.0
0.9
0.2
4.1
€ m
1.1
0.1
—
1.2
The 2023 amounts in the table above relate to fees payable to PricewaterhouseCoopers from the date of their appointment for services provided,
split between those payable to the statutory auditors, PricewaterhouseCoopers in Ireland and fees paid to overseas auditors,
PricewaterhouseCoopers LLP in the UK. The 2022 amounts relate to statutory audit fees payable to Deloitte Ireland LLP and overseas auditors,
Deloitte LLP in the UK.
Other assurance services include remuneration for additional assurance issued by the firms outside of the audit of the statutory financial statements
of the Group and its subsidiaries. This remuneration includes assignments where the Auditor, in Ireland, provides assurance to third parties.
The Group policy on the provision of non-audit services to the parent and its subsidiary companies includes the prohibition on the provision of
certain services and the pre-approval by the Board Audit Committee of the engagement of the Auditor in other instances.
The Board Audit Committee has reviewed the level of non-audit services remuneration and is satisfied that it has not affected the independence of
the Auditor. It is Group policy to subject all large consultancy assignments to competitive tender, where appropriate.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
14 Taxation
Current tax
Corporation tax in Ireland
Current tax on income for the year
Adjustments in respect of prior years
Foreign tax
Current tax on income for the year
Adjustments in respect of prior years
Current tax charge for the year
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior years
Recognition of deferred tax assets in respect of current period losses
Reduction in carrying value of deferred tax assets in respect of carried forward losses
Deferred tax charge for the year
Total tax charge for the year
Effective tax rate
2023
€ m
2022
€ m
(6)
—
(6)
(71)
—
(71)
(77)
1
2
—
(262)
(259)
(336)
(5)
(1)
(6)
(27)
—
(27)
(33)
(6)
—
—
(76)
(82)
(115)
14.0 %
13.1 %
Factors affecting the effective tax rate
The following table sets out the difference between the tax charge that would result from applying the standard corporation tax rate in Ireland of
12.5% and the actual tax charge for the year:
Profit before tax
Tax charge at standard corporation tax rate in Ireland of 12.5%
Effects of:
Foreign profits taxed at other rates
Expenses not deductible for tax purposes
Exempted income, income at reduced rates and tax credits
Share of results of investments accounted for using the equity method shown post tax in
the income statement
Income taxed at higher tax rates
Tax legislation on equity distributions
Reversal of amounts previously not recognised
Other tax adjustments
Change in tax rates
Adjustments to tax charge in respect of prior years
Tax charge
2023
2022
€ m
2,394
(299)
(40)
(11)
(1)
3
(12)
8
13
1
—
2
%
12.5
1.7
0.4
0.1
(0.2)
0.5
(0.3)
(0.5)
(0.1)
—
(0.1)
€ m
880
(110)
(12)
(17)
1
2
(11)
8
16
10
(1)
(1)
(336)
14.0
(115)
%
12.5
1.4
1.9
(0.1)
(0.2)
1.3
(0.9)
(1.8)
(1.2)
0.1
0.1
13.1
The member countries of the OECD/G20 Inclusive Framework have agreed the Pillar Two model rules for a global 15% minimum effective tax rate.
Ireland, the Group’s primary operating jurisdiction, enacted Pillar Two legislation on 18 December 2023, effective from 1 January 2024. The Group is
within the scope of the Pillar Two legislation. However, as it was not effective at the reporting date, the Group has no related current tax exposure for
2023.
Under the Pillar Two legislation, when effective, if the Group’s Pillar Two effective tax rate in a jurisdiction is less than the 15% minimum rate, the
Group is liable to pay a top up tax for the difference. For the purposes of the Pillar Two legislation, a number of adjustments are required in
calculating the Pillar Two effective tax rate. In particular, a transitional adjustment applies to deferred tax expense for utilisation of carried forward
losses, where a deferred tax asset has been recorded at a rate lower than 15%. The use of these losses is deemed to be at a rate of 15% where the
loss is a Pillar Two loss.
The Group continues to assess its exposure to the Pillar Two legislation. An initial assessment indicates that if Pillar Two legislation had been in
effect in 2023, the Group would not have had any top-up tax expense for the year in Ireland or in any of the other jurisdictions that the Group
operates in. This is because the Pillar Two effective tax rate in each of those jurisdictions would have been above 15% or a transitional exemption
would have applied.
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AIB Group plc
14 Taxation continued
Analysis of selected other comprehensive income
Retirement benefit schemes
Remeasurement of defined benefit asset/(liability)
Total
Foreign currency translation reserves
Amounts reclassified from the foreign currency translation reserves
to the income statement as a reclassification adjustment:
– amounts for which hedge accounting had previously been used,
but for which the hedged future cash flows are no longer
expected to occur
– amounts that have been transferred because the hedged item
has affected the income statement
Recognised in other comprehensive income:
– Net (losses)/gains on net investment hedges
– Exchange differences on translation of foreign operations
Total
Cash flow hedging reserves
Amounts reclassified from the cash flow hedging reserves to the
income statement as a reclassification adjustment:
– amounts for which hedge accounting had previously been used,
but for which the hedged future cash flows are no longer
expected to occur
– amounts that have been transferred because the hedged item
has affected the income statement
Gross
€ m
Tax
€ m
2023
Net
€ m
Gross
€ m
Tax
€ m
2022
Net
€ m
(2)
(2)
—
—
(2)
(2)
(20)
(20)
12
12
(8)
(8)
—
—
—
—
—
—
—
—
—
—
—
—
(28)
82
54
3
—
3
(25)
79
(10)
69
82
57
(140)
—
(140)
(61)
(10)
(71)
—
—
—
—
—
—
573
(72)
501
(74)
9
(65)
Hedging gains/(losses) recognised in other comprehensive income
791
(110)
681
(1,833)
279 (1,554)
Total
1,364
(182) 1,182
(1,907)
288 (1,619)
Investment debt securities at FVOCI reserves
Fair value losses transferred to income statement
Fair value losses recognised in other comprehensive income
Total
22
(68)
(46)
(3)
8
5
19
7
(60)
(216)
(41)
(209)
(1)
22
21
6
(194)
(188)
15 Loss on disposal of business
Loss on disposal of business
Total loss on disposal of business
2023
€ m
(26)
(26)
2022
€ m
—
—
The loss of € 26 million primarily relates to the repatriation of part of the capital of certain foreign subsidiaries in the Group which have ceased
trading. A pro-rata amount of the related foreign currency cumulative translation reserve was transferred to the income statement.
16 Trading portfolio
Equity securities
Debt securities
Total trading portfolio
Trading
portfolio
assets
2023
Trading
portfolio
liabilities
€ m
9
84
93
€ m
(5)
(134)
(139)
Trading
portfolio
assets
€ m
8
—
8
2022
Trading
portfolio
liabilities
€ m
(4)
—
(4)
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments
Derivatives are entered into to service customer requirements, to manage the Group’s interest rate, exchange rate, equity and credit exposures and
for trading purposes. Derivative instruments are contractual agreements whose value is derived from price movements in underlying assets, interest
rates, foreign exchange rates or indices.
Market risk is the exposure to potential loss through holding interest rate, exchange rate and equity positions in the face of absolute and relative
price movements, interest rate volatility, movements in exchange rates and shifts in liquidity. Credit risk is the exposure to loss should the
counterparty to a financial instrument fail to perform in accordance with the terms of the contract.
Credit risk in derivative contracts is the risk that the Group’s counterparty in the contract defaults prior to maturity at a time when the Group has
a claim on the counterparty under the contract (i.e. contracts with a positive fair value). The Group would then have to replace the contract at the
current market rate, which may result in a loss. For risk management purposes, consideration is taken of the fact that not all counterparties to
derivative positions are expected to default at the point where the Group is most exposed to them. While notional principal amounts are used to
express the volume of derivative transactions, the amounts subject to credit risk are much lower because derivative contracts typically involve
payments based on the net differences between specified prices or rates.
The following table presents the notional principal amount of interest rate, exchange rate, equity and credit derivative contracts together with the
positive and negative fair values attaching to those contracts at 31 December 2023 and 2022:
Derivative financial instruments(1)
Interest rate contracts
Exchange rate contracts
Equity contracts
Credit derivatives
Forward contracts to acquire loans(2)
Total
Notional
principal
amount
€ m
86,899
6,287
92
83
1,047
94,408
2023
Fair values
Assets
Liabilities
€ m
2,351
14
—
—
12
€ m
(1,869)
(29)
(1)
(3)
—
2,377
(1,902)
Notional
principal
amount
€ m
65,213
7,449
83
43
1,232
74,020
2022
Fair values
Assets
Liabilities
€ m
2,343
164
4
—
—
€ m
(2,900)
(72)
—
(1)
(9)
2,511
(2,982)
(1) Interest rate, exchange rate, equity and credit derivative contracts are entered into for both hedging and trading purposes.
(2) Relates to a forward contract to acquire tracker (and linked) mortgages from Ulster Bank in 2023 and a forward contract to acquire corporate and commercial loans from Ulster Bank in 2022. See
note 44 for further information.
The Group uses the same credit control and risk management policies in undertaking all off-balance sheet commitments as it does for on-balance
sheet lending including counterparty credit approval, limit setting and monitoring procedures. In addition, derivative instruments are subject to the
market risk policy and control framework as described in the ‘Risk management’ section of this report.
The increase in interest rate contracts reflects the Group’s hedging of net interest income in response to the sharp interest rate increases and
market volatility in the period.
The Group has the following concentration of exposures in respect of notional principal amount and positive fair value of derivative financial
instruments. The concentrations are based primarily on the location of the office recording the transaction.
Ireland
United Kingdom
United States of America
Total
Notional principal amount
Positive fair value
2023
€ m
90,975
3,341
92
2022
€ m
71,328
2,572
120
2023
€ m
2,261
113
3
2022
€ m
2,411
96
4
94,408
74,020
2,377
2,511
Trading book activities
The Group maintains trading positions in a variety of financial instruments including derivatives. These derivative financial instruments include interest
rate, foreign exchange, equity and credit derivatives. Most of these positions arise as a result of activity generated by corporate customers while the
remainder represent trading decisions of the Group’s derivative and foreign exchange traders with a view to generating incremental income.
All trading activity is conducted within risk limits approved by the Board. Systems are in place which measure risks and profitability associated with
derivative trading positions as market movements occur. Independent risk control units monitor these risks.
Banking book activities
In addition to meeting customer needs, the Group’s principal objective in holding or transacting derivatives is the management of interest rate and
foreign exchange risks which arise within the banking book through the operations of the Group as outlined below. Market risk within the banking
book is also controlled through limits approved by the Board and monitored by an independent second line risk function.
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AIB Group plc
17 Derivative financial instruments continued
The operations of the Group are exposed to interest rate risk arising from the fact that assets and liabilities mature or reprice at different times or in
differing amounts. Derivatives are used to modify the repricing or maturity characteristics of assets and liabilities in a cost-efficient manner. This
flexibility helps the Group to achieve interest rate risk management objectives. Similarly, foreign exchange derivatives can be used to hedge the
Group’s exposure to foreign exchange risk.
The fair values of derivatives fluctuate as the underlying market interest rates or foreign exchange rates change. If the derivatives are purchased or
sold as hedges of statement of financial position items, the change in fair value of the derivatives will generally be offset by the change in fair value
of the hedged items.
To achieve its risk management objectives, the Group uses a combination of derivative financial instruments, particularly interest rate swaps, cross
currency interest rate swaps, futures, options and currency swaps, as well as other contracts. The risk that counterparties to derivative contracts
(both trading and banking book) might default on their obligations is monitored on an ongoing basis. The level of credit risk is minimised by dealing
with counterparties of good credit standing, by the use of Credit Support Annexes and ISDA Netting Agreements and increased clearing of
derivatives through Central Clearing Counterparties (‘CCP’s’). As the traded instruments are recognised at market value, any changes in market
value directly affect reported income for a given period.
The following table shows the notional principal amount and the fair value of derivative financial instruments analysed by product and purpose at 31
December 2023 and 2022. A description of how the fair values of derivatives are determined is set out in note 44.
Derivatives held for trading
Interest rate derivatives – over the counter (‘OTC’)
Interest rate swaps
Cross-currency interest rate swaps
Interest rate options bought and sold
Total interest rate derivatives – OTC
Interest rates derivatives – OTC – central clearing
Interest rate swaps
Total interest rate derivatives – OTC – central clearing
Interest rate derivatives – exchange traded
Interest rate futures bought and sold
Total interest rate derivatives – exchange traded
Total interest rate derivatives
Foreign exchange derivatives – OTC
Foreign exchange contracts
Currency options bought and sold
Total foreign exchange derivatives
Equity derivatives – OTC
Equity index options bought and sold
Equity total return swaps
Total equity derivatives
Credit derivatives – OTC – central clearing
Credit derivatives
Total credit derivatives
Other
Forward contracts to acquire loans(1)
Total
Notional
principal
amount
€ m
5,199
645
3,493
9,337
4,650
4,650
85
85
14,072
4,783
—
4,783
—
92
92
83
83
1,047
1,047
2023
2022
Fair Values
Assets
Liabilities
Notional
principal
amount
Fair Values
Assets
Liabilities
€ m
138
3
14
155
278
278
—
—
433
12
—
12
—
—
—
—
—
12
12
€ m
€ m
(351)
—
(18)
(369)
(49)
(49)
—
—
5,067
421
2,305
7,793
4,417
4,417
79
79
(418)
12,289
(26)
—
(26)
5,985
5
5,990
—
(1)
(1)
(3)
(3)
—
—
5
78
83
43
43
1,232
1,232
€ m
114
—
28
142
379
379
—
—
521
121
—
121
—
4
4
—
—
—
—
€ m
(454)
(5)
(29)
(488)
(29)
(29)
—
—
(517)
(72)
—
(72)
—
—
—
(1)
(1)
(9)
(9)
Total derivatives held for trading
20,077
457
(448)
19,637
646
(599)
(1) Relates to a forward contract to acquire tracker (and linked) mortgages from Ulster Bank in 2023 and a forward contract to acquire corporate and commercial loans from Ulster Bank in 2022. See
note 44 for further information.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments continued
Derivatives held for hedging
€ m
€ m
€ m
€ m
€ m
€ m
2023
Fair values
Assets
Liabilities
Notional
principal
amount
Notional
principal
amount
2022
Fair values
Assets
Liabilities
Derivatives designated as fair value hedges – OTC
Interest rate swaps
Total derivatives designated as fair value hedges – OTC
Derivatives designated as fair value hedges – OTC –
central clearing
422
422
9
9
(1)
(1)
1,653
1,653
21
21
—
—
Interest rate swaps
24,015
1,228
(341)
20,458
1,656
Total interest rate fair value hedges – OTC – central clearing
Total derivatives designated as fair value hedges
24,015
24,437
1,228
1,237
(341)
(342)
20,458
22,111
1,656
1,677
(433)
(433)
(433)
Derivatives designated as cash flow hedges – OTC
Interest rate swaps
Total interest rate cash flow hedges – OTC
Derivatives designated as cash flow hedges – OTC –
central clearing
255
255
—
—
(12)
(12)
840
840
1
1
(17)
(17)
Interest rate swaps
48,135
681
(1,097)
29,973
144
(1,933)
Total interest rate cash flow hedges – OTC – central clearing
Total derivatives designated as cash flow hedges
48,135
48,390
681
681
(1,097)
(1,109)
29,973
30,813
144
145
(1,933)
(1,950)
Derivatives designated as net investment hedges – OTC
Forward exchange contracts
Total derivatives designated as net investment hedges –
OTC
Total derivatives held for hedging
Total derivative financial instruments
1,504
1,504
74,331
94,408
2
2
(3)
(3)
1,920
2,377
(1,454)
(1,902)
1,459
1,459
54,383
74,020
43
43
—
—
1,865
2,511
(2,383)
(2,982)
Fair value hedges
Fair value hedges are entered into to hedge the exposure to changes in the fair value of recognised assets or liabilities arising from changes in
interest rates, primarily, debt securities and fixed rate liabilities. The fair values of financial instruments are set out in note 44.
The net mark to market on fair value hedging derivatives, excluding accrual and risk adjustments at 31 December 2023 is positive € 764 million
(2022: positive € 1,168 million) and the net mark to market on the related hedged items at 31 December 2023 is negative € 748 million (2022:
negative € 1,154 million).
Netting financial assets and financial liabilities
Derivative financial instruments are shown on the statement of financial position at their fair value. Those with a positive fair value are reported as
assets and those with a negative fair value are reported as liabilities.
Details on offsetting financial assets and financial liabilities are set out in note 39.
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AIB Group plc
17 Derivative financial instruments continued
Nominal values and average interest rates by residual maturity
At 31 December 2023 and 2022, the Group held the following hedging instruments of interest rate risk and foreign exchange rate risk in fair value,
cash flow and net investment hedges respectively:
Less than 1
month
1 to 3
months
3 months to
1 year
1 to 5 years
5 years +
2023
Total
Fair value hedges – Interest rate swaps
Assets
Hedges of investment securities – debt
Nominal principal amount (€ m)
Average interest rate (%)(1)
Hedges of loans and advances to customers
Nominal principal amount (€ m)
Average interest rate (%)(1)
Liabilities
Hedges of debt securities in issue
Nominal principal amount (€ m)
Average interest rate (%)(1)
Hedges of subordinated debt
Nominal principal amount (€ m)
Average interest rate (%)(1)
Cash flow hedges – Interest rate swaps(2)
Hedges of financial assets
Nominal principal amount (€ m)
Average interest rate (%)(3)
Hedges of financial liabilities
Nominal principal amount (€ m)
Average interest rate (%)(3)
Net investment hedges – Forward exchange contracts
Nominal principal amount (€ m)
Forward FX rate (%)(4)
213
0.29
291
1.11
427
0.72
8,343
0.83
5,134
1.40
14,408
1.03
—
—
—
—
—
—
—
—
15
2.59
15
2.59
—
—
—
—
—
—
—
—
1,655
2.90
500
1.88
6,089
4.17
1,000
2.88
770
5.24
—
—
8,514
4.02
1,500
2.54
756
3.37
2,045
2.07
5,710
2.08
22,697
15,279
46,487
2.58
2.26
2.40
—
—
299
0.87
13
0.46
803
0.87
69
0.88
1,606
2.12
402
0.87
—
—
215
3.36
—
—
1,903
2.21
1,504
0.87
(1) Represents the fixed rate on the hedged item which is being swapped for a variable rate.
(2) Includes interest rate swaps used to hedge interest rate risk.
(3) This is the average interest rate on the fixed leg of swap agreements where the variable rate on the assets and liabilities in cash flow hedges is being swapped for a fixed rate.
(4) Being the forward FX rates on the hedging derivatives which are being used to hedge the Group’s net investment in foreign operations.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments continued
Nominal values and average interest rates by residual maturity continued
Less than 1
month
1 to 3
months
3 months to
1 year
1 to 5 years
5 years +
2022
Total
Fair value hedges – Interest rate swaps
Assets
Hedges of investment securities – debt
Nominal principal amount (€ m)
Average interest rate (%)(1)
Hedges of loans and advances to customers
Nominal principal amount (€ m)
Average interest rate (%)(1)
Liabilities
Hedges of debt securities in issue
Nominal principal amount (€ m)
Average interest rate (%)(1)
Hedges of subordinated debt
Nominal principal amount (€ m)
Average interest rate (%)(1)
Cash flow hedges – Interest rate swaps(2)
Hedges of financial assets
Nominal principal amount (€ m)
Average interest rate (%)(3)
Hedges of financial liabilities
Nominal principal amount (€ m)
Average interest rate (%)(3)
Net investment hedges – Forward exchange contracts
Nominal principal amount (€ m)
Forward FX rate (%)(4)
92
0.84
—
—
—
—
—
—
131
0.86
—
—
386
0.86
213
0.02
—
—
1,253
1.00
—
—
151
0.88
55
0.21
977
0.87
420
0.87
5,461
0.66
6,863
0.56
13,049
0.60
—
—
128
4.75
—
—
—
—
5,391
3.10
1,500
2.54
15
2.60
775
5.73
—
—
15
2.60
7,547
3.05
1,500
2.54
7,570
1.48
11,026
10,040
28,918
1.33
0.97
1.24
52
1.14
96
0.85
861
1.41
—
—
927
1.80
—
—
1,895
1.56
1,459
0.86
(1) Represents the fixed rate on the hedged item which is being swapped for a variable rate.
(2) Includes interest rate swaps and cross currency swaps used to hedge interest rate risk on variable rate EUR/GBP and EUR/USD assets and liabilities.
(3) This is the average interest rate on the fixed leg of swap agreements where the variable rate on the assets and liabilities in cash flow hedges is being swapped for a fixed rate.
(4) Being the forward FX rates on the hedging derivatives which are being used to hedge the Group’s net investment in foreign operations.
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AIB Group plc
17 Derivative financial instruments continued
Fair value hedges of interest rate risk
The tables below set out the amounts relating to items designated as (a) hedging instruments and (b) hedged items in fair value hedges of interest
rate risk together with the related hedge ineffectiveness at 31 December 2023 and 2022:
Carrying amount(1)
Nominal
Assets Liabilities
2023
Line item in
Statement of
Financial Position
where the hedging
instrument is
included
Change in fair value
used for calculating
hedge ineffectiveness
for the year
Hedge
ineffectiveness
recognised in
the income
statement
Line item in the
income
statement that
includes hedge
ineffectiveness
(a) Hedging instruments
€ m
€ m
€ m
€ m
€ m
Interest rate swaps hedging:
Investment securities – debt
14,408
1,102
(136) Derivative financial instruments
Debt securities in issue
8,514
136
(133) Derivative financial instruments
Subordinated debt
1,500
—
(73) Derivative financial instruments
Customer loans
15
—
(1) Derivative financial instruments
(724)
256
66
(1)
(1) Net trading
income
4 Net trading
income
1 Net trading
income
— Net trading
income
Carrying amount
of hedged items
recognised in
Statement of
Financial Position
Accumulated amount
of fair value hedge
adjustments on the
hedged items included
in the carrying amount
of the hedged item
Assets Liabilities
Assets
Liabilities
Line item in
Statement of
Financial
Position
where
hedged item
is included
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
€ m
13,540
—
—
15
€ m
—
(8,423)
(1,412)
€ m
—
89
88
€ m
(925)
Investment securities
— Debt securities in issue
— Subordinated liabilities
and other capital
instruments
—
1
— Customer loans
€ m
723
(252)
(65)
1
2023
Accumulated amount of fair
value hedge adjustments
remaining in Statement of
Financial Position for any
hedged items that have
ceased to be adjusted for
hedging gains and losses
€ m
—
—
—
—
2022
(b) Hedged items
Investment securities – debt
Debt securities in issue
Subordinated debt
Customer loans
Carrying amount(1)
Nominal
Assets
Liabilities
Line item in Statement
of Financial Position
where the hedging
instrument is included
Change in fair value used
for calculating hedge
ineffectiveness for the
year
Hedge
ineffectiveness
recognised in the
income
statement
Line item in the
income
statement that
includes hedge
ineffectiveness
(a) Hedging Instruments
€ m
€ m
€ m
€ m
€ m
Interest rate swaps hedging:
Investment securities – debt
13,049
1,669
(1) Derivative financial
1,679
Debt securities in issue
Subordinated debt
7,547
1,500
instruments
8
—
(294) Derivative financial
instruments
(138) Derivative financial
instruments
(407)
(128)
18 Net trading
income
— Net trading
income
(2) Net trading
income
2022
Carrying amount of
hedged items
recognised in
Statement of
Financial Position
Accumulated amount
of fair value hedge
adjustments on the
hedged items included
in the carrying amount of
the hedged items
Assets
Liabilities
Assets
Liabilities
Line item in
Statement of
Financial
Position
where hedged
item is
included
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
Accumulated amount of fair
value hedge adjustments
remaining in Statement of
Financial Position for any
hedged items that have ceased
to be adjusted for hedging
gains and losses
(b) Hedged items
Investment securities – debt
Debt securities in issue
Subordinated debt
€ m
11,652
€ m
€ m
€ m
—
(1,649)
Investment securities
(7,203)
(1,347)
342
153
Debt securities in issue
Subordinated liabilities
and other capital
instruments
€ m
(1,661)
407
126
(1) The net mark to market on fair value hedging derivatives, excluding accruals of € 130 million, is positive € 765 million (2022: € 76 million and positive € 1,168 million).
€ m
—
—
—
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments continued
Cash flow hedges of interest rate
The tables below set out the amounts relating to (a) items designated as hedging instruments and (b) the hedged items in cash flow hedges of interest rate risk together with the related hedge
ineffectiveness at 31 December 2023 and 2022:
Carrying amount
Hedge ineffectiveness
Line item in
the
Statement of
Financial
Position
where
hedging
instruments
are included
Change in fair
value of hedging
instruments used
for calculating
hedge
ineffectiveness
in the year
Change in
fair value of
hedging
instruments
recognised
in OCI in
the year
Hedge
Ineffectiveness
recognised in
the income
statement
Line item in
the income
statement that
includes hedge
ineffectiveness
2023
Amounts reclassified from cash flow
hedging reserves to the income statement
Amounts for
which hedge
accounting had
been used but for
which the hedged
future cash flows
are no longer
expected to occur
Amounts
that have
been
transferred
because the
hedged item
has affected
the income
statement
Line item in
the income
statement
affected by the
reclassification
€ m
€ m
€ m
€ m
€ m
(a) Hedging Instruments
Interest rate swaps(1)
Nominal
amount
Assets Liabilities
€ m
€ m
€ m
Derivatives hedging assets
46,487
604
(1,095) Derivative financial
instruments
1,480
1,480
Derivatives hedging
liabilities
1,903
77
(14) Derivative financial
instruments
(75)
(75)
(1) Hedging interest rate risk. These can include both interest rate swaps and cross currency swaps, both of which are hedging interest rate risk.
— Net trading
income
— Net trading
income
—
—
(615)
Interest and
similar income
and other
operating income
42
Interest and
similar expense
Line item in Statement
of Financial Position
in which hedged item
is included
Loans and advances to
customers
Customer accounts
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
€ m
(1,480)
75
Amounts in
the cash flow
hedging
reserves for
continuing
hedges(1)
pre tax
€ m
(432)
52
Amounts in
the cash flow
hedging
reserves for
continuing
hedges(1)
post tax
€ m
(344)
45
Amounts
remaining in the
cash flow hedging
reserves from
any hedging
relationship for
which hedge
accounting is no
longer applied
pre tax
€ m
13
—
2023
Amounts
remaining in the
cash flow hedging
reserves from
any hedging
relationship for
which hedge
accounting is no
longer applied
post tax
€ m
11
—
(b) Hedged items
Interest rate risk
Interest rate risk
(1) The cash flow hedging reserves are adjusted to the lower of either the cumulative gain or loss or the cumulative change in fair value (present value) of the hedged item from inception of the hedge.
The portion that is offset by the change in the cash flow hedging reserves is recognised in other comprehensive income with any hedge ineffectiveness recognised in the income statement.
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AIB Group plc
17 Derivative financial instruments continued
Cash flow hedges of interest rate continued
Carrying amount
Hedge ineffectiveness
Line item in
the Statement
of Financial
Position
where
hedging
instruments
are included
Change in fair
value of hedging
instruments used
for calculating
hedge
ineffectiveness
in the year
Change in
fair value of
the hedging
instruments
recognised
in OCI in
the year
Hedge
Ineffectiveness
recognised in the
income
statement
Line item in
the income
statement that
includes hedge
ineffectiveness
Nominal
amount
Assets
Liabilities
(a) Hedging instruments
Interest rate swaps(1)
€ m
€ m
€ m
€ m
€ m
€ m
2022
Amounts reclassified from cash flow
hedging reserves to the income statement
Amounts for
which hedge
accounting had
been used but for
which the hedged
future cash flows
are no longer
expected to occur
Amounts that
have been
transferred
because the
hedged item
has affected
the income
statement
€ m
€ m
Line item in
the income
statement
affected by the
reclassification
Derivatives hedging assets
28,918
Derivatives hedging
liabilities
1,895
7
138
(1,941) Derivative financial
instruments
(1,879)
(1,998)
(9) Derivative financial
165
165
instruments
— Net trading
income
— Net trading
income
—
—
70
4
Interest and
similar income
Interest and
similar expense
(1) Hedging interest rate risk. These can include both interest rate swaps and cross currency interest rate swaps, both of which are hedging interest rate risk.
Line item in Statement
of Financial Position in
which hedged item is
included
Loans and advances to
customers
Customer accounts
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
€ m
1,879
(165)
Amounts in
the cash flow
hedging
reserves for
continuing
hedges(1)
pre tax
€ m
(1,913)
127
Amounts in
the cash flow
hedging
reserves for
continuing
hedges(1)
post tax
€ m
(1,623)
111
Amounts
remaining in the
cash flow hedging
reserves from
any hedging
relationship for
which hedge
accounting is no
longer applied
pre tax
€ m
47
—
2022
Amounts
remaining in the
cash flow hedging
reserves from
any hedging
relationship for
which hedge
accounting is no
longer applied
post tax
€ m
41
—
(b) Hedged items
Interest rate risk
Interest rate risk
(1) The cash flow hedging reserves are adjusted to the lower of either the cumulative gain or loss or the cumulative change in fair value (present value) of the hedged item from inception of the hedge.
The portion that is offset by the change in the cash flow hedging reserves is recognised in other comprehensive income with any hedge ineffectiveness recognised in the income statement.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments continued
Cash flow hedges
The table below sets out the hedged cash flows which are expected to occur in the following periods:
Forecast receivable cash flows
Forecast payable cash flows
Forecast receivable cash flows
Forecast payable cash flows
Within 1 year
Between 1 and
2 years
Between 2 and
5 years
More than
5 years
€ m
1,400
73
€ m
692
44
€ m
1,381
59
€ m
1,113
21
Within 1 year
€ m
940
67
Between 1
and 2 years
€ m
Between 2
and 5 years
€ m
More than
5 years
€ m
610
55
1,038
106
810
66
2023
Total
€ m
4,586
197
2022
Total
€ m
3,398
294
The table below sets out the hedged cash flows, including amortisation of terminated cash flow hedges, which are expected to impact the income
statement in the following periods:
Forecast receivable cash flows
Forecast payable cash flows
Forecast receivable cash flows
Forecast payable cash flows
Within 1 year
Between 1 and
2 years
Between 2 and
5 years
More than 5
years
€ m
1,400
88
€ m
692
47
€ m
1,381
48
€ m
1,113
29
Within 1 year
Between 1
and 2 years
Between 2
and 5 years
More than
5 years
€ m
940
99
€ m
610
74
€ m
1,038
109
€ m
810
60
2023
Total
€ m
4,586
212
2022
Total
€ m
3,398
342
Ineffectiveness reflected in the income statement that arose from cash flow hedges in 2023 amounted to Nil (2022: Nil).
Pay fixed cash flow hedges are used to hedge the cash flows on variable rate liabilities and receive fixed cash flow hedges are used to hedge the
cash flows on variable rate assets.
The total amount recognised in other comprehensive income net of tax in respect of cash flow hedges in 2023 was a gain of € 1,182 million (2022: a
loss of € 1,619 million).
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AIB Group plc
17 Derivative financial instruments continued
Hedges of net investment in foreign operations
The tables below set out the amounts relating to (a) items designated as hedging instruments and (b) the hedged items in hedges of the net investment in foreign operations together with
the related hedge ineffectiveness at 31 December 2023.
Carrying amount
Hedge ineffectiveness
Line item in
the
Statement of
Financial
Position
where
hedging
instruments
are included
Change in fair
value of hedging
instruments used
for calculating
hedge
ineffectiveness
in the year
Change in
fair value of
hedging
instruments
recognised
in OCI in
the year
Hedge
Ineffectiveness
recognised in
the income
statement
Line item in
the income
statement
that includes
hedge
ineffectiveness
2023
Amounts reclassified from foreign currency
translation reserves to the income statement
Amounts for
which hedge
accounting had
been used but for
which the hedged
future cash flows
are no longer
expected to occur
Amounts
that have
been
transferred
because the
hedged item
has affected
the income
statement
Line item in the
income
statement
affected by the
reclassification
Nominal
amount
Assets Liabilities
(a) Hedging Instruments
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
Foreign exchange
contracts
Derivatives hedging assets
1,504
Derivatives hedging
liabilities
—
2
—
(3) Derivative Financial
Instruments
— Derivative Financial
Instruments
(28)
—
(28)
—
— Net trading
income
— Net trading
income
—
—
— Other Income
— Other Income
(b) Hedged items
Net investment in UK subsidiary
Reserves
Line item in Statement
of Financial Position
in which hedged item
is included
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
€ m
28
Amount in the
foreign currency
translation
reserves for
continuing
hedges
pre tax
€ m
(50)
Amounts in the
foreign currency
translation
reserves for
continuing
hedges
post tax
€ m
(43)
Amounts
remaining in the
foreign currency
translation reserves
from any hedging
relationship for
which hedge
accounting is no
longer applied
pre tax
2023
Amounts
remaining in the
foreign currency
translation reserves
from any hedging
relationship for
which hedge
accounting is no
longer applied
post tax
€ m
—
€ m
—
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AIB Group plc
Notes to the Consolidated Financial Statements continued
17 Derivative financial instruments continued
Hedges of net investment in foreign operations continued
Carrying amount
Hedge ineffectiveness
Line item in
the Statement
of Financial
Position
where
hedging
instruments
are included
Change in fair
value of hedging
instruments used
for calculating
hedge
ineffectiveness
in the year
Change in fair
value of
hedging
instruments
recognised
in OCI in
the year
Hedge
Ineffectiveness
recognised in
the income
statement
Line item in
the income
statement
that includes
hedge
ineffectiveness
Nominal
amount
Assets
Liabilities
(a) Hedging Instruments
€ m
€ m
€ m
€ m
€ m
€ m
Foreign exchange
contracts
2022
Amounts reclassified from foreign currency
translation reserves to the income statement
Amounts for
which hedge
accounting had
been used but for
which the hedged
future cash flows
are no longer
expected to occur
Amounts that
have been
transferred
because the
hedged item
has affected
the income
statement
€ m
€ m
Line item in the
income
statement
affected by the
reclassification
Derivatives hedging assets
1,459
Derivatives hedging
liabilities
—
43
—
— Derivative Financial
Instruments
— Derivative Financial
Instruments
79
—
79
—
— Net trading
income
— Net trading
income
—
—
— Other Income
— Other Income
(b) Hedged items
Net investment in UK subsidiary
Reserves
Line item in Statement
of Financial Position in
which hedged item is
included
Change in fair
value of hedged
items used for
calculating hedge
ineffectiveness
for the year
€ m
(79)
Amount in the
foreign currency
translation
reserves for
continuing
hedges
pre tax
€ m
(22)
Amounts in the
foreign currency
translation
reserves for
continuing
hedges
post tax
€ m
(19)
Amounts
remaining in the
foreign currency
translation reserves
from any hedging
relationship for
which hedge
accounting is no
longer applied
pre tax
€ m
—
2022
Amounts
remaining in the
foreign currency
translation reserves
from any hedging
relationship for
which hedge
accounting is no
longer applied
post tax
€ m
—
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AIB Group plc
18 Loans and advances to banks
At amortised cost
Funds placed with central banks
Funds placed with other banks
ECL allowance
Total loans and advances to banks
Loans and advances to banks by geographical area(1)
Ireland
United Kingdom
United States of America
Total loans and advances to banks by geographical area
(1) The classification of loans and advances to banks by geographical area is based primarily on the location of the office recording the transaction.
2023
€ m
259
1,070
1,329
—
2022
€ m
262
1,240
1,502
—
1,329
1,502
2023
€ m
937
388
4
2022
€ m
1,100
398
4
1,329
1,502
Loans and advances to banks include cash collateral of € 741 million (2022: € 963 million) placed with derivative counterparties in relation to net
derivative positions and placed with repurchase agreement counterparties. In addition, these include € 5 million (2022: € 5 million) relating to
restricted balances held in trust in respect of certain payables which are included in ‘other liabilities’ (note 33).
The group is required by law to maintain reserve balances with the Bank of England. At 31 December 2023, these amounted to € 259 million (2022:
€ 261 million).
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AIB Group plc
Notes to the Consolidated Financial Statements continued
19 Loans and advances to customers
At amortised cost
Loans and advances to customers (1)
Amounts receivable under finance leases and hire purchase contracts
ECL allowance
Mandatorily at fair value through profit or loss
Loans and advances to customers
Total loans and advances to customers
Additional information:
Amounts which are repayable on demand
Amounts due from equity accounted investments(2)
2023
€ m
2022
€ m
65,320
59,397
1,649
66,969
(1,520)
65,449
1,585
60,982
(1,618)
59,364
42
249
65,491
59,613
2,145
1,954
45
18
(1) During the period, the Group acquired Ulster Bank corporate and commercial loans of € 884 million and Ulster Bank tracker (and linked) mortgages of € 3,842 million. See note 44 for further
information.
(2) Undrawn commitments amount to € 225 million and are for less than one year (2022: € 133 million).
Loans and advances to customers include cash collateral amounting to € 21 million (2022: € 15 million) placed with derivative counterparties.
For details of credit quality of loans and advances to customers, including forbearance, refer to the sections denoted as ‘audited’ in the ‘Risk
management’ section 2.1.2 to 2.1.6 of this report.
Amounts receivable under finance leases and hire purchase contracts
The following balances principally comprise of leasing arrangements and hire purchase agreements of vehicles, plant, machinery and equipment:
Gross receivables
Not later than 1 year
Later than 1 year and not later than 2 years
Later than 2 years and not later than 3 years
Later than 3 years and not later than 4 years
Later than 4 years and not later than 5 years
Later than 5 years
Total
Unearned future finance income
Deferred costs incurred on origination
Present value of minimum payments
ECL allowance for uncollectible minimum payments receivable(1)
(1) Included in 'ECL allowance on financial assets' (note 21).
2023
€ m
640
466
344
208
104
19
1,781
(142)
10
1,649
43
2022
€ m
638
443
320
191
89
17
1,698
(121)
8
1,585
63
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AIB Group plc
20 Securities financing
Securities financing transactions are generally entered into on a collateralised basis, with debt securities and equities, usually advanced or received
as collateral. Reverse repurchase agreements involve purchase of debt securities with an agreement to resell substantially identical investments at
a fixed price on a certain future date. Securities borrowing agreements involve purchase of debt securities and equities with an agreement to resell
substantially identical investments at a fixed price on a certain future date. Securities sold under agreements to repurchase involves sales of
securities with agreements to repurchase substantially identical investments at a fixed price on a certain future date.
Assets
Reverse repurchase agreements
Securities borrowing transactions
Total (1)
Liabilities
Securities sold under agreements to repurchase
Total
3,628
1,541
5,169
575
575
Banks
Customers
€ m
€ m
Banks
Customers
2023
Total
€ m
3,799
2,667
6,466
€ m
2,888
2,431
5,319
171
1,126
1,297
—
—
575
575
898
898
2022
Total
€ m
2,917
3,365
6,282
898
898
€ m
29
934
963
—
—
(1) Classified as ECL Stage 1 and have an ECL of € 1 million at 31 December 2023 (31 December 2022: € 1 million).
In accordance with the terms of the reverse repurchase agreements and securities borrowing agreements, the Group accepts collateral that it is
permitted to sell or repledge in the absence of default by the owner of the collateral. At 31 December 2023, the total fair value of the collateral
received was € 6,466 million (2022: € 6,282 million), none of which had been resold or repledged. These transactions were conducted under terms
that are usual and customary to standard reverse repurchase agreements and securities borrowing agreements.
Securities sold under agreements to repurchase mature within six months and are secured by debt securities and eligible assets.
At 31 December 2023, in relation to securities sold under agreements to repurchase, the Group had pledged collateral with a fair value of € 575
million (2022: € 898 million). These transactions were conducted under terms that are usual and customary to standard securities sold under
repurchase transactions.
21 ECL allowance on financial assets
The following table shows the movements on the ECL allowance on financial assets. Further information is disclosed in the Gross Loans and ECL
movement tables in the ‘Risk management’ section of this report. See pages 152 to 158.
At 1 January
Exchange translation adjustments
Net re-measurement of ECL allowance – investment securities-debt
Net re-measurement of ECL allowance – banks
Net re-measurement of ECL allowance – customers
Net re-measurement of ECL allowance – securities financing
Changes in ECL allowance due to write-offs
Changes in ECL allowance due to disposals
Other
At 31 December
Amount included in financial assets measured at amortised cost:
Investment securities – debt
Loans and advances to banks
Loans and advances to customers
Securities financing
Other assets – stockbroking client debtors
At 31 December
2023
€ m
1,623
4
—
—
216
—
(125)
(200)
7
1,525
3
—
2022
€ m
1,888
(13)
2
—
50
—
(94)
(210)
—
1,623
3
—
1,520
1,618
1
1
1
1
1,525
1,623
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AIB Group plc
Notes to the Consolidated Financial Statements continued
22 Investment securities
The following table analyses the carrying value of investment securities by major classification at 31 December 2023 and 2022.
Debt securities at FVOCI
Government securities
Supranational banks and government agencies securities
Asset backed securities
Bank securities
Corporate securities
Total debt securities at FVOCI(1)
of which provided as collateral
Debt securities at amortised cost
Government securities
Supranational banks and government agencies securities
Asset backed securities
Bank securities
Corporate securities
Total debt securities at amortised cost
of which provided as collateral
Total debt securities
Total of which provided as collateral
Equity securities
Equity investments at FVTPL
Total equity securities
Total investment securities
The following table analyses the carrying amount of debt securities by ECL stage:
Gross amount
Stage 1
Stage 2
Total debt securities
ECL(2)
Carrying value
2023
€ m
2022
€ m
2,986
2,228
454
6,198
622
12,488
3,558
2,177
179
1,917
77
160
4,510
1,397
3,824
1,298
453
5,763
499
11,837
4,505
2,052
166
1,628
73
212
4,131
1,425
16,998
4,955
15,968
5,930
355
355
302
302
17,353
16,270
16,991
15,961
10
10
17,001
15,971
(3)
(3)
16,998
15,968
(1) The ECL of € 2 million (2022: € 2 million) on debt securities at FVOCI does not reduce the carrying amount, but an amount equal to the allowance is recognised in OCI as an accumulated
impairment amount, with corresponding impairment gains or losses recognised in the income statement.
(2) Relates to debt securities at amortised cost.
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AIB Group plc
23 Investments accounted for using the equity method
Share of net assets including goodwill
At 1 January
Investment during the year
Disposal of equity accounted investments (1)
Share of results of equity accounted investments (after
tax)
At 31 December
Associates
€ m
159
18
—
31 (2)
208
Joint
venture
€ m
14
107
—
(19)
102
2023
Total
Associates
Joint venture
€ m
€ m
173
125
—
12
310
124
21
(11)
25 (2)
159
€ m
3
24
—
(13)
14
2022
Total
€ m
127
45
(11)
12
173
(1) Income from equity accounted investments included a profit on disposal of investment in an associated undertaking of Nil (2022 : € 25 million).
(2) Share of results of equity accounted investments includes € 35 million (2022: € 27 million) relating to AIB Merchant Services.
Details of the Group’s associates and joint venture
Investments in associates comprises the Group’s investment in AIB Merchant Services, Synch Payments DAC, Clearpay DAC, First Homes Scheme
DAC and Autolease Fleet Management Ltd. Investment in joint venture comprises the Group’s investment in Saol Assurance Holdings Ltd (formerly
AIB JV Holdings Limited), trading as AIB life, being the Group’s joint venture with Great-West Lifeco Inc. None of the investments are considered
individually material to the Group.
The following is the principal associate company of the Group at 31 December 2023 and 2022:
Name of associate
Principal activity
Zolter Services DAC (holds 100% of First
Merchant Processing Ireland DAC and
First Merchant Processing UK Ltd, together
trading as AIB Merchant Services).
Provider of merchant
payment solutions
Place of incorporation
and operation
Registered Office: Unit 6,
Belfield Business Park,
Clonskeagh, Dublin 4
Ireland
Proportion of ownership interest
and voting power held by
the Group
2023
%
49.9
2022
%
49.9
In accordance with Sections 316 and 348 of the Companies Act 2014 and the European Communities (Credit Institutions: Financial Statements)
Regulations 2015, AIB Group plc will annex a full listing of associated undertakings to its annual return to the Companies Registration Office.
Transactions with the Group’s associates and joint venture
Banking transactions between the Group and its associates and joint venture are entered into in the normal course of business. For further
information see notes 19 and 30.There was no unrecognised share of losses of associates or joint ventures at 31 December 2023 or 2022.
Change in the Group’s ownership interest in associates
There were no disposals and/or change in the Group’s ownership interest in the current year. The Group’s interests in Fulfil Holdings Limited were
disposed of in 2022.
Significant restrictions
There is no significant restriction on the ability of associates or joint ventures to transfer funds to the Group in the form of cash or dividends, or to
repay loans or advances made by the Group.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
24 Intangible assets and goodwill
Cost
At 1 January
Additions
Transfers in/(out)
Amounts written-off(2)
Exchange translation adjustments
At 31 December
Amortisation/impairment
At 1 January
Amortisation for the year(3)
Impairment for the year(3)
Amounts written-off(2)
Exchange translation adjustments
At 31 December
Carrying value at 31 December
Cost
At 1 January
Additions
Transfers in/(out)
Amounts written-off(2)
Exchange translation adjustments
At 31 December
Amortisation/impairment
At 1 January
Amortisation for the year(3)
Impairment for the year(3)
Amounts written-off(2)
Exchange translation adjustments
At 31 December
Carrying value at 31 December
Software
externally
purchased
Software
internally
generated
Software
under
construction Goodwill (1)
€ m
243
10
—
(16)
—
237
221
9
—
(16)
—
214
23
€ m
1,638
91
86
(11)
1
1,805
1,005
205
1
(11)
1
1,201
€ m
149
95
(86)
—
—
158
—
—
—
—
—
—
€ m
120
8
—
—
—
128
—
—
—
—
—
—
604
158
128
Software
externally
purchased
Software
internally
generated
Software under
construction
Goodwill (1)
€ m
238
11
—
(6)
—
243
219
8
—
(6)
—
221
22
€ m
€ m
1,472
71
102
(4)
(3)
1,638
804
204
2
(4)
(1)
1,005
167
92
(102)
(8)
—
149
—
—
8
(8)
—
—
€ m
120
—
—
—
—
120
—
—
—
—
—
—
633
149
120
Other
€ m
40
2
—
—
—
42
24
6
—
—
—
30
12
Other
€ m
40
—
—
—
—
40
18
6
—
—
—
24
16
2023
Total
€ m
2,190
206
—
(27)
1
2,370
1,250
220
1
(27)
1
1,445
925
2022
Total
€ m
2,037
174
—
(18)
(3)
2,190
1,041
218
10
(18)
(1)
1,250
940
(1) During the year the Group acquired two subsidiaries, Gaiastream Ltd (trading as Clearstream Solutions) and ParkMagic Mobile Solutions Ltd, which were not material either individually or
collectively. The Group recognised goodwill of € 8 million as a result of these transactions.
(2) Relates to assets which are no longer in use with a Nil carrying value.
(3) Included in ‘Impairment and amortisation of intangible assets’ in the consolidated income statement.
Future capital expenditure in relation to both intangible assets and property, plant and equipment is set out in note 25.
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AIB Group plc
25 Property, plant and equipment
Property
Owned assets
Leased assets
Right-of-use assets
Cost
At 1 January
Transfers in/(out)
Additions
Amounts written off(1)
Other
Exchange translation adjustments
At 31 December
Depreciation/impairment
At 1 January
Depreciation charge for the year(2)
Impairment charge for the year(2)
Amounts written off(1)
Transfers (to)/from held for sale
Other
Exchange translation adjustments
At 31 December
Carrying value at 31 December
Freehold
Long
leasehold
Leasehold
under
50 years
Equipment
Assets under
construction
Property
€ m
€ m
€ m
€ m
€ m
€ m
168
2
4
(1)
—
—
173
50
5
—
(1)
—
—
—
54
119
38
—
1
—
—
—
39
13
1
—
—
—
—
—
14
25
107
1
2
378
1
15
(1)
(24)
—
—
109
53
9
—
—
—
370
298
24
—
(1)
(24)
—
—
—
61
48
—
—
—
298
72
9
(4)
12
—
—
—
17
—
—
—
—
—
—
—
—
17
377
—
57
(4)
13
—
443
128
34
—
(4)
—
13
—
171
272
(1) Relates to assets which are no longer in use with a Nil carrying value.
(2) Included in ‘Impairment and depreciation of property, plant and equipment’ in the consolidated income statement.
2023
Total
€ m
1,081
—
96
Other
€ m
4
—
5
(4)
(34)
—
—
5
3
1
—
13
—
1,156
545
74
—
(4)
(34)
—
—
—
—
5
—
13
—
598
558
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AIB Group plc
Notes to the Consolidated Financial Statements continued
25 Property, plant and equipment continued
Freehold
€ m
174
1
7
—
(12)
Long
leasehold
€ m
41
—
—
—
(3)
—
—
(1)
(1)
168
50
5
1
—
—
38
13
1
—
—
—
(1)
(5)
—
50
118
—
(1)
—
13
25
Property
Leasehold
under
50 years
€ m
124
1
1
—
(1)
—
(18)
—
107
53
10
9
—
(18)
(1)
—
53
54
Owned assets
Leased assets
Right-of-use assets
Equipment
Assets under
construction
Property
€ m
377
1
17
—
(1)
—
(15)
(1)
378
290
23
2
—
(15)
(1)
(1)
298
80
€ m
€ m
5
(3)
7
—
—
—
—
—
9
—
—
—
—
—
—
—
—
9
479
—
7
(11)
—
(97)
—
(1)
377
164
37
24
(97)
—
—
—
128
249
Other
€ m
3
—
1
—
—
—
—
—
4
2
1
—
—
—
—
—
3
1
2022
Total
€ m
1,203
—
40
(11)
(17)
(97)
(34)
(3)
1,081
572
77
36
(97)
(34)
(8)
(1)
545
536
Cost
At 1 January
Transfers in/(out)
Additions
Net re-measurements
Transfers (to)/from held for sale
Early termination/maturities
Amounts written off(1)
Exchange translation adjustments
At 31 December
Depreciation/impairment
At 1 January
Depreciation charge for the year(2)
Impairment charge for the year(2)
Early termination/maturities
Amounts written off(1)
Transfers (to)/from for sale
Exchange translation adjustments
At 31 December
Carrying value at 31 December
(1) Relates to assets which are no longer in use with a Nil carrying value.
(2) Included in ‘Impairment and depreciation of property, plant and equipment’ in the consolidated income statement.
The net carrying value of property occupied by the Group for its own activities was € 183 million (2022: € 189 million) in relation to owned assets and
€ 272 million in relation to right-of-use assets (2022: € 249 million), excluding those held as disposal groups and non-current assets held for sale.
Property leased to others by the Group had a carrying value of € 9 million (2022: € 8 million).
Future capital expenditure
The table below shows future capital expenditure in relation to both property, plant and equipment and intangible assets (excluding right-of-use
assets).
Estimated outstanding commitments for capital expenditure not provided for in the financial statements
Capital expenditure authorised but not yet contracted for
2023
€ m
7
7
2022
€ m
6
22
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AIB Group plc
25 Property, plant and equipment continued
Leased assets
Property
The Group leases property for its offices and retail branch outlets. Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. Most of these leases carry statutory renewal rights, or include an option to renew the lease for an additional period
after the end of the contract term. Where the Group is likely to exercise these options, this has been taken into account in determining the lease
liability and the right-of-use asset.
Other
The Group leases motor vehicles, ATM offsite locations and IT equipment.
Lease liabilities
A maturity analysis of lease liabilities is shown in note 32.
Amounts recognised in income statement
Depreciation expense on right-of-use assets
Interest on lease liabilities (note 5)
Amounts recognised in statement of cash flows
Total cash outflow for leases during the year(1)
2023
€ m
35
9
2023
€ m
43
2022
€ m
38
11
2022
€ m
55
(1) Includes amounts reported as interest expense on lease liabilities of € 9 million (2022: € 11 million) and amounts reported as principal repayments on lease liabilities of € 34 million (2022: € 44
million). Refer to note 32.
26 Other assets
Proceeds due from disposal of loan portfolio(1)
Stockbroking client debtors
Items in transit
Items in course of collection
Other(2)
Total other assets
(1) ECL – Nil (2022: Nil).
(2) Includes sundry debtors € 37 million (2022: € 41 million).
2023
€ m
43
21
83
42
71
260
2022
€ m
41
17
84
51
103
296
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AIB Group plc
Notes to the Consolidated Financial Statements continued
27 Deferred taxation
Deferred tax assets:
Unutilised tax losses
Cash flow hedges
Transition to IFRS 9
Assets used in the business
Retirement benefits
Assets leased to customers
Other
Total gross deferred tax assets
Deferred tax liabilities:
Cash flow hedges
Retirement benefits
Assets used in the business
Investment securities
Acquisition of subsidiary
Other
Total gross deferred tax liabilities
Net deferred tax assets
Represented on the statement of financial position:
Deferred tax assets
Deferred tax liabilities
2023
€ m
2,474
97
4
17
4
16
3
2022
€ m
2,742
311
4
15
6
15
3
2,615
3,096
(11)
(6)
(22)
—
(2)
(16)
(57)
(43)
(1)
(22)
(5)
(2)
(21)
(94)
2,558
3,002
2,581
(23)
2,558
3,032
(30)
3,002
For each of the years ended 31 December 2023 and 2022, full provision has been made for capital allowances and other temporary differences.
Analysis of movements in deferred taxation
At 1 January
Exchange translation and other adjustments
Deferred tax through other comprehensive income (note 14)
Income statement (note 14)
At 31 December
2023
€ m
3,002
(11)
(174)
(259)
2,558
2022
€ m
2,781
(8)
311
(82)
3,002
With regard to the Group’s deferred tax asset for unutilised losses, during 2023 the Group recognised a charge to the income statement of
€ 262 million (2022: € 76 million) and exchange translations and other adjustments of € 8 million (2022: € 22 million). As a result, the amount of
recognised deferred tax assets arising from unutilised tax losses amounted to € 2,474 million (2022: € 2,742 million) of which € 2,289 million (2022:
€ 2,546 million) relates to Irish tax losses and €185 million (2022: € 196 million) relates to UK tax losses (of which € 185 million
(2022: € 187 million) relates to the Group’s principal UK subsidiary).
Additional commentary on the basis of recognition of deferred tax assets on unused tax losses is included in note 2.
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AIB Group plc
27 Deferred taxation continued
Temporary differences recognised in other comprehensive income consist of deferred tax on financial assets at FVOCI, cash flow hedges and
actuarial gains/losses on retirement benefit schemes. Temporary differences recognised in the income statement consist of provisions for expected
credit losses on financial instruments, amortised income, assets leased to customers, and assets used in the course of the business.
Net deferred tax assets at 31 December 2023 of € 2,361million (2022: € 2,873 million) are expected to be recovered after more than 12 months.
For the Group’s principal UK subsidiary, the Group has concluded that the recognition of deferred tax assets be limited to the amount projected to be
realised within a time period of 15 years. This is the timescale within which the Group believes that it can assess the likelihood of its profits arising
as being more likely than not. The deferred tax asset for unutilised tax losses in the principal UK subsidiary amounts to £160 million at 31 December
2023 (2022: £ 166 million).
For certain other subsidiaries and branches, the Group has concluded that it is more likely than not that there will be insufficient profits to support full
recognition of deferred tax assets. The Group has not recognised deferred tax assets in respect of: Irish tax on unused tax losses at 31 December
2023 of € 161 million (2022: € 161 million); overseas tax (UK and USA) on unused tax losses of € 3,058 million (2022: € 2,996 million); and foreign
tax credits for Irish tax purposes of € 12 million (2022: € 13 million). Of these tax losses totalling € 3,219 million for which no deferred tax is
recognised: € 7 million expires in 2032; € 40 million in 2033; € 26 million in 2034; and € 5 million in 2035.
The aggregate amount of temporary differences associated with investments in subsidiaries, branches and associates for which deferred tax
liabilities have not been recognised amounted to Nil (2022: Nil).
Deferred tax recognised directly in equity amounted to Nil (2022: Nil).
Analysis of income tax relating to other comprehensive income
Profit for the year
Net change in foreign currency translation reserves
Net change in cash flow hedging reserves
Net change in fair value of investment securities at FVOCI
Remeasurement of defined benefit asset/(liability)
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Analysis of income tax relating to other comprehensive income
Profit for the year
Net change in foreign currency translation reserves
Net change in cash flow hedging reserves
Net change in fair value of investment securities at FVOCI
Remeasurement of defined benefit asset/(liability)
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
2023
Non-
controlling
interests
net of tax
Net amount
attributable to
equity holders
of the parent
€ m
(3)
—
—
—
—
(3)
—
(3)
€ m
2,061
57
1,182
(41)
(2)
3,257
3,257
—
2022
Non-
controlling
interests
net of tax
Net amount
attributable to
equity holders
of the parent
€ m
(2)
—
—
—
—
(2)
—
(2)
€ m
767
(71)
(1,619)
(188)
(8)
(1,119)
(1,119)
—
Tax
€ m
(336)
3
(182)
5
—
(510)
(510)
—
Tax
€ m
(115)
(10)
288
21
12
196
196
—
Net of tax
€ m
2,058
57
1,182
(41)
(2)
3,254
3,257
(3)
Net of tax
€ m
765
(71)
(1,619)
(188)
(8)
(1,121)
(1,119)
(2)
Gross
€ m
2,394
54
1,364
(46)
(2)
3,764
3,767
(3)
Gross
€ m
880
(61)
(1,907)
(209)
(20)
(1,317)
(1,315)
(2)
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AIB Group plc
Notes to the Consolidated Financial Statements continued
28 Retirement benefits
The Group operates a number of defined contribution and defined benefit schemes for employees. All defined benefit schemes are closed to future
accrual.
Defined contribution
From 1 January 2014, all Group staff accrue future pension benefits on a defined contribution (“DC”) basis with a standard employer contribution
of 10%. An additional matched employer contribution, subject to limits based on age bands of 2%, 5% or 8% is also paid into the schemes.
The amount included in operating expenses in respect of DC schemes is € 89 million (2022: € 80 million) (note 11).
Defined benefit schemes
All defined benefit schemes operated by the Group closed to future accrual no later than 31 December 2013 and staff transferred to defined
contribution schemes for future pension benefits. The most significant defined benefit schemes operated by the Group are the AIB Group Irish
Pension Scheme (‘the Irish scheme’) and the AIB Group UK Pension Scheme (‘the UK scheme’).
Retirement benefits for the defined benefit schemes are calculated by reference to service and Final Pensionable Salary at 31 December 2013. The
Final Pensionable Salary used in the calculation of this benefit for staff is based on their average pensionable salary in the period between 30 June
2009 and 31 December 2013. This calculation of benefit for each staff member will revalue between 1 January 2014 and retirement date in line with
the statutory requirement to revalue deferred benefits. There is no link to any future changes in salaries.
In the main Irish Scheme, there are 15,750 members comprising 4,479 pensioners and 11,271 deferred members at 31 December 2023. 7,570
members have benefits accrued from 2007 to 2013 under a hybrid arrangement. In addition, there are 944 members comprising 153 pensioners and
791 deferred members at 31 December 2023 in EBS Defined Benefit Schemes.
(i) Responsibilities for governance
The Trustees of each Group pension scheme are ultimately responsible for the governance of the schemes. In respect of the Irish schemes, the
Scheme Actuary reviews the statutory minimum funding requirement annually. In the event of a deficit on the statutory funding basis either the
Group can meet the deficit over an agreed period through agreeing a funding proposal with the Trustees and pensions regulator or making a
contribution to meet the deficit. There are currently no funding proposals or contribution requirements in respect of the Irish schemes and the
Scheme Actuary's most recent review confirmed that the schemes met their statutory funding obligations.
(ii) Risks
Details of the pension risk to which the Group is exposed are set out in the Risk section on pages 187 and 188 of this report.
(iii) Valuations
Independent actuarial valuations for the AIB Group Irish Pension Scheme (‘Irish scheme’) and the AIB Group UK Pension Scheme (‘UK scheme’)
are carried out on a triennial basis by the Schemes’ actuary, Mercer. The most recent valuation of the Irish scheme was carried out at 30 June 2021
and reported the scheme to be in surplus. The next actuarial valuation of the Irish scheme will be 30 June 2024. No deficit funding is required at this
time as the Irish scheme continues to meet the minimum funding standard. The most recent valuation of the UK scheme was carried out at 31
December 2020. The next actuarial valuation of the UK scheme will be 31 December 2023 with the results expected to be agreed by
31 March 2025.
(iv) Contributions
Total contributions to all defined benefit pension schemes operated by the Group in 2023 amounted to € 24 million (2022: € 24 million). There were
no contributions made to the Irish Scheme in 2023 (2022: Nil). Contributions of £ 18.5 million were made to the UK scheme (2022: £ 18.5 million) as
part of the revised funding arrangement which was implemented in December 2019.
Total contributions to all defined benefit pension schemes operated by the Group for the year to 31 December 2024 are estimated to be
€ 21 million.
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AIB Group plc
28 Retirement benefits continued
(v) Financial assumptions
The following table summarises the financial assumptions adopted in the preparation of these financial statements in respect of the main schemes
at 31 December 2023 and 2022. The assumptions have been set based upon the advice of the Group’s actuary.
Financial assumptions
Irish scheme
Rate of increase of pensions in payment
Discount rate
Inflation assumptions(1)
UK scheme
Rate of increase of pensions in payment
Discount rate
Inflation assumptions (RPI)
2023
%
2.05
3.55
2.15
3.00
4.80
3.00
2022
%
2.60
4.20
2.85
3.10
5.00
3.10
(1) The inflation assumption applies to the revaluation of deferred members’ benefits up to their retirement date.
(vi) Funding of increases in pensions in payment for the Irish defined benefit schemes
The Board previously determined that the funding of discretionary increases to pensions in payment is a decision to be made by the Board each
year. A process, taking account of all relevant interests and factors was implemented by the Board. These interests and factors include: the advice of
the Actuary; the interests of the members of the scheme; the interests of the employees; the Group’s financial circumstances and ability to pay; the
views of the Trustees; the Group’s commercial interests and any competing obligations to the State. As a result of this process, the Group’s
judgement is that a constructive obligation to fund future discretionary pension in payment increases does not exist.
The Group decided in March 2023 and February 2024 that the funding of discretionary increases was not appropriate in either year in relation to the
Irish scheme.
(vii) Rate of increase of pensions in payment – Irish scheme
Notwithstanding the decisions by the Board not to fund discretionary increases, the Trustee of the Irish scheme awarded an increase of 6.75% in
2023. Taking this decision by the Trustee into consideration and the financial position of the scheme, the long-term assumption for future
discretionary increases in pensions in payment continues to reflect an assessment of the Trustee’s ability to grant further discretionary increases
without funding from the Group. Having taken actuarial advice, the Group has adopted a rate of 2.05% (31 December 2022: 2.6%) for the long-term
assumption for future discretionary increases in pensions in payment (which is the lower of the surplus available to the Trustee to distribute or the
long-term inflation assumption). This increased the scheme liabilities by € 822 million at 31 December 2023 (31 December 2022: € 886 million).
(viii) Demographic assumptions
Demographic assumptions include assumptions for mortality, proportions married, commutation and retirement age. The mortality assumption has
the most material impact on changes in demographic assumptions and further details on this assumption are set out below. The life expectancies
underlying the value of the scheme liabilities for the Irish and UK schemes at 31 December 2023 and 2022 are shown in the following table.
Retiring today age 63
Males
Females
Retiring in 10 years at age 63
Males
Females
Life expectancy – years
Irish scheme
UK scheme
2023
25.1
27.0
25.7
27.7
2022
25.0
26.8
25.6
27.6
2023
24.3
26.2
24.6
27.2
2022
25.0
26.8
25.3
27.8
The mortality assumptions for the Irish and UK schemes were updated in 2021 to reflect emerging market experience. The table shows that a
member of the Irish scheme retiring at age 63 on 31 December 2023 is assumed to live on average for 25.1 years for a male (24.3 years for the UK
scheme) and 27.0 years for a female (26.2 years for the UK scheme).There will be variation between members but these assumptions are expected
to be appropriate for all members. The table also shows the life expectancy for members aged 53 on 31 December 2023 who will retire in ten years.
Younger members are expected to live longer in retirement than those retiring now, reflecting a decrease in mortality rates in future years due to
advances in medical science and improvements in standards of living.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
28 Retirement benefits continued
(ix) Movement in defined benefit obligation and scheme assets
The following table sets out the movement in the defined benefit obligation and scheme assets during 2023 and 2022.
Defined
benefit
obligation
Fair
value of
scheme
assets
Asset
ceiling/
minimum
funding(1)
€ m
€ m
€ m
(4,850)
5,454
(607)
(2)
(205)
—
(207)
—
232
(4)
228
—
(26)
—
(26)
2023
Net defined
benefit
(liabilities)
assets
€ m
(3)
(2)
1
(4)
(5)
Defined
benefit
obligation
Fair
value of
scheme
assets
Asset
ceiling/
minimum
funding(1)
€ m
€ m
€ m
(6,241)
6,976
(735)
(1)
(90)
—
(91)
—
101
(4)
97
—
(10)
—
(10)
2022
Net defined
benefit
(liabilities)
assets
€ m
—
(1)
1
(4)
(4)
At 1 January
Included in profit or loss
Past service cost
Interest (cost)/income
Administration costs
Included in other comprehensive income
Remeasurement loss:
– Actuarial gain/(loss) arising from:
– Experience adjustments
– Changes in demographic
assumptions
– Changes in financial
assumptions
– Return on scheme assets
excluding interest income
– Asset ceiling/minimum
funding adjustments
Total remeasurement loss
Translation adjustment on
non-euro schemes
Other
Contributions by employer
Benefits paid
(96)
—
—
(96)
(217)
—
—
(217)
17
—
—
17
18
—
—
18
(95)
—
—
(95)
1,390
—
—
1,390
—
189
—
189
—
(1,349)
—
(1,349)
—
—
(17)
(12)
(186)
15
204
—
(17)
—
220
220
24
(220)
(196)
—
—
—
(17)
(2) (2)
3
1
24
—
24
17
—
—
138
138
42
(45)
1,233
(1,394)
—
138
—
249
249
24
(249)
(225)
—
—
—
(4,850)
5,454
(607)
(20) (2)
(3)
(23)
24
—
24
(3)
At 31 December
(5,023)
5,690
(650)
31 December
2023
€ m
31 December
2022
€ m
Recognised on the statement of financial position as:
Retirement benefit assets
UK scheme
Other schemes
Total retirement benefit assets
Retirement benefit liabilities
Irish scheme
EBS scheme
Other schemes
Total retirement benefit liabilities
Net pension surplus/(deficit)
21
10
31
—
—
(14)
(14)
17
3
10
13
—
—
(16)
(16)
(3)
(1) In recognising the net surplus or deficit on a pension scheme, the funded status of each scheme is adjusted to reflect any minimum funding requirement and any ceiling on the amount that the
sponsor has a right to recover from a scheme.
(2) After tax € 2 million (2022: € 8 million).
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AIB Group plc
28 Retirement benefits continued
Scheme assets
The following table sets out an analysis of the scheme assets:
Cash and cash equivalents
Quoted equity instruments
Basic materials
Consumer goods
Consumer services
Energy
Financials
Healthcare
Industrials
Technology
Telecoms
Utilities
Total quoted equity instruments
Quoted debt instruments
Corporate bonds
Government bonds
Total quoted debt instruments
Real estate(1)(2)
Derivatives
Quoted investment funds
Alternatives
Cash
Equity
Fixed interest
Forestry
Liability Driven Investment
Multi-asset
Total quoted investment funds
Mortgage backed securities(2)
Insurance contracts(3)
Fair value of scheme assets at 31 December
(1) Located in Europe.
(2) A quoted market price in an active market is not available.
(3) Further details on these contracts are set out in the section "Asset-liability matching strategies" within this note.
2023
€ m
196
56
92
121
93
212
152
134
239
88
40
2022
€ m
146
61
104
111
105
200
174
130
207
79
46
1,227
1,217
721
1,032
1,753
682
1,001
1,683
300
344
9
17
26
11
187
109
48
978
10
16
3
190
110
46
810
12
1,369
1,187
139
697
177
683
5,690
5,454
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AIB Group plc
Notes to the Consolidated Financial Statements continued
28 Retirement benefits continued
Sensitivity analysis for principal assumptions used to measure scheme liabilities
There are inherent uncertainties surrounding the financial assumptions adopted in calculating the liabilities of the pension schemes. Set out in the
table below is a sensitivity analysis of the key assumptions for the Irish scheme and the UK scheme at 31 December 2023. A sensitivity analysis for
the rate of increase of pensions in payment is not provided, as this rate is dependent on the surplus available to the Trustee to distribute and the
advice of the actuary. See page 271.
Note that the changes in assumptions are independent of each other i.e. the effect of the reflected change in the discount rate assumes that there
has been no change in the rate of mortality assumption and vice versa.
Discount rate (0.25% movement)
Inflation (0.25% movement)
Future mortality (1 year change in life expectancy)
Irish scheme
defined benefit
obligation
UK scheme
defined benefit
obligation
Irish scheme
defined benefit
obligation
2023
2022
UK scheme
defined benefit
obligation
Increase Decrease
Increase Decrease
Increase Decrease
Increase Decrease
€ m
(105)
42
107
€ m
113
(40)
(107)
€ m
(20)
20
18
€ m
21
(19)
(18)
€ m
(102)
43
100
€ m
105
(41)
(100)
€ m
(22)
22
22
€ m
23
(21)
(22)
Maturity of the defined benefit obligation
The weighted average duration of the Irish scheme at 31 December 2023 is 14 years (2022: 14 years) and of the UK scheme at 31 December 2023
is 12 years (2022: 13 years).
Asset-liability matching strategies
UK scheme
The Group and the Trustee undertook a substantial de-risking of the UK scheme in 2019. A transaction entered into involved the acquisition of two
insurance contracts from Legal and General Assurance Society (“LGAS”) using the majority of the assets of the UK scheme. These insurance
contracts are: a pensioner buy-in contract in respect of the pensioner members and an assured payment policy (“APP”) in respect of deferred
members. The ultimate obligation to pay the members benefits still remains with the scheme.
The pensioner buy-in contract removes financial and demographic risk attaching to the current UK pensioners. This pensioner buy-in contract is
effectively a qualifying insurance contract, and exactly matches the amount and timing of the benefits covered. Accordingly, the fair value of the
pensioner buy-in contract is set equal to the corresponding value of the liabilities, using the same assumptions.
The APP significantly reduces the inflation and interest rate risk attaching to UK deferred members although demographic risks remain. The APP
can (at the UK Trustee’s election) be partially surrendered on an annual basis for the purpose of wholly or partially funding buy-in of further tranches
of deferred members over a defined period of time. This will remove exposure to the risks not covered by the APP over time. The fair value of the
APP is measured as the estimated cost of purchasing the contract on the open market. Since the initial de-risking transaction in 2019, additional
members (including deferred and subsequent retirees) have been added to the buy-in policy, with a partial surrender of a portion of the APP to fund
the cost.
The Group agreed with the Scheme Trustee a revised funding arrangement for the UK scheme to support the purchase of the pensioner buy-in
contract and the APP. Under this funding arrangement, the Group expects to make payments of £ 18.5 million in 2024 and £ 8.5 million in 2025.
These amounts are what is expected to be required to finalise the buy-in of the Scheme based on latest estimates from LGAS of c. £ 27 million.
These payments and any other related costs are subject to change prior to finalisation.
Irish scheme
The Irish scheme continued to de-risk in 2023, with further allocations to liability matching assets and sales of equities. As part of a strategy to
increase the scheme’s level of interest rate and inflation hedging, the allocation to the Liability Driven Investment (“LDI”) portfolio has increased
further. The LDI fund is comprised of a mixture of nominal bonds, inflation linked bonds and interest rate and inflation derivatives.
Other long term employee benefits
Other long term employee benefits include additional benefits which the Group provides to employees who suffer prolonged periods of sickness,
subject to the qualifying terms of the insurer. It provides for the partial replacement of income in event of illness or injury resulting in the employee’s
long term absence from work.
Furthermore, on the death of an employee before their normal retirement date, the Group has in place insurance policies to cover the additional
financial costs to the Group under the terms of the schemes.
In 2023, the Group contributed € 11 million (2022: € 9 million) towards insuring these benefits which are included in 'Operating expenses' (note 11).
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AIB Group plc
29 Deposits by central banks and banks
Central Bank Borrowings - secured
Central Bank Borrowings - unsecured
Other Bank Borrowings - unsecured
Total deposits by central banks and banks
2023
€ m
288
452
740
1,040
1,780
2022
€ m
282
—
282
232
514
Deposits by central banks and banks include cash collateral at 31 December 2023 of € 1,018 million (2022: € 210 million) received from derivative
counterparties in relation to net derivative positions and from repurchase agreement counterparties.
Financial assets pledged
Financial assets pledged for secured borrowings and providing access to future funding facilities with central banks and banks are detailed in the
following table:
Total carrying value of financial assets pledged
Of which:
Government securities
Other securities(1)
Central
banks
Banks
€ m
436
—
436
€ m
18
18
—
2023
Total
€ m
454
18
436
Central
banks
€ m
8,749
540
8,209
Banks
€ m
15
15
—
2022
Total
€ m
8,764
555
8,209
(1) The Group has issued covered bonds secured on pools of residential mortgages. Securities, other than those issued to external investors, have been pledged as collateral in addition to other
securities held by the Group.
30 Customer accounts
Current accounts
Demand deposits
Time deposits
Of which:
Non-interest bearing current accounts
Interest bearing deposits, current accounts and short term borrowings
Total customer accounts
Amounts include:
Due to equity accounted investments
2023
€ m
62,928
32,083
9,771
2022
€ m
64,402
32,595
5,362
104,782
102,359
58,643
46,139
59,266
43,093
104,782
102,359
303
271
Customer accounts include cash collateral of € 94 million (2022: € 71 million) received from derivative counterparties in relation to net
derivative positions.
At 31 December 2023, the Group’s five largest customer deposits amounted to 1% (2022: 1%) of total customer accounts.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
31 Debt securities in issue
Issued by AIB Group plc
Euro Medium Term Note Programme
Global Medium Term Note Programme
Issued by subsidiaries
Bonds and other medium term notes
Total debt securities in issue
Analysis of movements in debt securities in issue
At 1 January
Issued during the year
Repurchased
Matured
Other(1)
At 31 December
2023
€ m
2022
€ m
5,901
2,495
8,396
4,451
1,728
6,179
27
8,423
1,024
7,203
2023
€ m
7,203
2,431
—
(1,382)
171
8,423
2022
€ m
5,881
3,231
(847)
(750)
(312)
7,203
(1) Comprises a positive fair value hedge adjustment of € 254 million (2022: negative € 404 million) and negative exchange translation adjustments of € 83 million (2022: positive € 92 million).
On 23 January 2023, AIB Group plc issued € 750 million Senior Unsecured 4.625% Notes maturing on 23 July 2029. The notes bear interest on the
outstanding nominal amount, payable annually in arrears on 23 July each year, commencing on 24 July 2023 up to and including the maturity date.
On 13 September 2023, AIB Group plc issued $ 1 billion Senior Unsecured 6.608% Notes maturing on 13 September 2029. The notes bear interest
on the outstanding nominal amount, payable semi-annually in arrears on 13 March and 13 September each year, commencing on 13 March 2024 up
to and including the maturity date.
On 23 October 2023, AIB Group plc issued € 750 million Senior Unsecured 5.25% Notes maturing on 23 October 2031. The notes bear interest on
the outstanding nominal amount, payable annually in arrears on 23 October each year, commencing on 23 October 2024 up to and including the
maturity date.
All the issuances by AIB Group plc are initially eligible to meet the Group’s MREL requirements. These instruments are redeemable for tax or for
regulatory reasons, subject to the permission of the relevant regulation authority.
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AIB Group plc
32 Lease liabilities
Analysis of movements in lease liabilities
At 1 January
Lease payments(1)
Interest expense(1)
Additions
Early terminations
Net remeasurements
Foreign exchange translation adjustments
At 31 December
(1) Repayment of principal portion of the lease liabilities amounted to € 34 million (2022: € 44 million), i.e. lease payments net of interest expense.
Maturity analysis – contractual undiscounted cash flows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total undiscounted lease liabilities at end of year
33 Other liabilities
Notes in circulation
Items in transit
Creditors
Stockbroking client creditors
Bank drafts
Items in course of collection
Other(1)
Total other liabilities
(1) Includes invoice discounting credit balances on customer accounts € 73 million (2022: € 55 million).
2023
€ m
257
2022
€ m
346
(43)
(55)
9
59
(1)
—
1
282
11
8
(40)
(12)
(1)
257
2023
2022
€ m
43
136
181
360
2023
€ m
34
108
36
18
271
284
331
€ m
39
125
154
318
2022
€ m
40
105
37
13
298
261
352
1,082
1,106
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AIB Group plc
Notes to the Consolidated Financial Statements continued
34 Provisions for liabilities and commitments
The Group has presented legal claims, Belfry related provisions, FSPO provision and other provisions as separate classes of provisions in 2023.
Restructuring costs which were previously presented separately, are now included within other provisions as those amounts are no longer
considered material. The related comparatives for 2022 have been restated(1).
Legal claims
€ m
29
11
(4)
(13)
—
23
Legal claims
€ m
31
6
(3)
(5)
—
29
Provisions (excluding loan commitments and financial
guarantee contracts)
At 1 January 2023
Charged to income statement
Released to income statement
Provisions utilised
Exchange translation adjustments
At 31 December 2023
Loan commitments and financial guarantees contracts
At 1 January 2023
Net charge to income statement
Disposals
Exchange translation adjustments
At 31 December 2023
Total provisions for liabilities and commitments
Provisions (excluding loan commitments and financial
guarantee contracts)
At 1 January 2022
Charged to income statement
Released to income statement
Provisions utilised
Exchange translation adjustments
At 31 December 2022
Loan commitments and financial guarantees contracts
At 1 January 2022
Net charge to income statement
Disposals
Exchange translation adjustments
At 31 December 2022
FSPO provision
Belfry related
provisions
€ m
79
88
—
(126)
—
41
75
94
—
(90)
—
79
FSPO provision
Belfry related
provisions
€ m
€ m
60
—
(28)
(12)
—
20
€ m
79
—
(16)
(3)
—
60
Other
provisions
€ m
94
10
(9)
(42)
1
54
Other
provisions
€ m
237
40
(34)
(148)
(1)
94
2023
Total
€ m
262
109 (2)
(41)
(2)
(193)
1
138 (3)
78
(17) (4)
(1)
(1)
59
197
2022
Total
€ m
422
140 (2)
(53)
(2)
(246)
(1)
262 (3)
79
— (4)
(1)
—
78
340
Total provisions for liabilities and commitments
(1) Refer to note 1(c) for further information about the change in presentation for certain notes to the financial statements.
(2) Included in note 11.
(3) Amounts expected to be settled within one year are € 92 million (31 December 2022: € 190 million).
(4) Included in note 12.
The ECL allowance on loan commitments and financial guarantee contracts are presented as a provision in the balance sheet (i.e. as a liability
under IFRS 9 Financial Instruments) and separate from the ECL allowance on financial assets. For details of the internal credit ratings and
geographic concentration of contingent liabilities and commitments, see pages 157 and 144 in the ‘Risk management’ section of this report.
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AIB Group plc
34 Provisions for liabilities and commitments continued
(a) Belfry related provisions
During the period 2002 to 2006 the Group sold a series of investment property funds, known as Belfry, which subsequently incurred losses to c.
2,500 individual investors (c. £ 214 million invested). The Group settled claims from certain of those investors in 2021 which resulted in a charge
(including amounts for legal and settlement costs) which was reported in Legal claims in 2021. Following this, the Group instigated a programme to
review the suitability of advice outcomes for individual investors to determine if redress may be due in certain instances and based on an initial
assessment, a provision was also recorded in 2021.
Following the approval by the Board during 2022 of the customer treatment methodology and the close out of the individual case assessments, the
initial provision recorded in 2021 was reassessed and increased for the cost of redress. Furthermore, associated costs required to conclude the
redress programme, were estimated, and separately provided for.
In 2023, the provision for redress was further reassessed, primarily as a result of additional information that was obtained during the period and
increased by € 77 million. Payments are substantially complete with the Group making payments of € 112 million in 2023. The provision for
associated costs was also reassessed and increased by € 11 million and € 14 million of the provision was utilised during the period. Separately, the
independent Appeals Panel review of submitted appeals is ongoing.
While the Group’s best estimate of the provision at 31 December 2023 is € 41 million, the final cost is subject to some uncertainty (with a range of
possible outcomes) and the final outcome may be higher or lower depending on the finalisation of all associated matters.
(b) FSPO provision
In 2020, following a Financial Services and Pensions Ombudsman (‘FSPO’) decision in relation to a complaint by a customer from the ‘06-09 Terms
and Conditions who never had a tracker’ cohort, which found that the Bank had breached the terms of the customer’s mortgage loan contract and
directed it to remedy the matter in what the FSPO believed was a fair and proportionate manner, the Group decided to accept the decision in full.
Furthermore, the Group decided to apply the remedy to all other customers within this cohort, and payments to customers on that basis have
effectively concluded. The Group has continued to engage with stakeholders regarding some related items.
Following utilisations of € 12 million, the Group’s best estimate of the provision at 31 December 2023 for customer redress and compensation and
other related costs amounted to € 20 million (31 December 2022: € 60 million). The final cost is subject to some uncertainty (with a range of possible
outcomes) and the final outcome may be higher or lower depending on the finalisation of all associated matters.
(c) Other provisions
Other provisions includes ROU commitments, customer redress (repayments to customers), restructuring costs and miscellaneous provisions.
During the period, the Group settled an outstanding obligation for € 29 million relating to previous submissions to the Single Resolution Board.
The remaining provision of € 2 million was released to the income statement.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
35 Subordinated liabilities and other capital instruments
Dated loan capital – European Medium Term Note Programme:
Issued by AIB Group plc
€ 500 million Subordinated Tier 2 Notes due 2029, Callable 2024
€ 1 billion Subordinated Tier 2 Notes due 2031, Callable 2026
Issued by subsidiaries
€ 500m Callable Step-up Floating Rate Notes due October 2017
– nominal value € 25.5 million (maturity extended to 2035 as a result of the Subordinated Liabilities Order)
£ 368m 12.5% Subordinated Notes due June 2019
– nominal value £ 79 million (maturity extended to 2035 as a result of the Subordinated Liabilities Order)
£ 500m Callable Fixed/Floating Rate Notes due March 2025
– nominal value £ 1 million (maturity extended to 2035 as a result of the Subordinated Liabilities Order)
Total subordinated liabilities and capital instruments
Maturity of dated loan capital
Dated loan capital outstanding is repayable as follows:
5 years or more
(a)
(b)
(c)
(c)
(c)
2023
€ m
2022
€ m
484
928
466
881
13
47
1
61
12
44
1
57
1,473
1,404
2023
€ m
2022
€ m
1,473
1,404
Dated loan capital
The dated loan capital in this section is subordinated in right of payment to senior creditors, including depositors, of the respective issuing entities.
Following the implementation in Ireland of the EU (Bank Recovery and Resolution) Regulations 2015, these notes are loss absorbing at the point of
non-viability. There were no movements in subordinated liabilities and other capital instruments apart from fair value hedge adjustments and
exchange translation adjustments.
(a) € 500 million Subordinated Tier 2 Notes due 2029, Callable 2024
On 19 November 2019, AIB Group plc issued € 500 million Subordinated Tier 2 Notes due 2029, Callable 2024. These notes mature on 19
November 2029 but may be redeemed in whole, but not in part, at the option of the Group on the optional redemption date on 19 November 2024,
subject to the approval of the regulatory authorities, with approval being conditional on meeting the requirements of the EU Capital Requirements
Regulation. The notes bear interest on the outstanding nominal amount at a fixed rate of 1.875%, payable annually in arrears on 19 November each
year. The interest rate will be reset on 19 November 2024 to Eur 5 year Mid Swap rate plus the initial margin of 215 basis points.
(b) € 1 billion Subordinated Tier 2 Notes due 2031, Callable 2026
On 30 September 2020, AIB Group plc issued € 1 billion Subordinated Tier 2 Notes due 2031, Callable 2026. These notes mature on 30 May 2031
but may be redeemed in whole, but not in part, at the option of the Group on the optional redemption date on 30 May 2026, subject to the approval
of the regulatory authorities, with approval being conditional on meeting the requirements of the EU Capital Requirements Regulation. The notes
bear interest on the outstanding nominal amount at a fixed rate of 2.875%, payable annually in arrears on 30 May each year. The interest rate will be
reset on 30 May 2026 to Eur 5 year Mid Swap rate plus the initial margin of 330 basis points.
(c) Other dated subordinated loan capital
Following liability management exercises and the Subordinated Liabilities Order (“SLO”) in 2011, residual balances remained on the dated loan
capital instruments above. The SLO, which was effective from 22 April 2011, changed the terms of all of those outstanding dated loan capital
instruments. The original liabilities were derecognised and new liabilities were recognised, with their initial measurement based on the fair value at
the SLO effective date. The contractual maturity date changed to 2035 as a result of the SLO, and payment of coupons became optional at the
discretion of the Group. The Board of Allied Irish Banks, p.l.c. has considered the matter and as at the date of this report, the Group’s position is that
coupons are not paid on these instruments. These instruments will amortise to their nominal value in the period to their maturity in 2035.
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AIB Group plc
36 Share capital
The following table shows the authorised and fully paid issued share capital:
Authorised
Ordinary share capital
Ordinary shares of € 0.625 each
Issued and fully paid
Ordinary share capital
Ordinary shares of € 0.625 each
31 December 2023
31 December 2022
Number of
shares
Number of
shares
m
€ m
m
€ m
4,000.0
2,500
4,000.0
2,500
2,618.7
1,637
2,673.4
1,671
All AIB Group plc ordinary shares in issue confer identical rights, including in respect of capital, dividends and voting.
Movement in ordinary shares
The following table shows the movement in the number of ordinary shares:
At 1 January
Repurchase and cancellation of shares(1)
At 31 December
2023
2022
Number of
shares
Number of
shares
m
m
2,673.4
2,714.4
(54.7)
(41.0)
2,618.7
2,673.4
(1) In April 2023, AIB Group plc completed a directed share buyback. This buyback resulted in the repurchase of 54,674,818 ordinary shares with a nominal value of € 0.625 each for a total
consideration of € 215 million. Following repurchase these shares were cancelled and € 34 million, which represents the nominal value of the acquired shares, were transferred from share capital
to capital redemption reserves.
Warrants
In 2017, AIB issued warrants to the Minister for Finance to subscribe for 271,166,685 ordinary shares of AIB Group plc representing 9.99% of the
issued share capital at the time (31 December 2023: 10.35%). The exercise price for the warrants is 200% of the Offer Price of € 4.40 per ordinary
share, the Offer Price being the price in euro per ordinary share which was payable under the IPO. This price may be adjusted in accordance with
the terms of the Warrant Instrument and the warrants will be capable of exercise by the holder of the warrants during the period commencing on 27
June 2018 and ending on 27 June 2027. Following the Share Buyback Programme the exercise price has been adjusted to € 8.478.
In accordance with the terms of the Warrant Agreement, no cash consideration was payable by the Minister to AIB Group plc in respect of the issue
of the warrants.
Structure of the Company’s share capital
The following table shows the structure of the Company’s share capital:
Class of share
Ordinary share capital
Capital resources
The following table shows the Group’s capital resources:
Equity
Dated capital notes (note 35)
Total capital resources
31 December 2023
31 December 2022
Authorised
share capital
%
Issued share
capital
%
Authorised
share capital
%
Issued share
capital
%
100
100
100
100
31 December
2023
€ m
15,069
1,473
16,542
2022
€ m
12,261
1,404
13,665
The objectives of the Group’s capital management policy are to at all times comply with regulatory capital requirements and to ensure that the Group
has sufficient capital to cover the current and future risk inherent in its business and to support its future development.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
36 Share capital continued
Earnings per share
The calculation of basic earnings per unit of ordinary shares is based on the profit attributable to ordinary shareholders divided by the weighted
average number of ordinary shares in issue, excluding own shares held. The ordinary shares are included in the weighted average number of
shares on a time apportioned basis.
The diluted earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary
shares in issue, excluding own shares held, adjusted for the effect of dilutive potential ordinary shares.
There was no difference in the weighted average number of shares used for basic and diluted earnings per share for 2023 and 2022. Warrants
issued to the Minister of Finance were not included in calculating the diluted earnings per share as they were antidilutive.
The following table shows the basic and diluted earnings per share:
Basic and diluted earnings per share
Profit attributable to equity holders of the parent
Distributions on other equity interests (note 37)
Profit attributable to ordinary shareholders of the parent
2023
€ m
2,061
(65)
1,996
2022
€ m
767
(65)
702
Weighted average number of ordinary shares in issue during the year (millions)
Basic and diluted earnings per share (cent)
2,635.9
2,688.3
EUR 75.7 c EUR 26.1 c
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AIB Group plc
37 Other equity interests
Issued by AIB Group plc
€ 500 million Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities issued 2019
€ 625 million Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities issued 2020
(a)
(b)
Total other equity interests
2023
€ m
496
619
2022
€ m
496
619
1,115
1,115
Distributions amounting to € 65 million (2022: € 65 million) were paid in 2023 on the Additional Tier 1 Securities issued by AIB Group plc. Other
equity interests are included in the Group’s capital base.
The securities, which do not carry voting rights, rank pari passu with holders of other Tier 1 instruments (excluding the Company’s ordinary shares).
They rank ahead of the holders of ordinary share capital of the Company but junior to the claims of senior creditors and to Tier 2 capital of the
Company.
Under the EU (Bank Recovery and Resolution) Regulations 2015, these securities are loss absorbing at the point of non-viability.
Furthermore, if the CET1 ratio of the Group at any time falls below 7%, subject to certain conditions, the Company shall write down the AT1s by the
write-down amount and irrevocably cancel any accrued and unpaid interest up to (but excluding) the write-down date. To the extent permitted, in
order to comply with regulatory capital and other requirements, the Company may reinstate any previously written down amount.
(a) In 2019, the Company issued € 500 million nominal value of Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities (‘AT1s’).
Interest on the securities, at a fixed rate of 5.250% per annum, is payable semi-annually in arrears on 9 April and 9 October, commencing on 9
April 2020. On the first reset date on 9 April 2025, in the event that the securities are not redeemed, interest will be reset to the relevant 5 year
fixed rate plus a margin of 570.2 bps per annum. The interest payment is fully discretionary and non-cumulative and conditional upon the
Company being solvent at the time of payment, having sufficient distributable reserves and not being required by the regulatory authorities to
cancel an interest payment.
The securities are perpetual securities with no fixed redemption date. The Company may, in its sole and full discretion, subject to regulatory
approval, redeem all (but not some only) of the securities on any day falling in the period commencing on (and including) 9 October 2024 and
ending on (and including) the first reset date or on any interest payment date thereafter at the prevailing principal amount together with accrued
but unpaid interest. In addition, the securities are redeemable at the option of the Company for certain regulatory or tax reasons, subject to
regulatory approval.
(b) In 2020, the Company issued € 625 million nominal value of Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities (‘AT1s’).
Interest on the securities, at a fixed rate of 6.250% per annum, is payable semi-annually in arrears on 23 June and 23 December, commencing
on 23 December 2020. On the first reset date on 23 December 2025, in the event that the securities are not redeemed, interest will be reset to
the relevant 5 year fixed rate plus a margin of 662.9 bps per annum. The interest payment is fully discretionary and non-cumulative and
conditional upon the Company being solvent at the time of payment, having sufficient distributable reserves and not being required by the
regulatory authorities to cancel an interest payment.
The securities are perpetual securities with no fixed redemption date. The Company may, in its sole and full discretion, subject to regulatory
approval, redeem all (but not some only) of the securities on any day falling in the period commencing on (and including) 23 June 2025 and
ending on (and including) the first reset date or on any interest payment date thereafter at the prevailing principal amount together with accrued
but unpaid interest. In addition, the securities are redeemable at the option of the Company for certain regulatory or tax reasons, subject to
regulatory approval.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
38 Capital reserves, merger reserve and capital redemption reserves
The following table shows the movement on capital reserves:
Capital reserves
At beginning and end of year
Capital
contribution
reserves
€ m
Other
capital
reserves
€ m
955 (1)
178 (2)
2023
Total
€ m
1,133
Capital
contribution
reserves
€ m
Other
capital
reserve
€ m
955 (1)
178 (2)
2022
Total
€ m
1,133
(1) Relates to the acquisition of EBS d.a.c.
(2) Other capital reserves represent transfers from retained earnings in accordance with relevant legislation.
For details regarding the capital contribution reserves, refer to accounting policy (w) in note 1.
The following table shows the movement on merger reserve:
Merger reserve
At beginning and end of year
The following table shows the movement on capital redemption reserves:
Capital redemption reserves
At 1 January
Transfer from ordinary share capital (note 36)
At 31 December
2023
€ m
2022
€ m
(3,622)
(3,622)
2023
€ m
39
34
73
2022
€ m
14
25
39
39 Offsetting financial assets and financial liabilities
The disclosures set out in the tables below include financial assets and financial liabilities that:
• Are offset in the Group’s statement of financial position; or
• Are subject to enforceable master netting arrangements or similar agreements that cover similar financial instruments, irrespective of whether they
are offset in the statement of financial position.
The similar agreements include derivative clearing agreements, global master repurchase agreements and global master securities lending
agreements. Similar financial instruments include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements, and
securities borrowing and lending agreements. Financial instruments such as loans and advances and customer accounts are not included in the
tables below unless they are offset in the statement of financial position.
The Group has a number of ISDA Master Agreements (netting agreements) in place which allow it to net the termination values of derivative
contracts upon the occurrence of an event of default with respect to its counterparties. The enforcement of netting agreements would potentially
reduce the statement of financial position carrying amount of derivative assets and liabilities by € 1,556 million at 31 December 2023
(2022: € 2,220 million). Additionally, the Group has agreements in place which may allow it to net the termination values of cross currency swaps
upon the occurrence of an event of default.
The Group’s sale and repurchase and reverse sale and repurchase transactions and securities borrowing and lending are covered by netting
agreements with terms similar to those of ISDA Master Agreements. The ISDA Master Agreements and similar master netting arrangements do not
meet the criteria for offsetting in the statement of financial position where a right of set-off of recognised amounts becomes enforceable only
following an event of default, insolvency or bankruptcy of the Group or the counterparties. Offsetting in the statement of financial position is applied
where the Group has a legally enforceable right to set-off the recognised amounts and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
The Group provides and accepts collateral in the form of cash and marketable securities in respect of the following transactions:
• Derivatives;
• Sale and repurchase agreements;
• Reverse sale and repurchase agreements; and
• Securities lending and borrowing.
Collateral is subject to the standard industry terms of Credit Support Annexes ("CSAs"), which enable the Group to pledge or sell securities received
during the term of the transaction. The collateral must be returned on the maturity of the transaction. The terms also give each counterparty the right
to terminate the related transactions where the counterparty fails to post collateral. The CSAs in place provide collateral for derivative contracts. At
31 December 2023, € 713 million (2022: € 795 million) of CSAs are included within financial assets and € 839 million (2022: € 245 million) of CSAs
are included within financial liabilities.
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AIB Group plc
39 Offsetting financial assets and financial liabilities continued
The following table shows financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar
agreements at 31 December 2023 and 2022. The effects of over-collateralisation have not been taken into account in the table below.
Financial assets
Derivative financial instruments
Securities financing
Reverse repurchase agreements
Securities borrowings
Total
Gross
amounts of
recognised
financial
liabilities
offset in the
statement
of financial
position
Net
amounts of
financial
assets
presented
in the
statement
of financial
position
2023
Related amounts not
offset in the statement of
financial position
Financial
instruments
Cash
collateral
Net
amount
€ m
2,356
3,799
2,667
8,822
€ m
(1,556)
(3,734)
(2,667)
(7,957)
€ m
(218)
(65)
—
(283)
€ m
582
—
—
582
2023
Gross
amounts of
recognised
financial
assets
€ m
2,356
7,530
2,667
Note
17
20
20
€ m
—
(3,731)
—
12,553
(3,731)
Gross
amounts of
recognised
financial
assets
offset in the
statement of
financial
position
Net amounts
of financial
liabilities
presented in
the
statement of
financial
position
Related amounts not
offset in the statement of
financial position
Financial
instruments
Cash
collateral
Net
amount
€ m
—
(3,731)
(3,731)
€ m
1,881
575
2,456
€ m
(1,556)
(534)
(2,090)
€ m
(92)
(41)
(133)
€ m
233
—
233
Gross
amounts of
recognised
financial
liabilities
€ m
1,881
4,306
6,187
Note
17
20
Financial liabilities
Derivative financial instruments
Securities financing
Securities sold under agreements to repurchase
Total
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AIB Group plc
Notes to the Consolidated Financial Statements continued
39 Offsetting financial assets and financial liabilities continued
Financial assets
Derivative financial instruments
Securities financing
Reverse repurchase agreements
Securities borrowings
Total
Gross
amounts of
recognised
financial
assets
€ m
2,501
8,222
3,365
Note
17
20
20
€ m
—
(5,305)
—
14,088
(5,305)
Gross
amounts of
recognised
financial
liabilities
offset in the
statement
of financial
position
Net
amounts of
financial
assets
presented
in the
statement
of financial
position
2022
Related amounts not offset
in the statement of financial
position
Financial
instruments
Cash
collateral
Net
amount
€ m
2,501
2,917
3,365
8,783
€ m
(2,220)
(2,899)
(3,365)
(8,484)
€ m
(200)
(18)
—
(218)
€ m
81
—
—
81
2022
Gross
amounts of
recognised
financial
assets
offset in the
statement of
financial
position
Net
amounts of
financial
liabilities
presented
in the
statement of
financial
position
Related amounts not offset
in the statement of financial
position
Financial
instruments
Cash
collateral
Net
amount
€ m
—
(5,305)
(5,305)
€ m
2,932
898
3,830
€ m
(2,220)
(879)
(3,099)
€ m
(749)
(19)
(768)
€ m
(37)
—
(37)
Gross
amounts of
recognised
financial
liabilities
€ m
2,932
6,203
9,135
Note
17
20
Financial liabilities
Derivative financial instruments
Securities financing
Securities sold under agreements to repurchase
Total
The gross amounts of financial assets and financial liabilities and their net amounts as presented in the statement of financial position that are
disclosed in the above tables are measured on the following bases:
• Derivative assets and liabilities – fair value; and
• Securities financing – amortised cost.
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AIB Group plc
39 Offsetting financial assets and financial liabilities continued
The following table reconciles the ‘Net amounts of financial assets and financial liabilities presented in the statement of financial position’, as set out
in the previous pages to the line items presented in the statement of financial position at 31 December 2023 and 2022:
Financial assets
Derivative financial instruments
Securities financing
Reverse repurchase agreements
Securities borrowings
Net amounts of
financial assets
presented in the
statement of financial
position
€ m
Line item in
statement of
financial position
2,356
Derivative financial instruments
Carrying
amounts in
statement
of financial
position
€ m
2,377
3,799
2,667
Securities financing
6,466
2023
Financial
assets not
in scope of
offsetting
disclosures
€ m
21
—
2023
Financial liabilities
Securities financing
Securities sold under agreements to
repurchase
Net amounts of
financial liabilities
presented in the
statement of financial
position
€ m
Line item in
statement of
financial position
575
Securities financing
Derivative financial instruments
1,881
Derivative financial instruments
Financial assets
Derivative financial instruments
Securities financing
Reverse repurchase agreements
Securities borrowing
Net amounts of financial
assets presented in the
statement of financial
position
€ m
Line item in
statement of
financial position
2,501
Derivative financial instruments
2,917
3,365
Securities financing
Financial liabilities
Securities financing
Securities sold under agreements to
repurchase
Net amounts of financial
liabilities presented in the
statement of financial
position
€ m
Line item in
statement of
financial position
898
Securities financing
Derivative financial instruments
2,932
Derivative financial instruments
Carrying
amounts in
statement
of financial
position
Financial
liabilities not in
scope of
offsetting
disclosures
€ m
€ m
575
1,902
—
21
Carrying
amounts in
statement
of financial
position
€ m
2,511
6,282
Carrying
amounts in
statement
of financial
position
2022
Financial
assets not
in scope of
offsetting
disclosures
€ m
10
—
2022
Financial
liabilities not
in scope of
offsetting
disclosures
€ m
€ m
898
2,982
—
50
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AIB Group plc
Notes to the Consolidated Financial Statements continued
40 Contingent liabilities and commitments
In the normal course of business, the Group is a party to financial instruments with off-balance sheet risk to meet the financing needs of customers.
These instruments involve, to varying degrees, elements of credit risk which are not reflected in the consolidated statement of financial position.
Credit risk is defined as the possibility of sustaining a loss because the other party to a financial instrument fails to perform in accordance with the
terms of the contract.
The Group’s maximum exposure to credit loss under contingent liabilities and commitments to extend credit, in the event of non-performance by the
other party where all counterclaims, collateral or security prove valueless, is represented by the contractual amounts of those instruments.
The Group uses the same credit control and risk management policies in undertaking off-balance sheet commitments as it does for ‘on-balance
sheet lending’.
The following table gives the nominal or contract amounts of contingent liabilities and commitments:
Contingent liabilities(1) – credit related
Guarantees and assets pledged as collateral security:
Guarantees and irrevocable letters of credit
Other contingent liabilities
Commitments(2)
Documentary credits and short term trade-related transactions
Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year
1 year and over
Total contingent liabilities and commitments
(1) Contingent liabilities are off-balance sheet products and include guarantees, irrevocable letters of credit and other contingent liability products.
(2) A commitment is an off-balance sheet product where there is an agreement to provide an undrawn credit facility.
Contract amount
2023
€ m
2022
€ m
829
28
857
208
764
38
802
121
9,827
6,101
16,136
16,993
9,173
5,766
15,060
15,862
For details of the internal credit ratings and geographic concentration of contingent liabilities and commitments, see pages 157 and 144 in ‘Risk
management’ section of this report.
Provisions for ECLs on loan commitments and financial guarantee contracts are set out in note 34.
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AIB Group plc
40 Contingent liabilities and commitments continued
Legal proceedings
The Group, in the course of its business, is frequently involved in litigation cases. However, it is not, nor has been involved in, nor are there, so far
as the Group is aware, (other than as set out in the following paragraphs), pending or threatened by or against the Group any legal or arbitration
proceedings, including governmental proceedings, which may have, or have had during the previous twelve months, a material effect on the
financial position, profitability or cash flows of the Group.
Specifically, litigation has been served on the Group by customers that are pursuing claims in relation to tracker mortgages. Customers have also
lodged complaints to the Financial Services and Pensions Ombudsman (“FSPO”) in relation to tracker mortgages issues which are outlined in
‘Provisions for liabilities and commitments' (note 34).
Further claims may also be served in the future in relation to tracker mortgages. The Group will also receive further rulings by the FSPO in relation
to complaints concerning tracker mortgages.
Based on the facts currently known and the current stages that the litigation and the FSPO’s complaints process is at, it is not practicable at this time
to predict the final outcome of this litigation/FSPO complaints, nor the timing and possible impact on the Group.
Target-Ireland – Gross Settlement System
From 2008, AIB participated in the TARGET2 – Ireland system, which was the real time gross settlement system for large volume interbank
payments in euro. As a result of an ECB consolidation project, TARGET2-Ireland was replaced by TARGET-Ireland and AIB entered into a new
participation agreement with the Central Bank of Ireland (CBI) which took effect on 20th March 2023 (effective date). On 16th March 2023 AIB
executed a deed of charge pursuant to which it created a first floating charge in favour of the Central Bank of Ireland over all of its right, title, interest
and benefit, present and future, in and to the balances then or at any time standing to the credit of the TARGET-Ireland Accounts. The floating
charge secures all liabilities of Allied Irish Banks, p.l.c. to the CBI arising pursuant to the Participation Documents (as defined in the participation
agreement between AIB and the CBI) or otherwise in connection with AIB’s participation in TARGET-Ireland. On the effective date, this deed of
floating charge replaced previous existing security over the TARGET2 Accounts.
In addition, AIB and the CBI entered into a Framework Agreement in respect of Eurosystem Operations (dated 7 April 2014), which included a credit
line facility for intra-day credit in TARGET2-Ireland (now Target-Ireland). In order to secure its obligations under that Framework Agreement, AIB
executed a deed of charge (also dated 7 April 2014). Pursuant to that deed, AIB created a first fixed charge over all of its right, title, interest, and
benefit, present and future, in and to eligible assets (as identified as such by the CBI) which are held in a designated collateral account and a
floating charge in favour of the CBI over AIB’s right, title, interest and benefit, present and future, in and to other eligible assets of AIB.
The deeds of charge contain provisions that during the subsistence of the security, otherwise than with the prior written consent of the CBI, AIB shall
not:
• create or attempt to create or permit to arise or subsist any encumbrance on or over the charged property or any part thereof; or
• otherwise than in the ordinary course of business, sell, transfer, lend or otherwise dispose of or deal in the property or assets subject to the
charges or any part thereof or attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one
time or over a period of time.
The financial assets pledged as collateral, in relation to the first fixed charge, are included in the disclosure in note 29 for financial assets pledged.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
41 Subsidiaries and structured entities
The material Group subsidiary companies at 31 December 2023 and 2022 are:
Name of company
Allied Irish Banks, p.l.c.
AIB Mortgage Bank Unlimited Company
Principal activity
A direct subsidiary of AIB Group plc and the
principal operating company of the Group and
holds the majority of the subsidiaries within
the Group. Its activities include banking and
financial services – a licensed bank
Issue of mortgage covered securities
– a licensed bank
EBS d.a.c.
Mortgages and savings
– a licensed bank
Place of
incorporation
Ireland
Registered
Office
10 Molesworth Street,
Dublin 2,
Ireland.
Ireland
Ireland
10 Molesworth Street,
Dublin 2,
Ireland.
10 Molesworth Street,
Dublin 2,
Ireland.
AIB Group (UK) p.l.c. trading as Allied Irish Bank (GB) in
Great Britain and AIB (NI) in Northern Ireland
Banking and financial services
– a licensed bank
Northern Ireland 92 Ann Street,
Belfast BT1 3HH.
The proportion of ownership interest and voting power held by AIB Group plc in Allied Irish Banks, p.l.c. is 100% of the ordinary share capital.
All subsidiaries of Allied Irish Banks, p.l.c., being the immediate subsidiary of AIB Group plc, are wholly owned apart from Augmentum Limited
(‘Augmentum’), in which there are non-controlling interests. Practically all subsidiaries in the Group are involved in the provision of financial services
or ancillary services.
Significant restrictions
Each of the subsidiaries listed above which is a licensed bank is required by its respective financial regulator to maintain capital ratios above
a certain minimum level. These minimum ratios restrict the payment of dividend by the subsidiary and, where the ratios fall below the minimum
requirement, will require the parent company to inject capital to make up the shortfall.
Consolidated structured entities
The Group has acted as sponsor and invested in a number of structured entities in order to generate funding for the Group’s lending activities
(with the exception of AIB PFP Scottish Limited Partnership). The Group considers itself a sponsor of a structured entity when it facilitates the
establishment of the structured entity.
The following structured entities are consolidated by the Group:
• Burlington Mortgages No. 1 DAC;
• Burlington Mortgages No. 2 DAC; and
• AIB PFP Scottish Limited Partnership.
Further details on these structured entities are set out in note 42.
There are no contractual arrangements that could require AIB Group plc or its subsidiaries to provide financial support to the consolidated structured
entities listed above. During the year, neither AIB Group plc nor any of its subsidiaries provided financial support to a consolidated structured entity
and there is no current intention to provide financial support.
Unconsolidated structured entities
The Group acts as a fund or investment manager for a number of unconsolidated structured entities for which it receives investment or fund
management fees. The Group acts as sponsor of these entities. The Group has no units within these funds. Therefore the carrying amount of assets
and liabilities in relation to these entities in the Group’s statement of financial position is Nil (2022: Nil).
The Group’s maximum exposure to loss is equal to the value of outstanding fees owed from these entities of Nil at 31 December 2023
(31 December 2022: € 2 million). These entities are financed by investors in the entities. During the year the Group has not provided any non-
contractual financial or other support to these entities and has no current intention of providing any financial or other support.
Non-controlling interests in subsidiary undertaking
On 31 October 2019, Augmentum Limited of which 75% is owned by the Group and 25% by a non-controlling interest, First Data Global Services
Limited (part of First Data Corporation which is owned by Fiserv Inc.), acquired 97.93% of the equity share capital and voting rights of Semeral
Limited (‘Semeral’), the holding company for Payzone Ireland Limited (‘Payzone’).
Semeral/Payzone place of business: 4 Heather Road, Sandyford Industrial Estate, Dublin 18.
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AIB Group plc
42 Off-balance sheet arrangements and transferred financial assets
Under IFRS, transactions and events are accounted for and presented in accordance with their substance and economic reality and not merely their
legal form. As a result, the substance of transactions with structured entities forms the basis for their treatment in the Group’s financial statements. A
structured entity is consolidated in the financial statements when the substance of the relationship between the Group and the structured entity
indicates that the structured entity is controlled by the entity and meets the criteria set out in IFRS 10 Consolidated Financial Statements. The
principal forms of structured entity utilised by the Group are securitisations and employee compensation trusts.
Securitisations
The Group utilises securitisations primarily to support the following business objectives:
• As an investor, the Group has primarily been an investor in securitisations issued by other credit institutions as part of the management of its
interest rate and liquidity risks through the Treasury function;
• As an investor, securitisations have been utilised by the Group to invest in transactions that offered an appropriate risk-adjusted return
opportunity; and
• As an originator of securitisations to support the funding activities of the Group.
The Group controls certain structured entities which were set up to support its funding activities. Details of these structured entities are set out below
under the heading ‘Structured Entities’. The Group controls two structured entities set up in relation to the funding of the Group Pension Schemes
which are also detailed below.
Securities borrowing and reverse repurchase agreements
Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, at which point the obligation to repurchase
the securities is recorded as a trading liability at fair value and any subsequent gain or loss is included in trading income.
Employee compensation trusts
The Group and some of its subsidiary companies use trust structures to benefit employees and to facilitate the ownership of the Group’s equity
by employees. The Group consolidates these trust structures where the risks and rewards of the underlying shares have not been transferred to the
employees.
Transfer of financial assets
The Group enters into transactions in the normal course of business in which it transfers previously recognised financial assets. Transferred
financial assets may, in accordance with IFRS 9 Financial Instruments:
(i) Continue to be recognised in their entirety; or
(ii) Be derecognised in their entirety but the Group retains some continuing involvement.
The most common transactions where the transferred assets are not derecognised in their entirety are securities sold under an agreement to
repurchase, issuance of covered bonds and securitisations.
(i) Transferred financial assets not derecognised in their entirety
Securities sold under agreements to repurchase and securities lending
Sale and repurchase agreements are transactions in which the Group sells a financial asset to another party, with an obligation to repurchase it at a
fixed price on a certain later date. The Group continues to recognise the financial assets in full in the statement of financial position as it retains
substantially all the risks and rewards of ownership. The Group’s sale and repurchase agreements are with banks and customers. The obligation to
pay the repurchase price is recognised within ‘Securities financing’ (note 20). As the Group sells the contractual rights to the cash flows of the
financial assets, it does not have the ability to use or pledge the transferred assets during the term of the sale and repurchase agreement. The
Group remains exposed to credit risk and interest rate risk on the financial assets sold. The obligation arising as a result of sale and repurchase
agreements together with the carrying value of the financial assets pledged are set out in the table below.
The Group enters into securities lending in the form of collateral swap agreements with other parties. The Group continues to recognise the financial
assets in full in the statement of financial position as it retains substantially all the risks and rewards of ownership. As a result of these transactions,
the Group is unable to use, sell or pledge the transferred assets for the duration of the transaction. A fee is generated for the Group under this
transaction.
Issuance of covered bonds
Covered bonds, which the Group issues, are debt securities backed by cash flows from mortgages for the purpose of financing loans secured on
residential property through its wholly owned subsidiary, AIB Mortgage Bank Unlimited Company. The Group retains all the risks and rewards of
these mortgage loans, including credit risk and interest rate risk, and therefore, the loans continue to be recognised on the Group’s statement of
financial position with the related covered bonds held by external investors included within ‘Debt securities in issue’ (note 31). As the Group
segregates the assets which back these debt securities into 'cover asset pools' it does not have the ability to otherwise use such segregated
financial assets during the term of these debt securities. However, of the total debt securities of this type issued amounting to € 9.9 billion
(2022: € 8.3 billion), internal Group companies hold € 9.87 billion (2022: € 7.3 billion) which are eliminated on consolidation.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
42 Off-balance sheet arrangements and transferred financial assets continued
Structured entities
Securitisations are transactions in which the Group sells loans and advances to customers (mainly mortgages) to structured entities which, in turn,
issue notes to external investors. The notes issued by the structured entities are on terms which result in the Group retaining the majority of
ownership risks and rewards and therefore, the loans continue to be recognised in the Group’s statement of financial position. The Group remains
exposed to credit risk, interest rate risk and foreign exchange risk on the loans sold. If debt is issued to external investors, the liability in respect of
the cash received is included within ‘Debt securities in issue’ (note 31). Under the terms of the securitisations, the rights of the investors are limited
to the assets in the securitised portfolios and any related income generated by the portfolios, without further recourse to the Group. The Group does
not have the ability to otherwise use the assets transferred as part of securitisation transactions during the term of the arrangement.
Burlington Mortgages No. 1 DAC
In 2020, the Group securitised € 4 billion of its residential mortgage portfolio held in two of its subsidiaries, EBS d.a.c. and Haven Mortgages
Limited. These mortgages were transferred to a securitisation vehicle, Burlington Mortgages No. 1 DAC (‘Burlington 1’). In order to fund the acquired
mortgages, Burlington issued eleven classes of notes to EBS d.a.c. and Haven in the same proportion as the mortgages securitised. The transferred
mortgages have not been derecognised as the Group retains substantially all the risks and rewards of ownership and continue to be reported in the
Group’s financial statements. Burlington 1 is consolidated into the Group’s financial statements with all the notes being eliminated on consolidation.
At 31 December 2023, the carrying amount of the transferred financial assets which the Group continues to recognise is € 2.4 billion (2022: € 2.8
billion) (fair value € 2.4 billion (2022: € 2.6 billion)) and the carrying amount of the associated liabilities is Nil (2022: Nil).
Burlington Mortgages No. 2 DAC
In 2023, the Group securitised c. € 5 billion of its residential mortgage portfolio held in two of its subsidiaries, EBS d.a.c. and Haven Mortgages
Limited. These mortgages were transferred to a securitisation vehicle, Burlington Mortgages No. 2 DAC (‘Burlington 2’). In order to fund the acquired
mortgages, Burlington 2 issued seven classes of notes to EBS d.a.c. and Haven in the same proportion as the securitised mortgages. The
transferred mortgages have not been derecognised as the Group retains substantially all the risks and rewards of ownership and continue to be
reported in the Group’s financial statements. Burlington 2 is consolidated into the Group’s financial statements with all the notes being eliminated on
consolidation. At 31 December 2023, the carrying amount of the transferred financial assets which the Group continues to recognise is € 5 billion
(fair value € 4.9 billion) and the carrying amount of the associated liabilities is Nil.
The following table summarises as at 31 December 2023 and 2022, the carrying value and fair value of financial assets which did not qualify for
derecognition together with their associated financial liabilities.
Securities sold under agreements to repurchase/ similar products
Covered bond programmes
Residential mortgage backed
Securities sold under agreements to repurchase/similar products
Covered bond programmes
Residential mortgage backed
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair
value of
transferred
assets
Fair
value of
associated
liabilities
€ m
4,955 (1)(2)
€ m
575 (1)
€ m
4,973
38
(3)
27 (4)
37
€ m
575
28
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair
value of
transferred
assets
Fair
value of
associated
liabilities
€ m
5,945 (1)(2)
€ m
898 (1)
€ m
5,949
€ m
898
2023
Net fair
value
position
€ m
4,398
9
2022
Net fair
value
position
€ m
5,051
1,845
(3)
1,024 (4)
1,756
1,026
730
(1) See note 20.
(2) Includes € 4,360 million of assets pledged in relation to securities lending arrangements (2022: € 5,030 million).
(3) The asset pools of € 15 billion (2022: € 15 billion) in the covered bond programme have been apportioned on a pro-rata basis in relation to the value of bonds held by external investors and those
held by the Group companies. The € 38 million (2022: € 1,845 million) above refers to those assets apportioned to external investors.
(4) Included in ‘Bonds and other medium term notes’ issued by subsidiaries (note 31).
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AIB Group plc
42 Off-balance sheet arrangements and transferred financial assets continued
AIB Group (UK) p.l.c. Pension Scheme interest in the AIB PFP Scottish Limited Partnership
In December 2013, the Group agreed with the Trustee of the AIB UK Defined Benefit Pension Scheme ('the UK scheme') a restructure of the funding
of the deficit in the UK scheme.
The Group established a pension funding partnership, AIB PFP Scottish Limited Partnership ('SLP') under which a portfolio of loans were transferred
to the SLP from another Group entity, AIB UK Loan Management Limited ('UKLM') for the purpose of ring-fencing the repayments on these loans to
fund future deficit payments of the UK scheme.
Assets ring–fenced for this purpose entitled the UK Scheme to expected annual payments in the range of £ 15 million to £ 35 million per annum
from 2016 until 2032, with a potential termination payment in 2032 of up to £ 60 million. This funding plan was replaced in December 2019, as part
of the de-risking of the UK scheme (note 28). Under the 2019 funding arrangement, the Group expects to make payments of £ 18.5 million in 2024
and £ 8.5 million in 2025. This is subject to change prior to finalisation. The 2019 funding arrangement also limited the potential liability of the SLP to
the UK scheme and, when the cash held by the SLP exceeded the maximum potential liability limit in 2023, the ring-fenced loans were removed
from the arrangement on 30 June 2023. UKLM has the right to cash flows on the loans from that date.
The general partner in the partnership, AIB PFP (General Partner) Limited which is an indirect subsidiary of Allied Irish Banks, p.l.c. has controlling
power over the partnership. In addition, the pension scheme has a priority right to the cash flows from the partnership, up to the SLP’s maximum
potential liability limit, and any risks and rewards thereafter are expected to be borne by the Group through UKLM’s junior partnership interest.
(ii) Transferred financial assets derecognised in their entirety but the Group retains some continuing involvement
The Group has a continuing involvement in transferred financial assets where it retains any of the risks and rewards of ownership of the transferred
financial assets. Set out below are transactions in which the Group has a continuing involvement in assets transferred.
Pension scheme
On 31 July 2012, the Group entered into a Contribution Deed with the Trustee of the AIB Group Irish Pension Scheme (‘the Irish Scheme’), whereby
it agreed to make contributions to the scheme to enable the Trustee ensure that the regulatory Minimum Funding Standard position of non-
pensioner members of the pension scheme was not affected by the agreed early retirement scheme. These contributions amounting to
€ 594 million were settled through the transfer to the Irish Scheme of interests in a structured entity owning loans and advances previously
transferred at fair value from the Group. The loans and advances were derecognised in the Group’s financial statements as all of the risks and
rewards of ownership had transferred.
A subsidiary company of the Group was appointed as a service provider for the loans and advances transferred. Under the servicing agreement, the
Group subsidiary company collects the cash flows on the transferred loans and advances on behalf of the pension scheme in return for a fee. The
fee is based on an annual rate of 0.125% of the principal balance outstanding of all transferred loans and advances on the last day of each calendar
month. The Group has not recognised a servicing asset/liability in relation to this servicing arrangement as the fee is considered to be at market
rate. Under the servicing agreement, the Irish Scheme has the right to replace the Group subsidiary company as the service provider with an
external third party. In 2023, the Group recognised € 0.4 million (cumulative € 9.6 million) (2022: € 0.5 million (cumulative € 9.2 million)) in the
income statement for the servicing of the loans and advances transferred.
NAMA
During 2010 and 2011, the Group transferred financial assets with a net carrying value of € 15,428 million to NAMA. All assets transferred were
derecognised in their entirety.
As part of this transaction, the Group has provided NAMA with a series of indemnities relating to the transferred assets.
The Group was appointed by NAMA as a service provider for the loans and advances transferred, for which it receives a fee. The fee is based on
the lower of actual costs incurred or 0.1% of the value of the financial assets transferred. The Group has not recognised a servicing asset/liability in
relation to this servicing arrangement. In 2023, the Group recognised € 1 million (cumulative € 101 million) (2022: € 2 million (cumulative € 100
million)) in the income statement for the servicing of financial assets transferred to NAMA.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
43 Classification and measurement of financial assets and financial liabilities
Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The accounting policy for
financial assets in note 1 (j) and financial liabilities in note 1 (k), describes how the classes of financial instruments are measured, and how income
and expenses, including fair value gains and losses, are recognised.
The following table analyses the carrying amounts of the financial assets and financial liabilities by measurement category and by statement of
financial position heading at 31 December 2023 and 2022.
At fair value through
profit or loss
At fair value through other
comprehensive income
At amortised
cost
Mandatorily
Debt
investments
Hedging
derivatives
2023
Total
Financial assets
Cash and balances at central banks
Trading portfolio financial assets
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities
Other financial assets
Total
Financial liabilities
Deposits by central banks and banks
Customer accounts
Securities financing
Trading portfolio financial liabilities
Derivative financial instruments
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
Total
(1) Includes cash on hand € 598 million.
(2) Held for trading € 457 million and fair value hedges € 1,237 million.
(3) Held for trading € 448 million and fair value hedges € 342 million.
€ m
—
93
1,694 (2)
—
42
—
355
—
2,184
—
—
—
139
790 (3)
—
—
—
929
€ m
—
—
—
—
—
—
12,488
—
12,488
—
—
—
—
—
—
—
—
—
€ m
—
—
683
—
—
—
—
—
€ m
€ m
38,018 (1)
38,018
—
—
1,329
65,449
6,466
4,510
688
93
2,377
1,329
65,491
6,466
17,353
688
683
116,460
131,815
—
—
—
—
1,112
—
—
—
1,780
104,782
1,780
104,782
575
—
—
8,423
1,473
1,571
575
139
1,902
8,423
1,473
1,571
1,112
118,604
120,645
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43 Classification and measurement of financial assets and financial liabilities continued
At fair value through
profit or loss
At fair value through other
comprehensive income
At amortised
cost
Mandatorily
Debt
investments
Hedging
derivatives
2022
Total
€ m
—
8
2,323 (2)
—
249
—
302
—
2,882
—
—
—
4
1,032 (3)
—
—
—
1,036
€ m
—
—
—
—
—
—
11,837
—
11,837
—
—
—
—
—
—
—
—
—
€ m
—
—
188
—
—
—
—
—
€ m
€ m
38,138 (1)
38,138
—
—
1,502
59,364
6,282
4,131
592
8
2,511
1,502
59,613
6,282
16,270
592
188
110,009
124,916
—
—
—
—
1,950
—
—
—
514
514
102,359
102,359
898
—
—
7,203
1,404
1,375
898
4
2,982
7,203
1,404
1,375
1,950
113,753
116,739
Financial assets
Cash and balances at central banks
Trading portfolio financial assets
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Securities financing
Investment securities
Other financial assets
Total
Financial liabilities
Deposits by central banks and banks
Customer accounts
Securities financing
Trading portfolio financial liabilities
Derivative financial instruments
Debt securities in issue
Subordinated liabilities and other capital instruments
Other financial liabilities
Total
(1) Includes cash on hand € 573 million.
(2) Held for trading € 646 million and fair value hedges € 1,677 million.
(3) Held for trading € 599 million and fair value hedges € 433 million.
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Notes to the Consolidated Financial Statements continued
44 Fair value of financial instruments
The term ‘financial instruments’ includes both financial assets and financial liabilities. The fair value of a financial instrument is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the
principal market, or in its absence, the most advantageous market to which the Group has access at that date. The Group’s accounting policy for the
‘determination of fair value of financial instruments’ is set out in note 1 accounting policy (m).
The valuation of financial instruments, including loans and advances, involves the application of judgement and estimation. Market and credit risks
are key assumptions in the estimation of the fair value of loans and advances. The Group has estimated the fair value of its loans to customers
taking into account market risk and the changes in credit quality of its borrowers.
Fair values are based on observable market prices where available, and on valuation models or techniques where the lack of market liquidity means
that observable prices are unavailable. The fair values of financial instruments are classified according to the following fair value hierarchy that
reflects the observability of significant market inputs:
Level 1 – financial assets and liabilities measured using quoted market prices from an active market (unadjusted);
Level 2 – financial assets and liabilities measured using valuation techniques which use quoted market prices from an active market or measured
using quoted market prices unadjusted from an inactive market; and
Level 3 – financial assets and liabilities measured using valuation techniques which use unobservable market inputs.
All valuations are carried out within the Finance function and valuation methodologies are validated by the independent Risk function within the
Group. Readers of these financial statements are advised to use caution when using the data in the following tables to evaluate the Group’s
financial position or to make comparisons with other institutions. Fair value information is not provided for items that do not meet the definition of a
financial instrument.
The methods used for calculation of fair value in 2023 are as follows:
Financial instruments measured at fair value in the financial statements
(i) Trading portfolio financial instruments
The fair value of trading debt securities, together with quoted equity shares is based on quoted prices or bid/offer quotations sourced from external
securities dealers, where these are available on an active market. Where securities and equities are traded on an exchange, the fair value is based
on prices from the exchange.
(ii) Derivative financial instruments
Where derivatives are traded on an exchange, the fair value is based on prices from the exchange. The fair value of over-the-counter derivative
financial instruments is estimated based on standard market discounting and valuation methodologies which use reliable observable inputs including
yield curves and market rates. These methodologies are implemented by the Finance function and validated by the Risk function. Where there is
uncertainty around the inputs to a derivative’s valuation model, the fair value is estimated using inputs which provide the Group’s view of the most
likely outcome in a disposal transaction between willing counterparties in a functioning market. Where an unobservable input is material to the
outcome of the valuation, a range of potential outcomes from favourable to unfavourable is estimated.
Counterparty valuation adjustment ('CVA') and Funding valuation adjustment ('FVA') are applied to all uncollateralised over-the-counter derivatives.
The combination of CVA and FVA is referred to as XVA.
CVA is calculated as: Expected positive exposure ('EPE') multiplied by probability of default ('PD') multiplied by loss given default ('LGD'). EPE
profiles are generated at a counterparty netting set through simulation. PDs are derived from market based credit default swaps ('CDS') information.
As most counterparties do not have a quoted CDS, PDs are derived by mapping each counterparty to an index CDS credit grade. LGDs are based
on the specific circumstances of the counterparty and take into account valuation of offsetting security, where applicable. For smaller exposures
where security valuations are not individually assessed, an LGD of 60% is applied (2022: 60%).
FVA is calculated as: Expected exposure ('EE') multiplied by funding spread ('FS') multiplied by counterpart survival probability (1-PD). EE profiles
(net of expected positive and negative exposures) are generated at a counterparty netting set through simulation. Funding spreads used are an
average implied by CDSs for the Group’s most active external derivative counterparties. The rationale in applying these spreads is to best estimate
the FVA which a counterparty would apply in a transaction to close out the Group’s existing positions.
Where XVA valuation adjustments have been applied to a derivative instrument, the entire instrument is classified as Level 3 in the fair value
hierarchy where a not insignificant component of the XVA valuation is derived from unobservable inputs.
Within the range of estimates and fair value sensitivity measurements, a favourable and an adverse scenario have been selected for PDs and LGDs
for CVA. The favourable/adverse scenario for customer PDs are (i) a single rating upgrade and (ii) a single rating downgrade, respectively. Customer
LGDs are shifted according to estimates of improvement in value of security compared with potential derivatives market values. Within the
combination of LGD and PD, both are shifted together yielding positive and negative valuations which are disclosed as potential alternative
valuations. See 'Sensitivity of Level 3 measurements' within this note. For FVA, an adverse scenario is the use of the bond yields of the Group’s
most active derivative counterparties while a favourable scenario is an upgrade in the CDS of the reference entities used to derive funding spreads.
(iii) Investment securities
The fair value of investment securities has been estimated based on expected sale proceeds. The expected sale proceeds are based on bid prices
which have been analysed and compared across multiple sources for reliability. Where bid prices are unavailable, fair values are estimated by
valuation techniques using observable market data for similar instruments. Where there is no market data for a directly comparable instrument,
management judgement on an appropriate credit spread to similar or related instruments with market data available is used within the valuation
technique. This is supported by cross referencing other similar or related instruments.
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44 Fair value of financial instruments continued
(iv) Loans and advances to customers
The Group provides lending facilities of varying rates and maturities to corporate and personal customers.
Valuation techniques are used in estimating the fair value of loans, primarily using discounted cash flows and applying market rates where
practicable and taking credit risk into account.
The majority of loans and advances to customers are held at amortised cost, however, the Group has a small number of loans and advances which
are required to be measured at FVTPL having failed the SPPI test. The valuation techniques used apply equally to those held at FVTPL and those
held at amortised cost.
A key assumption for determining the fair value of loans and advances is that the carrying amount of variable rate loans (excluding mortgage
products) approximates to market value. For fixed rate loans, the fair value is calculated by discounting expected cash flows using discount rates
that reflect the interest rate risk in that portfolio.
The fair value of mortgage products, including tracker mortgages, is calculated by discounting expected cash flows using discount rates that reflect
the interest rate/credit risk in the portfolio.
Financial instruments not measured at fair value but with fair value information presented separately in the notes to the financial
statements
(i) Loans and advances to banks
The fair value of loans and advances to banks is estimated using discounted cash flows applying either market rates, where practicable, or rates
currently offered by other financial institutions for placings with similar characteristics.
(ii) Loans and advances to customers at amortised cost
See methodology above under the heading ‘Loans and advances to customers’.
(iii) Securities financing
The fair value of securities financing assets and liabilities approximate their carrying amount as these balances are generally short-dated and fully
collateralised.
(iv) Deposits by central banks and banks and customer accounts
The fair value of current accounts and deposit liabilities which are repayable on demand, or which re-price frequently, approximates to their book
value. The fair value of all other deposits and other borrowings is estimated using discounted cash flows and applying applicable market rates as
appropriate.
(v) Subordinated liabilities and debt securities in issue
The estimated fair value of subordinated liabilities and other capital instruments, and debt securities in issue, is based on quoted prices where
available, or where these are unavailable, are estimated using valuation techniques using observable market data for similar instruments. Where
there is no market data for a directly comparable instrument, management judgement, on an appropriate credit spread to similar or related
instruments with market data available, is used within the valuation technique. This is supported by cross-referencing other similar or related
instruments.
(vi) Other financial assets and other financial liabilities
This caption includes accrued interest receivable and payable and other receivables (including amounts awaiting settlement and accounts payable).
The carrying amount is considered representative of fair value.
(vii) Commitments pertaining to credit-related instruments
Details of the various credit-related commitments and other off-balance sheet financial guarantees entered into by the Group are included in note 40
‘Contingent liabilities and commitments’. The ECL is considered a reasonable approximation of these credit-related financial instruments.
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Notes to the Consolidated Financial Statements continued
44 Fair value of financial instruments continued
The table below sets out the carrying amount and fair value of financial instruments across the three levels of the fair value hierarchy at 31
December 2023 and 2022:
Carrying
amount
2023
Fair Value
Carrying
amount
2022
Fair Value
Fair value hierarchy
Level 1
Level 2
Level 3
€ m
€ m
€ m
€ m
Fair value hierarchy
Total
€ m
Level 1
Level 2
Level 3
€ m
€ m
€ m
€ m
Total
€ m
—
—
8
2,255
88
2,343
164
4
—
—
15
—
—
—
—
249
164
4
—
249
—
11,837
284
621
302
14,907
Financial assets measured at fair value
Trading portfolio financial assets
Derivative financial instruments:
Interest rate derivatives(1)
Exchange rate derivatives
Equity derivatives
Forward contracts to acquire loans(2)
Loans and advances to customers at FVTPL
93
93
—
—
93
8
2,351
14
—
12
42
—
—
—
—
—
2,234
117
2,351
2,343
—
—
12
42
—
14
—
12
42
164
4
—
249
Investment debt securities at FVOCI
12,488
12,411
Equity investments at FVTPL
355
15
12,488
11,837
11,822
340
355
302
18
15,355
12,519
2,325
511
15,355
14,907
11,848
2,438
Financial assets not measured at fair value
Cash and balances at central banks
Loans and advances to banks
Loans and advances to customers:
Mortgages(4)
Non-mortgages
Securities financing
38,018
1,329
34,472
30,977
6,466
598 (3)
37,420
—
38,018
38,138
573 (3)
37,565
—
38,138
259
1,070
1,329
1,502
33,459
33,459
30,031
30,909
30,909
29,333
6,466
6,466
6,282
—
—
—
—
262
1,240
1,502
—
—
—
28,625
28,625
29,253
29,253
6,282
6,282
Investment debt securities measured at
amortised cost
Other financial assets
4,510
2,566
688
—
1,971
4,537
4,131
2,413
— 1,739
4,152
688
688
592
—
—
592
592
116,460
3,164
37,679
74,563
115,406
110,009
2,986
37,827
67,731
108,544
Financial liabilities measured at fair value
Trading portfolio financial liabilities
139
139
—
—
139
4
Derivative financial instruments:
Interest rate derivatives(1)
Exchange rate derivatives
Equity derivatives
Credit derivatives
Forward contracts to acquire loans(5)
1,869
29
1
3
—
2,041
Financial liabilities not measured at fair
value
Deposits by central banks and banks
1,780
Customer accounts:
Current accounts
Demand deposits
Time deposits
Securities financing
Debt securities in issue
Subordinated liabilities and other capital
instruments
62,928
32,083
9,771
575
8,423
8,573
1,473
1,497
Other financial liabilities
1,571
Loan commitments and other credit related
commitments
Financial guarantees
43
16
—
—
—
1,563
28
1
3
—
1,595
306
1
—
—
—
307
1,869
29
1
3
—
2,041
2,900
72
—
1
9
2,986
740
1,040
1,780
514
62,928
62,928
64,402
32,083
32,083
32,595
9,755
9,755
5,362
575
575
898
28
8,601
7,203
7,214
13
1,510
1,404
1,401
1,571
1,571
1,375
43
16
43
16
59
19
—
—
—
—
—
4
2,477
72
—
1
—
2,550
423
—
—
—
9
432
2,900
72
—
1
9
2,986
282
232
514
—
—
—
—
11
—
—
—
—
64,402
64,402
32,595
32,595
5,348
5,348
898
898
16
7,241
13
1,414
1,375
1,375
59
19
59
19
—
—
—
—
—
—
—
—
—
139
—
—
—
—
—
118,663
10,070
740
108,052
118,862
113,831
8,615
293
104,957
113,865
(1) Includes € 84 million (2022: € 40 million) derivative assets and € 262 million (2022: € 372 million) derivative liabilities categorised as level 3 where a not insignificant component of the XVA
valuation is derived from unobservable inputs.
(2) Relates to the forward contract to acquire Ulster Bank tracker (and linked) mortgages. See ‘Ulster Bank forward contract – tracker (and linked) mortgages’ below for further information.
(3) Comprises cash on hand.
(4) Includes residential and commercial mortgages.
(5) Relates to the forward contract to acquire Ulster Bank corporate and commercial loans. See ‘Ulster Bank forward contract – corporate and commercial loans’ below for further information.
14
—
—
—
77
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
—
—
—
—
—
4
—
—
—
—
—
4
—
—
—
—
—
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44 Fair value of financial instruments continued
Significant transfers between Level 1 and Level 2 of the fair value hierarchy
There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended 31 December 2023 and 2022.
Reconciliation of balances in Level 3 of the fair value hierarchy
The following table shows (i) A reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair
value hierarchy and (ii) Total unrealised gains or losses included in profit or loss that is attributable to the assets and liabilities categorised as Level 3
in the fair value hierarchy at the end of the year.
Financial assets
Loans and
advances at
FVTPL
Equities
at FVTPL
Derivatives
Investment
securities
€ m
Debt
€ m
Equities
at FVOCI
2023
Financial liabilities
Total
Derivatives
Total
€ m
€ m
€ m
€ m
€ m
€ m
Movement in level 3 assets and
liabilities
At 1 January 2023
Transfers into/out of level 3(1)
Total gains or (losses) in:
Profit or loss:
Net trading income
Net change in FVTPL
Other comprehensive income:
Net change in fair value of investment
securities
Net change in fair value of cash flow
hedges
Purchases/additions
Sales/disposals/redemptions
Cash received:
Principal
At 31 December 2023
Total unrealised gains or losses included
in profit or loss for assets and liabilities
classified as level 3 at the end of the year
Net trading income - income
Gains on equity investments at FVTPL
Losses on loans and advances at FVTPL
88
—
—
—
—
—
249
284
—
—
621
—
432
—
432
—
41
—
—
—
41
—
—
—
—
—
—
3
3
30
30
41
33
74
(125)
(125)
—
—
(125)
(125)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20
(135)
35
(9)
55
(144)
—
—
—
—
—
—
129
—
—
—
(95)
—
(95)
42
340
511
—
307
—
307
71
—
—
71
—
—
—
—
—
—
—
—
—
—
(15)
(15)
—
27
—
27
71
27
(15)
83
76
—
—
76
76
—
—
76
(1) Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change occurred.
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Notes to the Consolidated Financial Statements continued
44 Fair value of financial instruments continued
Reconciliation of balances in Level 3 of the fair value hierarchy
Financial assets
Derivatives
Investment securities
Debt
Equities
at FVOCI
Loans and
advances at
FVTPL
Equities at
FVTPL
2022
Financial liabilities
Total
Derivatives
Total
€ m
€ m
€ m
€ m
€ m
€ m
€ m
€ m
Movement in level 3 assets and
liabilities
At 1 January 2022
Transfers into/out of level 3(1)
Total gains or (losses) in:
Profit or loss:
Net trading income
Net change in FVTPL
Other comprehensive income:
Net change in fair value of investment
securities
Net change in fair value of cash flow
hedges
Purchases/additions
Sales/disposals
Cash received:
Principal
At 31 December 2022
Total unrealised gains or losses included
in profit or loss for assets and liabilities
classified as level 3 at the end of the year
Net trading income - losses
Gains on equity investments at FVTPL
Losses on loans and advances at FVTPL
301
—
—
—
—
—
243
248
—
—
792
—
96
96
—
—
(213)
—
—
—
(213)
—
—
—
—
—
—
(213)
14
14
89
89
103
(110)
336
—
336
336
—
336
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
88
—
—
—
—
—
—
—
—
—
—
—
—
—
97
25
(1)
72
(125)
(126)
—
—
—
—
(32)
—
(32)
—
249
284
621
432
—
—
—
—
—
432
(56)
—
—
—
—
—
(56)
—
—
—
—
—
—
—
(16)
(16)
—
13
—
13
(56)
13
(16)
(59)
(225)
(225)
—
—
—
—
(225)
(225)
(1) Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change occurred.
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44 Fair value of financial instruments continued
Significant unobservable inputs
The table below sets out information about significant unobservable inputs used in measuring financial instruments categorised as Level 3 in the fair
value hierarchy:
Financial instrument
Uncollateralised
customer derivatives
Asset
Liability
Fair value
2023
€ m
117
307
2022
€ m
Valuation
technique
Significant
unobservable input
88 CVA
423
LGD
PD
Range of estimates
31 December
2023
41% - 59%
(Base 49%)
0.4% - 1.9%
31 December
2022
26% - 43%
(Base 34%)
0.8% - 4.6%
(Base 0.9% 1-year PD)
(Base 2.1% 1-year PD)
FVA
Funding spreads
(0.1%) - 0.3%
(0.1%) to 0.2%
Ulster Bank forward
contract – tracker (and
linked) mortgages
Ulster Bank forward
contract – corporate and
commercial loans
Visa Inc. Series B
Preferred Stock(1)
Asset
Liability
Asset
Liability
12
—
—
—
—
—
—
9
Asset
41
22
Loans and advances to
customers measured at
FVTPL
Asset
—
249
Discounted
Expected Future
Cash flows
Discounted
Expected Future
Cash flows
Quoted market
price (to which a
discount has been
applied)
Discounted cash
flows(2)
PD
Discount Yield
PD
Discount Yield
(0.25%) - 0.25%
(0.1%) - 0.1%
n/a
n/a
—
—
(0.5%) to 0.5%
(0.5%) to 0.5%
Final conversion rate
0% - 90%
0% - 90%
Discount on market
value
—
(4%) - 3%
(1) Sensitivity information has not been provided for other equities as the portfolio comprises several investments, none of which is individually material.
(2) Expected cash flows discounted at market rates, taking into consideration the fair value of collateral where relevant.
Uncollateralised customer derivatives
Interest rate derivatives (assets and liabilities) include negative XVA valuation adjustments amounting to net € 12 million (2022: € 18 million). The
sensitivity to unobservable inputs for this XVA valuation adjustment at 31 December 2023 ranges from (i) negative € 9 million to positive € 4 million
for CVA (2022: negative € 12 million to positive € 6 million) and (ii) negative € 2 million to positive € 1 million for FVA (2022: negative € 2 million to
positive € 1 million).
A number of other derivatives are subject to valuation methodologies which use unobservable inputs. As the variability of the valuation is not greater
than € 1 million in any individual case or collectively, the detail is not disclosed here.
Ulster Bank forward contract – tracker (and linked) mortgages
The Group entered into an agreement in 2022 with NatWest Group plc and Ulster Bank Ireland DAC for the acquisition of the Ulster Bank tracker
(and linked) mortgage portfolio which was subject to regulatory approval. Following the receipt of regulatory authority approval in 2023, the contract
to acquire the loans (which is not considered a regular way transaction) is a forward contract which recognises the change in fair value from the date
of agreed transfer of beneficial ownership (1 September 2022) to the earlier of the reporting date or the acquisition date for a loan. The notional
value of the forward contract at 31 December 2023 represents the principal amount of loans to be acquired by the Group in 2024.
The following are key considerations in determining the fair value of the forward contract at 31 December 2023:
– Valuation technique: The loans are valued by discounting the expected future cash flows, allowing for interest and principal payments to date
and fees/charges. Key drivers of the valuation include PDs which determine potential reductions in expected cash flows due to changes in credit
quality, and the discount yield which is used to calculate a present value of the expected future cash flows. The updated calculated value for the
loans, compared with the agreed transaction price, determines the change in fair value.
– Unobservable input: The PDs used for generation of the underlying expected cash flows are unobservable as the loans are not publicly quoted,
and the discount yield is also unobservable due to lack of publicly available information for transactions of this type.
– Range of estimates: The range of estimates is based on the application of favourable/adverse scenarios for customer PDs and discounting
yields, based on the trend of previous movements in these rates.
The fair value sensitivity to unobservable inputs ranges from negative € 4.8 million to positive € 5.4 million for PDs at 31 December 2023, and
negative € 3.2 million to positive of € 3.2 million for discount yield.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
44 Fair value of financial instruments continued
Ulster Bank forward contract – corporate and commercial loans
The Group entered into a binding agreement in 2022 to acquire performing Ulster Bank corporate and commercial loans which was subject to
regulatory approval. The transfer of the loans completed in August 2023. Following the receipt of regulatory authority approval, the contract to
acquire the loans was a forward contract. The notional value of the forward contract at 31 December 2022 represented the principal amount of
performing loans acquired by the Group in 2023.
The following are key considerations in determining the fair value of the forward contract at 31 December 2022:
– Valuation technique: The loans are valued by discounting the expected future cash flows, allowing for interest and principal payments to date
and fees/charges. Key drivers of the valuation include PDs which determine potential reductions in expected cash flows due to changes in credit
quality, and the discount yield which is used to calculate a present value of the expected future cash flows. The updated value for the loans is
then compared with the agreed transaction price to determine the change in fair value.
– Unobservable input: The PDs used for generation of the underlying expected cash flows are unobservable as the loans are not publicly quoted,
and the discount yield is also unobservable due to lack of publicly available information for transactions of this type.
– Range of estimates: The range of estimates is based on the application of favourable/adverse scenarios for customer PDs and discounting
yields, based on the trend of previous movements in these rates.
The fair value sensitivity to unobservable inputs ranges from negative € 3.1 million to positive of € 2.9 million for PDs at 31 December 2022, and
negative € 8.7 million to positive of € 8.9 million for discount yield.
Visa Inc. Series B Preferred Stock
In June 2016, the Group received Series B Preferred Stock in Visa Inc. with a fair value of € 65 million as part consideration for its holding of shares
in Visa Europe. The preferred stock is convertible into Class A Common Stock of Visa Inc. over time, with partial conversions having occurred in
2020 and 2022. The remaining conversion is subject to certain Visa Europe litigation risks that may affect the ultimate conversion rate. In addition,
the stock, being denominated in US dollars, is subject to foreign exchange risk.
– Valuation technique: Quoted market price of Visa Inc. Class A Common Stock to which a discount has been applied for the illiquidity and the
conversion rate variability of the preferred stock of Visa Inc. 56% haircut (2022: 71%). This was converted at the year end exchange rate.
– Unobservable input: Final conversion rate of Visa Inc. Series B Preferred Stock into Visa Inc. Class A Common Stock.
– Range of estimates: Estimates range from (a) no discount for conversion rate variability with a discount for illiquidity only; to (b) 90% discount
for conversion rate variability.
The fair value measurement sensitivity to unobservable discount rates ranges from negative € 31 million to positive € 23 million at 31 December
2023 (2022: negative € 15 million to positive of € 24 million).
Loans and advances to customers measured at FVTPL
For loans and advances to customers measured at FVTPL of € 42 million, categorised within Level 3 of the fair value hierarchy in 2023, the Group
does not believe that a reasonably possible change to alternative assumptions would change fair value significantly and therefore has not disclosed
those amounts in the table above or provided the related disclosures.
The fair value measurement sensitivity to unobservable inputs ranged from negative € 9 million to positive € 8 million at 31 December 2022.
Fair value is applied in respect of secondary facilities arising on restructured loans subject to forbearance measures, on the likelihood that additional
cash flows, in excess of their primary facilitates, will be received from customers. Given the significant uncertainty with regard to such cash flows,
the Group does not attribute a fair value unless it is reasonably certain that this value will be realised.
Day 1 gain or loss:
No difference existed between the fair value at initial recognition of financial instruments and the amount that was determined at that date using a
valuation technique incorporating significant unobservable data.
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AIB Group plc
45 Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following balances with less than three months maturity
from the date of acquisition:
Cash and balances at central banks
Loans and advances to banks(1)(2)(3)
Total cash and cash equivalents
(1) Included in ‘Loans and advances to banks’ total of € 1,329 million (2022: € 1,502 million) set out in note 18.
(2) Includes € 5 million (2022: € 5 million) relating to restricted balances held in trust in respect of certain payables which are included in ‘Other liabilities’ (note 33).
(3) Includes € 80 million (2022: € 50 million) of restricted cash balances that are held to meet certain requirements under the Asset Covered Securities Act 2001.
Cash and balances at central banks (net of ECL allowance of Nil) comprises:
Central Bank of Ireland
Bank of England
Federal Reserve Bank of New York
Other (cash on hand)
Total cash and balances at central banks
2023
€ m
2022
€ m
38,018
38,138
1,023
1,178
39,041
39,316
2023
€ m
2022
€ m
33,282
32,573
3,869
4,584
269
598
408
573
38,018
38,138
There are certain regulatory restrictions on the ability of subsidiaries to transfer funds to the parent company in the form of cash dividends, loans or
advances. The impact of such restrictions is not expected to have a material effect on the Group’s ability to meet its cash obligations.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
46 Statement of cash flows
Non-cash and other items included in profit before taxation
Non-cash items
(Profit)/loss on disposal of property
Loss on disposal of business
Net loss/(gain) on derecognition of financial assets measured at amortised cost
Dividends received from equity investments
Investments accounted for using the equity method
Net credit impairment charge
Change in other provisions
Retirement benefits – defined benefit expense
Depreciation, amortisation and impairment
Interest on subordinated liabilities and other capital instruments
Interest on debt securities (1)
Loss on disposal of investment securities
Gain on termination of hedging swaps
Amortisation of premiums and discounts
Net gain on equity investments at FVTPL
Net loss on loans and advances to customers at FVTPL
Change in prepayments and accrued income
Change in accruals and deferred income
Effect of exchange translation and other adjustments(2)
Total non-cash items
Contributions to defined benefit pension schemes
Dividends received on equity investments
Total other items
Non-cash and other items for the year ended 31 December
Change in operating assets(2)
Change in trading portfolio financial assets
Change in net derivative financial instruments
Change in loans and advances to banks
Change in loans and advances to customers
Change in securities financing
Change in other assets
Change in operating liabilities(2)
Change in deposits by central banks and banks
Change in customer accounts
Change in securities financing
Change in trading portfolio liabilities
Change in debt securities in issue
Change in notes in circulation
Change in other liabilities
(1) Relates to debt securities classified at origination as MREL.
(2) The impact of foreign exchange translation for each line of the statement of financial position is removed in order to show the underlying cash impact.
2023
€ m
(2)
26
9
(2)
(12)
199
68
5
295
42
274
22
(14)
35
(27)
14
(115)
162
27
1,006
(24)
2
(22)
984
2022
€ m
1
—
(18)
(2)
(37)
52
87
4
341
41
146
7
(4)
50
(88)
16
—
53
(315)
334
(24)
2
(22)
312
2023
€ m
(85)
(32)
26
(6,023)
(213)
36
2022
€ m
—
(149)
69
(3,221)
(2,343)
21
(6,291)
(5,623)
2023
€ m
1,260
2,276
(306)
135
(1,000)
(6)
(213)
2,146
2022
€ m
(9,852)
10,045
851
2
(750)
(56)
(237)
3
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AIB Group plc
47 Related party transactions
Related parties in the Group include the parent company, AIB Group plc, subsidiary undertakings, associated undertakings, joint arrangements,
post-employment benefits, Key Management Personnel and connected parties. The Irish Government is also considered a related party by virtue of
its significant influence over the Group. The immediate holding company and controlling party is AIB Group plc with its registered office at 10
Molesworth Street, Dublin 2.
(a) Transactions with subsidiary undertakings
AIB Group plc is the ultimate parent company of the Group. Banking transactions between the parent company and its subsidiaries and between
subsidiaries are entered into in the normal course of business. These include loans, deposits, provision of derivative contracts, foreign currency
contracts and the provision of guarantees on an ‘arm’s length basis’. Furthermore, pricing arrangements between Allied Irish Banks, p.l.c. and
certain Irish subsidiaries, and between certain Irish subsidiaries reflect revised OECD guidelines on transfer pricing, which are the internationally
accepted principles in this area, and take account of the functions, risks and assets involved. Details of related party transactions and balances
between AIB Group plc and its subsidiaries are set out in note (k) to AIB Group plc Company financial statements. In accordance with IFRS 10
Consolidated Financial Statements transactions between the parent company and its subsidiaries and between subsidiaries have been eliminated
on consolidation.
(b) Associated undertakings and joint ventures
From time to time, the Group provides certain banking and financial services for associated undertakings. These transactions are made in the
ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of collectability or present other unfavourable features. Details of loans
to associates and joint venture are set out in notes 19 and 30 to the consolidated financial statements.
(c) Provision of banking and related services and funding to Group Pension schemes
The Group provides certain banking and financial services including money transmission services for the AIB Group Pension schemes. Such
services are provided in the ordinary course of business, on substantially the same terms, including interest rates, as those prevailing at the time for
comparable transactions with other persons.
During 2013, the Group established a pension funding partnership, AIB PFP Scottish Limited Partnership ('SLP') in the UK. Following this, a
subsidiary of Allied Irish Banks, p.l.c. transferred loans to the SLP for the purpose of ring-fencing the repayments of these loans to fund future deficit
payments of the AIB UK Defined Benefit Pension Scheme (note 42).
During 2012, the Group agreed to make certain contributions to the pension scheme which were settled through the transfer to the AIB Group Irish
Pension Scheme of interests in a special purpose entity owning loans and advances previously transferred at fair value from the Group. A subsidiary
of the Group was appointed as a service provider for the loans and advances transferred in return for a servicing fee at a market rate (note 42).
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AIB Group plc
Notes to the Consolidated Financial Statements continued
47 Related party transactions continued
(d) IAS 24 Related Party Disclosures
The following disclosures are made in accordance with the provisions of IAS 24 Related Party Disclosures (‘IAS 24’). Under IAS 24, Key
Management Personnel (‘KMP’) are defined as comprising Executive and Non-Executive Directors together with Senior Executive Officers, namely,
the members of the Executive Committee. As at 31 December 2023, the Group had 25 KMP (2022: 25 KMP).
(i) Compensation of Key Management Personnel
Details of compensation paid to KMP are provided below. The figures shown include the figures separately reported in respect of Directors’
remuneration on page 106 to 107.
Short term compensation(1)
Post-employment benefits(2)
Termination benefits
Total compensation of key management personnel
2023
€ m
7.5
1.0
0.4
8.9
2022
€ m
7.1
0.9
—
8.0
(1) Comprises (a) in the case of Executive Directors and Senior Executive Officers: salary and a non-pensionable cash allowance in lieu of company car, medical insurance and other contractual
benefits including, where relevant, payment in lieu of notice, and (b) in the case of Non-Executive Directors: Directors’ fees and travel and subsistence expenses incurred in the performance of
the duties of their office, which are paid by the Group.
(2) Comprises payments to defined benefit or defined contribution pension schemes, in accordance with actuarial advice, to provide post-retirement pensions. The Group’s defined benefit pension
schemes closed to future accrual with effect from 31 December 2013 and all employee pension benefits have accrued on the basis of defined contributions since that date.
(ii) Transactions with Key Management Personnel
Loans to KMP and their close family members are made in the ordinary course of business on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with other persons of similar standing not connected with the Group, and
do not involve more than the normal risk of collectability or present other unfavourable features. Loans to Directors and Senior Executive Officers
are made on terms available to other employees in the Group generally, in accordance with established policy, within limits set on a case by case
basis.
The aggregate amounts outstanding, in respect of all loans, quasi loans and credit transactions between the Group and KMP, as defined above,
together with members of their close families and entities controlled by them are shown in the following table:
Loans outstanding
At 1 January
Loans issued during the year
Net loan repayments during the year/change of KMP/other
At 31 December
2023
€ m
1.56
—
0.41
1.97
2022
€ m
1.51
—
0.05
1.56
Total commitments outstanding refers to the total of any undrawn amounts on credit cards and/or overdraft facilities provided to KMP. Total
commitments outstanding as at 31 December 2023 were € 0.12 million (2022: € 0.13 million).
Deposit and other credit balances held by KMP and their close family members as at 31 December 2023 amounted to € 2.08 million
(2022: € 2.48 million).
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AIB Group plc
47 Related party transactions continued
(e) Companies Act 2014 disclosures
(i) Loans to Directors
The following information is presented in accordance with the Companies Act 2014. For the purposes of the Companies Act disclosures, Director
means the Board of Directors and any past Directors who are Directors during the relevant period.
There were 15 Directors in office during the year, 5 of whom availed of credit facilities (2022: 6). Of the Directors who availed of credit facilities, 2
had balances outstanding at 31 December 2023 (2022: 3 of 6).
Details of transactions with Directors for the year ended 31 December 2023 are as follows:
Tanya Horgan
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Colin Hunt
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Balance at
31 December
2022
Amounts
advanced
during 2023
Amounts repaid
during 2023
Balance at
31 December
2023
€ 000
€ 000
€ 000
€ 000
47
—
47
642
16
658
—
—
—
—
—
—
4
—
4
45
—
45
43
—
43
3
47
597
15
612
17
666
* Amounts advanced and repaid are not shown for overdraft/credit card facilities as these are revolving in nature (i.e. they may be drawn, repaid and redrawn up to their limit over the course of the
year).
** The maximum debit balance is calculated by aggregating the maximum debit balance drawn on each facility during the year.
Ms Helen Normoyle and Mr Fergal O’Dwyer held overdraft facilities which were not used during the year. Ms Ann O’Brien held a credit card facility
with the Group, which had a Nil opening balance, and a maximum debit balance of less than € 500 in the period.
Ms Anik Chaumartin, Mr Donal Galvin, Mr Basil Geoghegan, Ms Sandy Kinney Pritchard, Mr Andy Maguire, Ms Elaine MacLean, Mr Brendan
McDonagh, Mr Jim Pettigrew, Mr Jan Sijbrand and Mr Raj Singh had no credit facilities with the Group in 2023.
All facilities are performing to their terms and conditions. An expected credit loss allowance is held for all loans and advances. Accordingly, a total
expected credit loss allowance of under € 500 was held on the above facilities at 31 December 2023.
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Annual Financial Report 2023 308
AIB Group plc
Notes to the Consolidated Financial Statements continued
47 Related party transactions continued
(e) Companies Act 2014 disclosures
(i) Loans to Directors (continued)
Details of transactions with Directors for the year ended 31 December 2022 are as follows:
Tanya Horgan
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Colin Hunt
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Carolan Lennon
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Balance at
31 December
2021
Amounts
advanced
during 2022
Amounts repaid
during 2022
Balance at
31 December
2022
€ 000
€ 000
€ 000
€ 000
55
—
55
691
12
703
—
8
8
—
—
—
—
—
—
—
—
—
8
—
8
49
—
49
—
—
—
47
—
47
2
55
642
16
658
8
714
—
10
10
—
16
* Amounts advanced and repaid are not shown for overdraft/credit card facilities as these are revolving in nature (i.e. they may be drawn, repaid and redrawn up to their limit over the course of the
year).
** The maximum debit balance is calculated by aggregating the maximum debit balance drawn on each facility during the year.
Ms Helen Normoyle and Mr Fergal O’Dwyer held overdraft facilities which were not used during the year. Ms Ann O’Brien held a credit card facility
with the Group, which had a Nil opening and closing balance, and a maximum debit balance of less than € 1,000 in the period.
Ms Anik Chaumartin, Mr Donal Galvin, Mr Basil Geoghegan, Ms Sandy Kinney Pritchard, Mr Andy Maguire, Ms Elaine MacLean, Mr Brendan
McDonagh, Mr Jim Pettigrew, Mr Jan Sijbrand and Mr Raj Singh had no credit facilities with the Group in 2022.
All facilities are performing to their terms and conditions. An expected credit loss allowance is held for all loans and advances. Accordingly, a total
expected credit loss allowance of under € 1,000 was held on the above facilities at 31 December 2022.
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Annual Financial Report 2023 309
AIB Group plc
47 Related party transactions continued
(e) Companies Act 2014 disclosures continued
(ii) Connected persons
The aggregate of disclosable loans to connected persons of Directors in office during the year are as follows:
Tanya Horgan (3 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Brendan McDonagh (1 person)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Helen Normoyle (3 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Ann O’Brien (1 person)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Fergal O’Dwyer (3 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Balance at
31 December
2022
Amounts
advanced
during 2023
Amounts repaid
during 2023
Balance at
31 December
2023
€ 000
€ 000
€ 000
€ 000
440
2
442
—
4
4
48
2
50
161
—
161
—
1
1
—
—
—
—
—
—
—
—
—
—
—
—
17
—
17
—
—
—
4
—
4
88
—
88
243
—
243
219
—
219
423
3
426
10
445
—
9
9
—
9
44
8
52
2
57
73
—
73
6
161
24
1
25
1
245
*
Amounts advanced and repaid are not shown for overdraft/credit card facilities as these are revolving in nature (i.e. they may be drawn, repaid and redrawn up to their limit over the course of the
year).
** The maximum debit balance is calculated by aggregating the maximum debit balance drawn on each facility during the year.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
47 Related party transactions continued
(e) Companies Act 2014 disclosures continued
(ii) Connected persons continued
Tanya Horgan (2 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Carolan Lennon (2 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Brendan McDonagh (1 person)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Helen Normoyle (3 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Ann O’Brien (1 person)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Fergal O’Dwyer (2 persons)
Loans
Overdraft/credit card*
Total
Interest charged during the year
Maximum debit balance during the year**
Balance at
31 December
2021
Amounts
advanced
during 2022
Amounts repaid
during 2022
Balance at
31 December
2022
€ 000
€ 000
€ 000
€ 000
346
1
347
212
—
212
118
—
118
—
—
—
—
4
4
52
3
55
345
—
345
—
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
—
4
185
—
185
—
—
—
440
2
442
8
561
—
—
—
—
3
—
4
4
—
6
48
2
50
2
58
161
—
161
3
345
—
1
1
—
5
* Amounts advanced and repaid are not shown for overdraft/credit card facilities as these are revolving in nature (i.e. they may be drawn, repaid and redrawn up to their limit over the course of the
year).
** The maximum debit balance is calculated by aggregating the maximum debit balance drawn on each facility during the year.
An expected credit loss allowance is held for all loans and advances. Accordingly, a total expected credit loss allowance of less than € 1,000 was
held on the above facilities at 31 December 2023.
(iii) Aggregate balance of loans and guarantees held by Directors and their connected persons
The aggregate balance of loans and guarantees held by Directors and their connected persons as at 31 December 2023 represents c. 0.01 % of the
net assets of the Group (2022: c. 0.01%).
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Annual Financial Report 2023
311
47 Related party transactions continued
(f) Summary of relationship with the Irish Government
The Irish Government is recognised as a related party under IAS 24 as it is in a position to exercise significant influence over the Group.
Relationship Framework
In order to comply with contractual commitments imposed on the Group in connection with its recapitalisation by the Irish State and with the
requirements of EU state aid applicable in respect of that recapitalisation, a Relationship Framework was entered into between the Minister and the
Group in March 2012. This provides the framework under which the relationship between the Minister and the Group is governed. The Relationship
Framework was amended and restated on 12 June 2017. Furthermore, the AIB Group plc Relationship Framework was put in place on 8 December
2017 in substitution for the Relationship Framework dated 12 June 2017. Under the relationship framework, the authority and responsibility for
strategy and commercial policies (including business plans and budgets) and conducting the Group’s day-to-day operations rest with the Board and
the Group’s management team, however the Group remains subject to certain obligations which require advance consultation with or approval by
the State.
These obligations relate to, inter alia:
– The composition of the board;
– Declaration and payment of dividends;
– Restrictions on various types of remuneration;
– Buy-backs or redemptions by the Group of its shares; and
– Material acquisitions/disposals.
The relationship of the Irish Government with the Group is outlined under the following headings:
– Ordinary shares
At 31 December 2023, the State’s shareholding in the Company has reduced to 1,067,638,190 ordinary shares (40.77%) following a directed
share buyback, the sell down of shares, the placing of shares, and disposals as part of a pre-arranged trading plan. At 31 December 2022, the
State held 1,520,799,849 ordinary shares (56.89%).
– Issue of warrants to the Minister for Finance
In 2017, the Group issued warrants to the Minister to subscribe for 271,166,685 ordinary shares. Following the reduction in issued share capital
during the year, these warrants now represent 10.35% of the issued share capital. For further details see note 36.
– Guarantee schemes
European Communities (Deposit Guarantee Scheme) Regulations 2015
Eligible deposits (including credit balances in current accounts, demand deposit accounts and term deposit accounts) of up to € 100,000 per
depositor per credit institution are covered under this scheme. The scheme is administered by the CBI and is funded by the credit institutions
covered by the scheme.
Strategic Banking Corporation of Ireland Scheme
The Group through its participation in the Strategic Banking Corporation of Ireland (‘SBCI’) Support loan Schemes (the ‘Schemes’) benefits from a
Government guarantee against losses on qualifying finance agreements on amounts advanced under the Schemes. At 31 December 2023, c
€ 548 million is outstanding across individual schemes of which the Future Growth Loan Scheme; Brexit/COVID-19 Working Capital Loan
Schemes, Growth & Sustainability Loan Schemes, Covid-19 and Ukraine Credit Guarantee Scheme benefit from up to 80% Government
guarantee.
Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009
The Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 was one of various stabilisation measures implemented by the State to
support the Irish banking system including the Group. The Group no longer has any guaranteed liabilities under the scheme however, certain of
the covenants in the scheme continue to apply to the Group including reporting covenants, until the scheme is terminated by the Minister for
Finance.
– NAMA
The Group has provided NAMA with a series of indemnities relating to transferred assets. Any indemnity payment would result in an outflow of
economic benefit for the Group.
– Funding support
The Group availed of Targeted Long Term Refinancing Operation III (“TLTRO III”) funding from the ECB, through the Central Bank and which was
repaid in full in December 2022. See note 4 for further details in relation to the Group’s participation in the TLTRO programme.
These facilities, together with other assets and liabilities with Irish Government entity counterparties, are set out below.
– Irish bank levy
The bank levy was calculated based on each financial institution’s Deposit Interest Retention Tax (‘DIRT’) payment in a base year with 2019 being
the base year for 2023. The annual levy paid by the Group for 2023 and reflected in operating expenses (note 11) in the income statement
amounted to € 37 million (2022: € 37 million). The basis of calculation will change in 2024.
– Other transactions with the Irish Government and entities under its control
In addition to the above matters, the Group also enters into other normal banking transactions with the Irish Government, its agencies and entities
under its control. This includes transactions with (i) Government related entities, (ii) local government and commercial semi-state bodies and (iii)
financial institutions under Irish Government control/significant influence. Other transactions include the payment of taxes, pay related social
insurance, local authority rates, and the payment of regulatory fees, as appropriate.
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AIB Group plc
Notes to the Consolidated Financial Statements continued
47 Related party transactions continued
(f) Summary of relationship with the Irish Government continued
(i) Irish Government and related entities
The following table outlines the amounts outstanding at 31 December 2023 and 2022 with Irish Government and related entities which are
considered individually significant (excluding accrued interest). Related entities includes departments of the Irish Government located in the State
and embassies, consulates and other institutions of the Irish Government located outside the State. The Post Office Savings Bank (‘POSB’) and
the National Treasury Management Agency (‘NTMA’) are also included.
Assets
Cash and balances at central banks(1)
Trading portfolio financial assets
Investment securities(2)
Liabilities
Trading portfolio financial liabilities
Customer accounts
2023
2022
Balance
Balance
€ m
€ m
33,282
54
4,356
32,573
—
4,860
134
466
—
340
(1) Cash and balances at central banks represent the placements which the Group holds with the Central Bank.
(2) Investment securities at 31 December 2023 comprise € 4,356 million (2022: € 4,860 million) in Irish Government securities held in the normal course of business.
The Group has disclosed details of the share buyback and the Irish bank levy separately in these financial statements. All other banking transactions
are entered into in the normal course of business.
(ii) Local government(1) and Commercial semi-state bodies(2)
During 2023 and 2022, the Group entered into banking transactions in the normal course of business with local government bodies and semi-
state bodies. These transactions include the granting of loans and the acceptance of deposits, as well as derivative and clearing transactions.
(1) This category includes local authorities, borough corporations, county borough councils, county councils, boards of town commissioners, urban district councils, non-commercial public sector
entities, public voluntary hospitals and schools.
(2) Semi-state bodies is the name given to organisations within the public sector operating with some autonomy. They include commercial organisations or companies in which the State is the sole or
main shareholder.
(iii) Financial institutions under Irish Government control/significant influence
The Irish Government no longer has significant influence over Bank of Ireland and therefore this financial institution is no longer considered a
related party for purposes of this disclosure in 2023. Bank of Ireland was a related party in the comparative period.
The Irish Government has a controlling interest in Permanent tsb plc and controls the Irish Bank Resolution Corporation Limited (In Special
Liquidation). Due to the Group’s related party relationship with the Irish Government, balances between these financial institutions and the Group
are considered related party transactions in accordance with IAS 24. Transactions with these institutions are normal banking transactions entered
into in the ordinary course of cash management business under normal business terms. The transactions constitute the short-term placing and
acceptance of deposits, derivative transactions, investment debt securities and repurchase agreements.
The following balances were outstanding in total to these financial institutions at 31 December 2023 and 2022:
Assets
Loans and advances to banks
Investment securities
2023
€ m
—
—
2022
€ m
1
35
(g) Indemnities
The Group has indemnified the Directors of Allied Irish Banks Pensions Limited and AIB DC Pensions (Ireland) Limited, the trustees of the Group’s
Ireland defined benefit pension scheme and defined contribution pension scheme, respectively, against any actions, claims or demands arising out
of their actions as Directors of the trustee companies, other than by reason of wilful default.
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AIB Group plc
48 Employees
The following table shows the geographical analysis of average employees for 2023 and 2022:
Average number of staff (Full time equivalents)
Ireland
United Kingdom
United States of America
Total
The following table shows the segmental analysis of average employees for 2023 and 2022:
Retail Banking
Capital Markets
AIB UK
Group(1)
Total
2023
2022
9,485
8,517
681
34
672
32
10,200
9,221
2023
4,516
1,143
614
3,927
10,200
2022
4,194
1,016
605
3,406
9,221
(1) Group comprises wholesale treasury activities and Group control and support functions. Treasury manages the Group’s liquidity and funding positions and provides customer treasury services
and economic research. The Group control and support functions in the period included Technology, Operations, Finance, Risk, Legal, Corporate Governance & Customer Care, Human
Resources, Sustainability and Corporate Affairs, Enterprise Development and Group Internal Audit.
The average number of employees for 2023 and 2022 set out above excludes employees on career breaks and other unpaid long-term leaves.
Actual full time equivalent numbers at 31 December 2023 were 10,551 (2022: 9,590).
49 Regulatory compliance
The Group’s policy is that the Group and its regulated subsidiaries must comply at all times with their externally imposed capital ratios.
50 Financial and other information
Operating ratios
Operating expenses/operating income
Other income/operating income
Rates of exchange
€/$*
Closing
Average
€/£*
Closing
Average
*Throughout this report, US dollar is denoted by $ and Pound sterling is denoted by £.
Currency Information
Euro
Other
Total
2023
%
45.4
18.7
2022
%
70.8
28.1
2023
2022
1.1050
1.0811
1.0666
1.0531
0.8691
0.8698
0.8869
0.8527
Assets
Liabilities and equity
2023
€ m
2022
€ m
2023
€ m
2022
€ m
116,450 108,236
116,560 109,514
19,899 21,516
19,789 20,238
136,349 129,752
136,349 129,752
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AIB Group plc
Notes to the Consolidated Financial Statements continued
51 Dividends
A final dividend for the year ended 31 December 2022 of 6.2 cent per ordinary share, amounting to € 166 million, was approved at the Annual
General Meeting on 4 May 2023 and subsequently paid on 12 May 2023. Final dividends are not accounted for until they have been approved at the
Annual General Meeting of shareholders.
52 Non-adjusting events after the reporting period
No significant non-adjusting events have taken place since 31 December 2023.
53 Approval of financial Statements
The financial statements were approved by the Board of Directors on 5 March 2024.
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AIB Group plc
AIB Group plc Company
Statement of Financial Position
as at 31 December 2023
Assets
Loans and advances to banks – subsidiary
Investment in subsidiary undertaking
Prepayments and accrued income
Total assets
Liabilities
Debt securities in issue
Subordinated liabilities and other capital instruments
Accruals and deferred income
Total liabilities
Equity
Share capital
Merger reserve
Reserves
Total shareholders’ equity
Other equity interests
Total equity
Total liabilities and equity
Notes
2023
€ m
2022
€ m
d
e
f
g
h
i
j
9,993
8,022
13,758
13,385
164
98
23,915
21,505
8,486
1,500
158
10,144
1,637
6,234
4,775
6,520
1,500
90
8,110
1,671
5,646
4,953
12,646
12,270
1,125
13,771
23,915
1,125
13,395
21,505
The Company recorded a profit after taxation of € 822 million for the year ended 31 December 2023 (2022: profit € 3,491 million).
Jim Pettigrew
Chair
Colin Hunt
Chief Executive Officer
Donal Galvin
Chief Financial Officer
Conor Gouldson
Group Company Secretary
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Annual Financial Report 2023 316
AIB Group plc
AIB Group plc Company
Statement of Changes in Equity
for the financial year ended 31 December 2023
At 1 January 2023
Total comprehensive income for the year
Profit after tax
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Dividends paid on ordinary shares (note 51 to the consolidated
financial statements)
Distributions paid to other equity interests (note 37 to the
consolidated financial statements)
Buyback of ordinary shares
Transfer between merger and revenue reserves (note i)
Total contributions by and distribution to owners
At 31 December 2023
1,637
1,125
6,234
At 1 January 2022
Total comprehensive income for the year
Profit after tax
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Dividends paid on ordinary shares (note 51 to the consolidated
financial statements)
Distributions paid to other equity interests (note 37 to the
consolidated financial statements)
Buyback of ordinary shares
Transfer between merger and revenue reserves (note i)
Total contributions by and distributions to owners
At 31 December 2022
—
—
—
—
—
(25)
—
(25)
1,671
Attributable to equity holders of the parent
Share
capital
€ m
1,671
Other
equity
interests
€ m
1,125
Merger
reserve
Revenue
reserves
Capital
redemption
reserves
€ m
5,646
€ m
4,928
—
—
—
—
—
(34)
—
(34)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
588
588
822
—
822
(166)
(65)
(215)
(588)
(1,034)
4,716
2023
Total
€ m
13,395
822
—
822
(166)
(65)
(215)
—
(446)
13,771
2022
€ m
25
—
—
—
—
—
34
—
34
59
Share
capital
Other equity
interests
Merger
reserve
Revenue
reserves
€ m
1,696
€ m
1,125
€ m
2,364
Attributable to equity holders of the parent
Capital
redemption
reserves
Total
€ m
—
10,182
—
—
—
3,491
—
3,491
€ m
4,997
3,491
—
3,491
—
—
—
—
—
—
—
—
—
—
—
1,125
—
—
—
3,282
3,282
5,646
(122)
—
(122)
(65)
(91)
(3,282)
(3,560)
4,928
—
25
—
25
25
(65)
(91)
—
(278)
13,395
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AIB Group plc
AIB Group plc Company
Statement of Cash Flows
for the financial year ended 31 December 2023
Cash flows from operating activities
Profit before taxation for the year
Adjustments for:
– Non-cash and other items
Dividend income
Distributions from Additional Tier 1 Securities issued by subsidiary
Interest on subordinated liabilities and other capital instruments
Interest on debt securities (1)
Change in prepayments and accrued income
Change in accruals and deferred income
Reversal of impairment of subsidiary undertaking (note e)
Other income
– Change in operating assets
Change in loans and advances to banks – subsidiary
Net cash outflow from operating activities
Cash flows from investing activities
Dividends received from subsidiary
Buyback of ordinary shares by subsidiary
Distributions received from Additional Tier 1 Securities issued by subsidiary
Net cash inflow from investing activities
Cash flows from financing activities
Proceeds on issue of debt securities(1) (note f)
Maturity of debt securities
Dividends paid on ordinary shares
Buyback of ordinary shares
Repurchase of debt securities(1)
Distributions paid to other equity interests
Interest paid on debt securities(1)
Interest paid on subordinated liabilities and other capital instruments
Net cash inflow from financing activities
Change in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
(1) Relates to debt securities classified at origination as MREL.
2023
€ m
2022
€ m
822
3,491
(166)
(142)
(67)
38
274
(68)
—
(67)
38
146
(44)
(17)
(588)
(3,282)
—
(3)
(577)
(3,371)
(2,050)
(1,805)
(2,385)
(2,265)
166
215
67
448
2,431
(382)
(166)
(215)
—
(65)
(204)
(38)
1,361
4
3
7
142
91
67
300
3,231
—
(122)
(91)
(844)
(65)
(108)
(38)
1,963
(2)
5
3
Net cash outflow from operating activities includes interest received of € 253 million (2022: € 151 million) and interest paid of Nil (2022: Nil).
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AIB Group plc
Notes to AIB Group plc Company
Financial Statements
Background
AIB Group plc is a company domiciled in Ireland with its registered office address at 10 Molesworth Street, Dublin 2, Ireland. AIB Group plc is
registered under the Companies Act 2014 as a public limited company under the company number 594283 and is the holding company of the
Group.
a Accounting policies
Where applicable, the accounting policies adopted by AlB Group plc (‘the parent company’ or ‘the Company’) are the same as those of the Group as
set out in note 1 to the consolidated financial statements.
The parent company financial statements and related notes have been prepared in accordance with International Financial Reporting Standards
(collectively 'IFRSs') as adopted by the EU and applicable for the financial year ended 31 December 2023. They also comply with those parts of the
Companies Act 2014 and with the European Union (Credit Institutions: Financial Statements) Regulations 2015 applicable to companies reporting
under lFRS.
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies
and reported amounts of certain assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. The estimates and
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Since
management judgement involves making estimates concerning the likelihood of future events, the actual results could differ from those estimates.
A description of the critical accounting estimate that applies to the Company is set out in note 2 to the consolidated financial statements.
Parent Company Income statement
In accordance with Section 304(2) of the Companies Act 2014, the parent company is availing of the exemption to omit the income statement,
statement of comprehensive income and related notes from its financial statements; from presenting them to the Annual General Meeting and from
filing them with the Registrar of Companies.
b Operating expenses
Amounts payable to subsidiary under Master Service Agreement
Total operating expenses
2023
€ m
9
9
2022
€ m
8
8
c Auditor's remuneration
The disclosure of auditor’s remuneration is in accordance with Section 322 of the Companies Act 2014. This mandates disclosure of remuneration
paid/payable to the Group Auditor only, for services relating to the audit of the Group and relevant subsidiary financial statements.
PricewaterhouseCoopers was appointed as the Group auditor for 2023. Deloitte Ireland LLP was the Group auditor for 2022. € 5,000 was paid to the
Group Auditor for services relating to the audit of the financial statements of AIB Group plc during the year to 31 December 2023 (2022: Nil). No fees
were paid/payable to overseas auditors (2022: Nil).
d Loans and advances to banks
At amortised cost
Funds placed with subsidiary, Allied Irish Banks, p.l.c.
ECL allowance
Total loans and advances to banks
2023
€ m
9,996
(3)
9,993
2022
€ m
8,025
(3)
8,022
Funds placed with subsidiary, Allied Irish Banks, p.l.c.
During 2023, AIB Group plc as the lender entered into loan agreements as described below with Allied Irish Banks, p.l.c. as the borrower, whereby
the obligations were unsecured and subordinated.
•
In January 2023, AIB Group plc lent € 750 million to Allied Irish Banks, p.l.c. repayable on 23 July 2029 with an optional redemption date of 23
July 2028 at a fixed interest rate of 4.750% up to the maturity date.
In September 2023, AIB Group plc lent $ 1 billion to Allied Irish Banks, p.l.c. repayable on 13 September 2029 with an optional redemption date of
13 September 2028 at a fixed interest rate of 6.733% up to the maturity date.
In October 2023, AIB Group plc lent € 750 million to Allied Irish Banks, p.l.c. repayable on 23 October 2031 with an optional redemption date of 23
October 2030 at a fixed interest rate of 5.375% up to the maturity date.
•
•
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AIB Group plc
e Investment in subsidiary undertaking
At 1 January
Additions – Additional Tier 1 Securities
Reversal of impairment of equity shares
Buyback of equity shares
At 31 December
2023
€ m
2022
€ m
13,385
10,194
—
588
(215)
—
3,282
(91)
13,758
13,385
AIB Group plc (‘the Company’) holds the entire ordinary share capital of Allied Irish Banks, p.l.c. (‘the subsidiary’) which it acquired in 2017
(2,714,381,237 ordinary shares of nominal value € 0.625 each) and which had a book value at acquisition of € 12,940 million and has a carrying
value at 31 December 2023 of € 12,633 million (2022: € 12,260 million). Separately, the Company invested € 1,125 million in Additional Tier 1
Securities (AT1) issued by Allied Irish Banks, p.l.c. These investments follow the Company’s own issuance of AT1 securities as detailed in note j.
Allied Irish Banks, p.l.c. is a financial services company incorporated and registered in Ireland with a registered office at 10 Molesworth Street,
Dublin 2. It is the parent company of a number of subsidiaries, both credit institutions and others, all of which are 100% owned apart from
Augmentum Limited in which there are non-controlling interests. It operates predominantly in Ireland, providing a comprehensive range of services
to retail customers, as well as business and corporate customers. Allied Irish Banks, p.l.c. and its subsidiaries offer a full suite of products for retail
customers, including mortgages, personal loans, credit cards, current accounts, insurance, pensions, financial planning, investments, savings and
deposits. Its products for business and corporate customers include finance and loans, business current accounts, deposits, foreign exchange and
interest rate risk management products, trade finance products, invoice discounting, leasing, credit cards, merchant services, payments and
corporate finance.
Allied Irish Banks, p.l.c. together with its principal subsidiaries in Ireland, AIB Mortgage Bank Unlimited Company and EBS d.a.c. are regulated by
the Central Bank of Ireland/Single Supervisory Mechanism. Its principal subsidiary outside the Republic of Ireland, AIB Group (UK) p.l.c., is
regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Impairment of investment in subsidiary
The Company reviews its investment in the subsidiary for impairment at the end of each reporting period if there are indications that impairment may
have occurred.
The testing for possible impairment involves comparing the estimated recoverable amount of an investment with its carrying amount. Where the
recoverable amount is less than the carrying amount, the difference is recognised as an impairment provision in the Company’s financial
statements. The recoverable amount is the higher of fair value less costs to sell and value-in-use ('VIU').
The subsidiary’s fair value is largely that of the Company since the net assets of the subsidiary are, in effect, the same as those of the Company.
Accordingly, AIB Group plc’s market capitalisation is a proxy for the fair value of Allied Irish Banks, p.l.c.
At 31 December 2023, the market capitalisation of AIB Group plc was € 10.2 billion. This was lower than the carrying amount of its investment in the
subsidiary of € 13,170 million. AIB Group plc tested its investment for impairment and reviewed the recoverable amount as determined by a VIU
calculation compared with the carrying amount.
The Company uses a discounted cash flow to equity model to derive a VIU, in line with industry practice. Under this approach, recoverable value is
determined by the present value of future distributable items which takes into consideration the requirement to retain earnings in line with relevant
target capital ratios and risk-weighted assets. Accordingly, the principal inputs to the model are (a) future profitability; (b) risk-weighted asset levels;
(c) the discount rate used; and (d) target capital ratios.
The VIU was determined at € 14,385 million which was higher than the carrying amount (i.e. € 13,170 million) due to the impact of the improvement
in the economic environment on the Group’s three year plan and accordingly, the Company recognised a reversal of an earlier impairment
amounting to € 588 million in 2023 resulting in a carrying value of € 13,758 million. Accordingly, the VIU is higher than the market capitalisation
noted above. Amongst the main reasons for this are that the VIU typically considers a longer time frame and there is also limited free-float of the
Group’s shares. Following the share buyback of € 215 million in April 2023, the carrying value prior to impairment reversal was € 13,170 million.
Basis used to calculate recoverable amount
In determining VIU, the Company used discounted cash flow projections attributable to equity and AT1 holders. These projections were the output
arising from the recent three year Strategic Plan (2024 to 2026) approved by the Board. This output from the Plan will be used by the Company on
an on-going basis during the three year planning cycle. The Strategic Plan involved significant judgements which were subject to review and
validation at a number of levels of governance and is the current best estimate of the expected cash flows over the planning period. For cash flows
beyond the planning period, the Company extrapolated into perpetuity the year 3 expected cash flows as a base, using a long term growth rate to
derive a terminal value. Risk weighted assets are assumed to grow at the same rate as that for long term profit growth.
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AIB Group plc
Notes to AIB Group plc Company Financial Statements continued
e Investment in subsidiary undertaking continued
Basis used to calculate recoverable amount continued
The Company used the following key assumptions in the VIU calculation:
• Long term profit/risk-weighted asset growth rate after 2026 of 2%;
• Discount rate of 12.1%; and
• Common equity Tier 1 trending to 14.5% (Target >14.0%).
Future profitability and growth rates are dependent on several factors, including the economic environment both local and international, and the
impact of regulatory requirements on the banking industry and the continuing developments in the financial services sector. Profitability and growth
were reassessed in the annual planning exercise covering the period 2024 to 2026 undertaken by the Group in the second half of 2023. The
discount rate to be used in future periods may increase/decrease due to changes to the risk free rate or to the risk premium. Changes to these
inputs may increase or decrease the impairment loss allowance/reversal in future periods.
The following sensitivities of the carrying value of the investment in the subsidiary to key input variables reflect the impact of the variables
individually and not any interrelationships. It is possible that more than one favourable and/or unfavourable change will occur at the same time:
•
•
•
If the long term profit/risk-weighted asset growth was assumed to be 100 bps higher (or lower), the carrying value at December 2023 would not
increase (or decrease).
If the discount rate was assumed to be 100 bps lower the carrying value at December 2023 would not increase, however, if the discount rate was
assumed to be 100 bps higher it would decrease the carrying value by € 636 million.
If year 3 expected cash flows that are used as a base to derive the terminal value were increased/decreased by € 100 million, the carrying value
would not increase or decrease.
31 December 2022
At 31 December 2022 the market capitalisation of AIB Group plc was € 9.7 billion. The Company recognised an impairment reversal amounting to
€ 3,282 million, as the VIU calculation for the impairment of equity shares at 31 December 2022 amounted to € 12,260 million, which was higher
than the carrying value of € 8,978 million. The VIU calculation was based on the output of the three year Strategic Plan (2023 – 2025), long term
profit/risk-weighted asset growth rate after 2025 of 2%, discount rate of 12.5% and Common equity Tier 1 trending to 14.0% (Target > 13.5%).
If the long term profit/risk-weighted asset growth was assumed to be 100 bps higher (or lower) on a standalone basis, the carrying value at
December 2022 would increase by € 433 million or decrease by (€ 345 million). If the discount rate was assumed to be 100 bps higher (or lower) on
a standalone basis, the carrying value at December 2022 would decrease by € 1,069 million or increase by € 588 million. In addition, if year 3
expected cash flows that are used as a base to derive the terminal value were increased/decreased by € 100 million, the carrying value would
increase by c. € 375 million / decrease by c. € 491 million.
f Debt securities in issue
Euro Medium Term Note Programme
Global Medium Term Note Programme
Total debt securities in issue
Analysis of movements in debt securities in issue
At 1 January
Issued during the year
Repurchased
Matured
Exchange translation adjustments
At 31 December
2023
€ m
6,000
2,486
8,486
2023
€ m
6,520
2,431
—
(382)
(83)
8,486
2022
€ m
4,753
1,767
6,520
2022
€ m
4,044
3,231
(847)
—
92
6,520
For details of debt securities issued by the Company during 2023, refer to note 31 to the consolidated financial statements.
The instruments issued by AIB Group plc were issued for the purpose of meeting Group MREL requirements.
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Annual Financial Report 2023 321
AIB Group plc
g Subordinated liabilities and other capital instruments
Dated loan capital – European Medium Term Note Programme:
€ 500 million Subordinated Tier 2 Notes due 2029, Callable 2024
€ 1 billion Subordinated Tier 2 Notes due 2031, Callable 2026
Total subordinated liabilities and other capital instruments
2023
€ m
500
1,000
1,500
2022
€ m
500
1,000
1,500
The dated loan capital above issued under the European Medium Term Note Programme, is subordinated in right of payment to the ordinary
creditors, including depositors, of the Group.
For details of subordinated liabilities and other capital instruments issued by the Company during 2023, refer to note 35 to the consolidated financial
statements.
h Share capital
The ordinary share capital of AIB Group plc is detailed in note 36 to the consolidated financial statements.
i Merger reserve
At 1 January
Transfer from revenue reserves
At 31 December
2023
€ m
5,646
588
6,234
2022
€ m
2,364
3,282
5,646
Under the Scheme of Arrangement ('the Scheme') approved by the Irish High Court on 6 December 2017 which became effective on 8 December
2017, a new company, AIB Group plc (‘the Company’), was introduced as the holding company of AIB Group. The share capital of Allied Irish Banks,
p.l.c., other than a single share owned by AIB Group plc, was cancelled and an equal number of new shares were issued by the Company to the
shareholders of Allied Irish Banks, p.l.c. The difference between the carrying value of the net assets of Allied Irish Banks, p.l.c. entity on acquisition
by the Company and the nominal value of the shares issued on implementation of the Scheme was accounted for as a merger reserve.
In the Company’s financial statements, impairment losses which arise from the Company’s investment in Allied Irish Banks, p.l.c. will be charged to
profit or loss and subsequently transferred to the merger reserve in so far as a credit balance remains in the merger reserve.
In 2023, the Company recognised an impairment reversal amounting to € 588 million (2022: € 3,282 million) which resulted in a transfer from
revenue reserves leaving a balance of € 6,234 million (2022: € 5,646 million) in merger reserves.
j Other equity interests
Issued by AIB Group plc
2023
€ m
2022
€ m
€ 500 million Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities issued 2019
500
500
€ 625 million Additional Tier 1 Perpetual Contingent Temporary Write-Down Securities issued 2020
Total other equity interests
625
1,125
625
1,125
Additional Tier 1 Perpetual Contingent Temporary Write-down Securities
For further details in relation to AT1s issued by the Company, see note 37 to the consolidated financial statements.
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Annual Financial Report 2023 322
AIB Group plc
Notes to AIB Group plc Company Financial Statements continued
k Related party transactions
Related parties of AIB Group plc include subsidiary undertakings including their associated undertakings, joint venture, post-employment benefit
schemes, Key Management Personnel and connected parties. The Irish Government is also considered a related party by virtue of its significant
influence over AIB Group plc.
Under a Master Service Agreement, Allied Irish Banks, p.l.c. provides various services which include accounting, taxation and administrative
services to AIB Group plc (note b).
Amounts included in AIB Group plc company’s income statement in relation to transactions with its immediate subsidiary, Allied Irish Banks, p.l.c. are
as follows:
Interest income
Operating expenses
Ordinary dividend
Distributions received from Additional Tier 1 Securities
Notes
b
2023
€ m
323
9
166
67
2022
€ m
192
8
142
67
Amounts included in AIB Group plc company’s statement of financial position in relation to balances with its immediate subsidiary, Allied Irish Banks,
p.l.c. are as follows:
Investment in subsidiary undertaking
Loans and advances to banks
Prepayments and accrued income
Notes
e
d
2023
€ m
2022
€ m
13,758
13,385
9,993
164
8,022
98
l Credit risk information
The following table sets out the maximum exposure to credit risk for financial assets all of which are carried at amortised cost(1) at 31 December
2023 and 2022:
Maximum exposure to credit risk
Loans and advances to banks
Included elsewhere:
Accrued interest
Total
(1) All amortised cost items are loans and advances which are in a ‘held to collect’ business model.
2023
Total
€ m
2022
Total
€ m
9,993
8,022
164
98
10,157
8,120
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Annual Financial Report 2023 323
AIB Group plc
m Liquidity and funding risk
Financial assets and financial liabilities by contractual residual maturity
The following table analyses financial assets and financial liabilities by contractual residual maturity at 31 December 2023 and 2022:
On demand
<3 months
but not on
demand
3 months
to 1 year
1–5 years
Over
5 years
2023
Total
€ m
€ m
€ m
Financial assets
Loans and advances to banks(1)
Other financial assets
Financial liabilities
Debt securities in issue(2)
Subordinated liabilities and other capital instruments
Other financial liabilities
€ m
7
—
7
—
—
158
158
€ m
—
164
164
—
—
—
—
€ m
750
—
750
750
—
—
750
4,584
—
4,584
4,584
—
—
4,584
4,655
—
4,655
3,155
1,500
—
4,655
9,996
164
10,160
8,489
1,500
158
10,147
2022
Total
On demand <3 months but
not on
demand
3 months
to 1 year
1–5 years
Over
5 years
Financial assets
Loans and advances to banks(1)
Other financial assets
Financial liabilities
Debt securities in issue(2)
Subordinated liabilities and other capital instruments
Other financial liabilities
(1) Shown gross of expected credit losses.
(2) Shown gross of transaction costs.
€ m
3
—
3
—
—
90
90
€ m
253
98
351
253
—
—
253
€ m
128
—
128
128
—
—
128
€ m
€ m
€ m
4,391
—
4,391
3,250
—
3,250
8,025
98
8,123
4,391
1,750
6,522
—
—
4,391
1,500
—
3,250
1,500
90
8,112
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Annual Financial Report 2023 324
AIB Group plc
General
information
EU Taxonomy Disclosure Tables
Shareholder Information
Forward Looking Statement
Glossary of Terms
Principal Addresses
Index
325
329
330
331
337
338
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AIB Group plc
EU Taxonomy Disclosure Tables
1. Assets for calculation of GAR (Revenue & CapEx)
Key
Of which use of proceeds
Of which transitional
Of which enabling
Assets for the calculation of GAR (revenue) (€m)
Assets for the calculation of GAR (capex) (€m)
Disclosure reference
date 31/12/23
Disclosure reference
date 31/12/23
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Of which towards
taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards
taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards
taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards
taxonomy relevant sectors
(Taxonomy-eligible)
Of which
environmentally
sustainable
(Taxonomy-aligned)
Of which
environmentally
sustainable
(Taxonomy-aligned)
Of which
environmentally
sustainable
(Taxonomy-aligned)
Of which
environmentally
sustainable
(Taxonomy-aligned)
Total
[gross]
carrying
amount
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,822
5,487
5,487
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
166
166
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,760
33,947
5,487
5,487
5,487
5,487
–
711
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
GAR – Covered assets in both numerator
and denominator
Loans and advances, debt securities and
equity instruments not HfT eligible
for GAR calculation
58,943
36,822
5,487
5,487
1
2
3
4
5
6
7
8
9
Financial undertakings
Credit institutions
Loans and advances
Debt securities, including UoP
Equity instruments
Other financial corporations
of which investment firms
Loans and advances
10 Debt securities, including UoP
11 Equity instruments
12
13
of which management companies
Loans and advances
14 Debt securities, including UoP
15 Equity instruments
16
17
of which insurance undertakings
Loans and advances
18 Debt securities, including UoP
19 Equity instruments
20 Non-financial undertakings [Subject to
NFRD]
21
Loans and advances
22 Debt securities, including UoP
23 Equity instruments
24 Households
25
26
27
of which loans collateralised by residential
immovable property
of which building renovation loans
of which motor vehicle loans
28 Local governments financing
29 Housing financing
30 Other local government financing
31 Collateral obtained by taking
possession: residential and commercial
immovable properties
32 Assets excluded from the numerator for
GAR calculation (covered in the
denominator)
33 Financial and Non-financial undertakings:
(NFCs less NFRD)
34 SMEs and NFCs (other than SMEs) not
subject to NFRD disclosure obligations
35
36
37
Loans and advances
of which loans collateralised by commercial
immovable property
of which building renovation loans
38 Debt securities
39 Equity instruments
40 Non-EU country counterparties not subject
41
to NFRD disclosure obligations
Loans and advances
42 Debt securities
43 Equity instruments
44 Derivatives
45 On demand interbank loans
46 Cash and cash-related assets
47 Other categories of assets (e.g. Goodwill,
commodities etc.)
48 Total GAR assets
49 Assets not covered for GAR calculation
50 Central governments and Supranational
issuers
51 Central banks exposure
52 Trading book
53 Total assets
17,990
12,623
5,937
6,686
–
5,367
215
189
26
–
15
15
–
–
30
30
–
–
900
900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62
62
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,028
36,760
33,992
33,947
5,487
5,487
5,487
5,487
–
711
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
711
22
–
22
2
33,466
25,811
16,540
15,956
5,620
–
569
15
9,271
9,072
198
–
1,920
328
598
4,809
45,451
7,199
37,701
550
137,860
36,822
5,487
5,487
92,409
36,822
5,487
5,487
–
–
–
–
–
–
36,822
5,487
5,487
–
–
–
–
–
–
Off-balance sheet exposures – Undertakings subject to NFRD disclosure obligations
54 Financial guarantees
55 Assets under management
56 Of which debt securities
57 Of which equity instruments
858
6,969
2,029
2,950
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,822
5,487
5,487
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes:
•
As at 31 December 2023 no taxonomy eligible or aligned exposure has been identified for the other four environmental objectives (water and marine resources, circular economy, pollution, biodiversity and ecosystems), and as such
columns for these environmental objectives have not been included in the template.
• Due to rounding, numbers presented in this template may not add up precisely to the totals provided.
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Annual Financial Report 2023 326
AIB Group plc
EU Taxonomy Disclosure Tables continued
2. GAR sector information (€m)
Breakdown by sector – NACE 4 digits level
(code and label)
1
2
3
4
5
6
7
8
9
A1.6.2 – Support activities for animal production
C17.1.2 – Manufacture of paper and paperboard
C21.1.0 – Manufacture of basic pharmaceutical products
C26.1.1 – Manufacture of electronic components
C28.2.9 – Manufacture of other general-purpose machinery
C32.9.9 – Other manufacturing
F41.1.0 – Development of building projects
F42.1.1 – Construction of roads and motorways
F42.9.9 – Construction of other civil engineering projects
10 G47.7.3 – Dispensing chemist in specialised stores
11 H51.1.0 – Passenger air transport
12 H52.2.9 – Other transportation support activities
13
14
15
I55.1.0 – Hotels and similar accommodation
J61.9.0 – Other telecommunications activities
J62.0.1 – Computer programming activities
16 Q86.1.0 – Hospital activities
17 Q86.9.0 – Other human health activities
18 R92.0.0 – Gambling and betting activities
19 S94.9.9 – Activities of other membership organisations
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Non-Financial
corporates
(Subject to
NFRD)
[Gross] carrying
amount
SMEs and other
NFC not subject
to NFRD
[Gross] carrying
amount
Non-Financial
corporates
(Subject to
NFRD)
[Gross] carrying
amount
SMEs and other
NFC not subject
to NFRD
[Gross] carrying
amount
63
–
111
45
27
118
9
–
–
1
38
1
202
50
10
–
17
175
33
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes:
•
This template covers sector information for non-financial corporates subject to NFRD under both the Revenue and CapEx alignment approaches.
3. GAR KPI Stock (Revenue & CapEx)
Key
GAR KPI stock (revenue) (%)
GAR KPI stock (capex) (%)
Disclosure reference
date 31/12/23
Disclosure reference
date 31/12/23
Of which use of proceeds
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Of which transitional
Of which enabling
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
% (compared to total covered assets
in the denominator)
GAR – Covered assets in both
numerator and denominator
1
2
3
4
5
6
7
8
9
Loans and advances,
debt securities and equity
instruments not HfT eligible
for GAR calculation
Financial undertakings
Credit institutions
Loans and advances
Debt securities, including UoP
Equity instruments
Other financial corporations
of which investment firms
Loans and advances
10 Debt securities, including UoP
11 Equity instruments
12
13
of which management companies
Loans and advances
14 Debt securities, including UoP
15 Equity instruments
16
17
of which insurance undertakings
Loans and advances
18 Debt securities, including UoP
19 Equity instruments
20 Non-financial undertakings
21
Loans and advances
22 Debt securities, including UoP
23 Equity instruments
24 Households
25
26
27
of which loans collateralised by
residential immovable property
of which building renovation loans
of which motor vehicle loans
28 Local governments financing
29 Housing financing
30 Other local government financing
31 Collateral obtained by taking
possession: residential and
commercial immovable
properties
32 Total GAR assets
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
63 %
9 %
9 %
— %
— %
— %
— %
— %
— %
43 %
63 %
9 %
9 %
— %
— %
— %
— %
— %
— %
43 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
7 %
7 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
92 % 14 % 14 %
100 % 16 % 16 %
— %
100 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
13 %
9 %
4 %
5 %
0 %
4 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
1 %
1 %
0 %
0 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
18 %
18 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
29 %
25 %
92 % 14 % 14 %
100 % 16 % 16 %
— %
— %
— %
— %
0 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
0 %
0 %
0 %
— %
100 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
13 %
9 %
4 %
5 %
0 %
4 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
0 %
1 %
1 %
0 %
0 %
29 %
25 %
— %
— %
— %
— %
0 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
0 %
0 %
0 %
— %
— %
— %
40 %
6 %
6 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
0 %
67 %
— %
— %
— %
40 %
6 %
6 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
0 %
67 %
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AIB Group plc
4. GAR KPI Flow (Revenue & CapEx)
Key
Of which use of proceeds
Of which transitional
Of which enabling
% (compared to flow of total
eligible assets)
GAR – Covered assets in both
numerator and denominator
1
2
3
4
5
6
7
8
9
Loans and advances,
debt securities and equity
instruments not HfT eligible
for GAR calculation
Financial undertakings
Credit institutions
Loans and advances
Debt securities, including UoP
Equity instruments
Other financial corporations
of which investment firms
Loans and advances
10 Debt securities, including UoP
11 Equity instruments
12
13
of which management companies
Loans and advances
14 Debt securities, including UoP
15 Equity instruments
16
17
of which insurance undertakings
Loans and advances
18 Debt securities, including UoP
19 Equity instruments
20 Non-financial undertakings
21
Loans and advances
22 Debt securities, including UoP
23 Equity instruments
24 Households
25
26
27
of which loans collateralised by
residential immovable property
of which building renovation loans
of which motor vehicle loans
28 Local governments financing
29 Housing financing
30 Other local government financing
31 Collateral obtained by taking
possession: residential and
commercial immovable
properties
32 Total GAR assets
GAR KPI flow (revenue) (%)
GAR KPI flow (capex) (%)
Disclosure reference
date 31/12/23
Disclosure reference
date 31/12/23
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion of
total covered assets
funding taxonomy
relevant sectors
(Taxonomy-aligned)
Proportion
of total
assets
covered
34 %
3 %
3 %
— %
— %
— %
— %
— %
— %
55 %
35 %
3 %
3 %
— %
— %
— %
— %
— %
— %
55 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
3 %
3 %
— %
— %
86 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
8 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
8 %
100 % 11 % 11 %
— %
100 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
31 %
29 %
29 %
— %
— %
2 %
1 %
1 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
2 %
2 %
— %
— %
22 %
16 %
— %
2 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
13 %
13 %
— %
— %
86 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
8 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
8 %
100 % 11 % 11 %
— %
100 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
31 %
29 %
29 %
— %
— %
2 %
1 %
1 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
2 %
2 %
— %
— %
22 %
16 %
— %
2 %
— %
— %
— %
— %
— %
— %
19 %
2 %
2 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
100 %
— %
— %
— %
19 %
2 %
2 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
100 %
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AIB Group plc
EU Taxonomy Disclosure Tables continued
5. KPI off-balance sheet exposures (stock) (%)
Key
Of which use of proceeds
Of which transitional
Of which enabling
% (compared to total eligible off-balance sheet assets)
Climate Change Mitigation
(CCM)
Climate Change Adaptation
(CCA)
Proportion of total covered assets
funding taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
aligned)
1
2
Financial guarantees (FinGuar KPI)
Assets under management (AuM KPI)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes:
•
As at 31 December 2023 no taxonomy eligible or aligned exposure has been identified within financial guarantees or assets under management, as such the flow template for off-balance sheet exposures has not been disclosed.
Template 1 Nuclear and fossil gas related activities
Row
Nuclear energy related activities
1
2
3
4
5
6
The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear
processes with minimal waste from the fuel cycle.
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of
district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies.
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or
industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.
Fossil gas related activities
The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels.
NO
NO
NO
YES
YES
YES
Notes:
•
•
AIB does not lend to nuclear energy related activities in accordance with the Group exclusion policy and as such there is no exposure to activities outlined under sections 4.26, 4.27 and 4.28 of Annexes I and II to Delegated Regulation
2021/2139.
As at 31 December 2023 no lending to activities outlined under sections 4.29, 4.30 and 4.31 of Annexes I and II to Delegated Regulation 2021/2139 is contained within the Taxonomy eligible or Taxonomy aligned assets as such
templates 2-5 have not been disclosed.
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AIB Group plc
Shareholder Information
Financial calendar
Annual General Meeting: 2 May 2024, at
10 Molesworth Street, Dublin 2.
Interim results
The unaudited Half-Yearly Financial Report
2024 will be announced on 2 August 2024
and will be available on the Company’s
website – www.aib.ie.
Stock Exchange Listings
AIB Group plc is an Irish registered company.
Its ordinary shares are traded on the primary
listing segment of the official list of Euronext
Dublin and the premium listing segment of the
Official List of the London Stock Exchange.
Registrar & Shareholder Enquiries
The Company’s Registrar for shareholder
enquiries is:
Computershare Investor Services (Ireland)
Ltd., 3100 Lake Dr, Citywest Business
Campus, Dublin 24, D24 AK82
Telephone: +353-1-247 5411.
Facsimile: +353-1-216 3151
Website: www.computershare.com or
www.investorcentre.com/ie/contactus
Major shareholdings
The issued share capital of the AIB Group plc
is 2,618,753,655 ordinary shares of € 0.625
each.
As of 29 February 2024, the Minister for
Finance of Ireland holds 1,067,638,190
ordinary shares representing 40.77% of the
total voting rights attached to issued share
capital.
Internet-based Shareholder Services
Ordinary Shareholders with access to the
internet may:
•
register for electronic communications on
the following link, www.computershare.com/
register/ie;
• view any outstanding payments, change
your address and view your shareholding
by signing into Investor Centre on
www.computershare.com/ie/InvestorCentre.
You will need your unique user ID
and password which you created
during registration, or register at
www.computershare.com/ie/investor/register
to become an Investor Centre member. To
register you will be required to enter the
name of the company in which you hold
shares, your Shareholder Reference
Number (“SRN”), your family or company
name and security code (provided on
screen); and
• download standard forms required to initiate
changes in details held by the Registrar
on the Investor Centre accessed above or
via the Investor Relations section of AIB’s
website at www.aib.ie/investorrelations,
clicking on the Shareholder Information and
Personal Shareholder Information option,
and following the on-screen instructions.
Shareholders may also use AIB’s website
to access the Company’s Annual
Financial Report.
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AIB Group plc
Forward Looking Statement
This document contains certain forward looking
statements with respect to the financial
condition, results of operations and business of
AIB Group and certain of the plans and
objectives of the Group. These forward looking
statements can be identified by the fact that
they do not relate only to historical or current
facts. Forward looking statements sometimes
use words such as ‘aim’, ‘anticipate’, ‘target’,
‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’,
‘believe’, ‘may’, ‘could’, ‘will’, ‘seek’, ‘continue’,
‘should’, ‘assume’, or other words of similar
meaning. Examples of forward looking
statements include, among others, statements
regarding the Group’s future financial position,
capital structure, Government shareholding
in the Group, income growth, loan losses,
business strategy, projected costs, capital
ratios, estimates of capital expenditures, and
plans and objectives for future operations.
Because such statements are inherently
subject to risks and uncertainties, actual
results may differ materially from those
expressed or implied by such forward looking
information. By their nature, forward looking
statements involve risk and uncertainty
because they relate to events and depend
on circumstances that will occur in the future.
There are a number of factors that could cause
actual results and developments to differ
materially from those expressed or implied by
these forward looking statements. These are
set out in the Principal risks on pages 27 to 30
in the 2023 Annual Financial Report. In
addition to matters relating to the Group’s
business, future performance will be impacted
by the Group's ability along with governments
and other stakeholders to measure, manage
and mitigate the impacts of climate change
effectively, the impact of higher inflation on
customer sentiment and by Irish, UK and wider
European and global economic and financial
market considerations. Future performance will
further be impacted by the direct and indirect
consequences of the Russia-Ukraine War on
European and global macroeconomic
conditions. Any forward looking statements
made by or on behalf of the Group speak only
as of the date they are made.The Group
cautions that the list of important factors on
pages 27 to 30 of the 2023 Annual Financial
Report is not exhaustive. Investors and others
should carefully consider the foregoing factors
and other uncertainties and events when
making an investment decision based on any
forward looking statement.
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AIB Group plc
Glossary of Terms
Additional Tier 1
Capital
Additional Tier 1 Capital (“AT1”) are securities issued by AIB and included in its capital base as fully CRD IV
compliant additional tier 1 capital on a fully loaded basis.
Arrears
Arrears relates to interest or principal on a loan which was due for payment, but where payment has not been received.
Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an
outstanding loan is unpaid or overdue.
Bank Recovery and
Resolution Directive
The Bank Recovery and Resolution Directive (“BRRD”) is a European legislative package issued by the European
Commission and adopted by EU Member States. The BRRD introduces a common EU framework for how
authorities should intervene to address banks which are failing or are likely to fail. The framework includes early
intervention and measures designed to prevent failure and in the event of bank failure for authorities to ensure an
orderly resolution.
Banking book
Basel III
Basel IV
Basis point
Basis risk
A regulatory classification to support the regulatory capital treatment that applies to all exposures which are not in
the trading book. Banking book positions tend to be structural in nature and, typically, arise as a consequence of the
size and composition of a bank’s balance sheet. Examples include the need to manage the interest rate risk on fixed
rate mortgages or rate insensitive current account balances. The banking book portfolio will also include all
transactions/positions which are accounted for on an interest accruals basis or, in the case of financial instruments,
on a hold to collect and sell basis.
Basel III is a global, voluntary regulatory framework on bank capital adequacy, stress testing and market liquidity
risk.
Basel IV represents the next generation of risk-weighted assets regulations, addressing critical aspects of banking
stability and risk management in the post-crisis era.
One hundredth of a per cent (0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or
yields on securities.
A type of market risk that refers to the possibility that the change in the price of an instrument (e.g. asset, liability,
derivative) may not match the change in price of the associated hedge, resulting in losses arising in the Group’s
portfolio of financial instruments.
Buy-to-let mortgage
A residential mortgage loan approved for the purpose of purchasing a residential investment property.
Capital Requirements
Directive
Capital Requirements Directive (“CRD”): Capital adequacy legislation implemented by the European Union and
adopted by Member States designed to ensure the financial soundness of credit institutions and certain investment
firms and give effect in the EU to the Basel II proposals which came into force on 20 July 2006.
Capital Requirements
Directive IV
Capital Requirements Directive IV (“CRD IV”), which came into force on 1 January 2014, comprises a Capital
Requirements Directive and a Capital Requirements Regulation which implements the Basel III capital proposals
together with transitional arrangements for some of its requirements. The Regulation contains the detailed prudential
requirements for credit institutions and investment firms. Requirements Regulation (No. 575/2013) (“CRR”) and the
Capital Requirements Directive (2013/36/EU).
Collateralised bond
obligation/
collateralised debt
obligation
A collateralised bond obligation (“CBO”)/collateralised debt obligation (“CDO”) is an investment vehicle (generally
an SPE) which allows third party investors to make debt and/or equity investments in a vehicle containing a portfolio
of loans and bonds with certain common features. In the case of synthetic CBOs/CDOs, the risk is backed by credit
derivatives instead of the sale of assets (cash CBOs/CDOs).
Commercial paper
Commercial paper is similar to a deposit and is a relatively low-risk, short term, unsecured promissory note traded
on money markets and issued by companies or other entities to finance their short-term expenses. In the USA,
commercial paper matures within 270 days maximum, while in Europe, it may have a maturity period of up to 365
days; although maturity is commonly 30 days in the USA and 90 days in Europe.
Commercial property
Commercial property lending focuses primarily on the following property segments:
a) Apartment complexes;
b) Office projects;
c) Retail projects;
d) Hotels; and
e) Selective mixed-use projects and special purpose properties.
Common equity tier 1
capital (“CET 1”)
The highest quality form of regulatory capital under Basel III that comprises ordinary shares issued and related
share premium, retained earnings and other reserves excluding cash flow hedging reserves, and deducting
specified regulatory adjustments.
Common equity tier 1
ratio
Common equity tier 1 ratio – A measurement of a bank’s common equity tier 1 capital expressed as a percentage
of its total risk weighted assets.
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AIB Group plc
Glossary of Terms continued
Concentration risk
Concentration risk is the risk of loss from lack of diversification, investing too heavily in one industry, one geographic
area or one type of security.
Contractual maturity
The period when a scheduled payment is due and payable in accordance with the terms of a financial instrument.
Contractual residual
maturity
The time remaining until the expiration or repayment of a financial instrument in accordance with its
contractual terms.
Credit default swaps
An agreement between two parties whereby one party pays the other a fixed coupon over a specified term. The
other party makes no payment unless a specified credit event, such as a default, occurs, at which time a payment is
made and the swap terminates. Credit default swaps are typically used by the purchaser to provide credit protection
in the event of default by a counterparty.
Credit derivatives
Credit impaired
Financial instruments where credit risk connected with loans, bonds or other risk weighted assets or market risk
positions is transferred to counterparties providing credit protection. The credit risk might be inherent in a financial
asset such as a loan or might be a generic credit risk such as the bankruptcy risk of an entity.
Under IFRS 9, these include Stage 3 financial assets where there is objective evidence of impairment and,
therefore, considered to be in default. A lifetime ECL is recognised for such assets. Also credit impaired are POCI
financial assets which are credit-impaired on initial recognition.
Credit rating
An evaluation of the creditworthiness of an entity seeking to enter into a credit agreement.
Credit risk
The risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge
an obligation.
Credit risk mitigation
Techniques used by lenders to reduce the credit risk associated with an exposure by the application of credit risk
mitigants. Examples include: collateral; guarantee; and credit protection.
Credit spread
Credit spread can be defined as the difference in yield between a given security and a comparable benchmark
government security, or the difference in value of two securities with comparable maturity and yield but different
credit qualities. It gives an indication of the issuer’s or borrower’s credit quality.
Credit support annex
Credit support annex (“CSA”) provides credit protection by setting out the rules governing the mutual posting of
collateral. CSAs are used in documenting collateral arrangements between two parties that trade over-the-counter
derivative securities. The trade is documented under a standard contract called a master agreement, developed by
the International Swaps and Derivatives Association (“ISDA”). The two parties must sign the ISDA master agreement
and execute a credit support annex before they trade derivatives with each other.
Credit valuation
adjustment
Credit valuation adjustment (“CVA”) is an adjustment to the valuation of OTC derivative contracts to reflect the
creditworthiness of derivative counterparties.
Criticised
Accounts of lower quality and considered as less than satisfactory are referred to as criticised and include criticised
watch and criticised recovery below:
Customer accounts
A liability of the Group where the counterparty to the financial contract is typically a personal customer, a corporation
(other than a financial institution) or the government. This caption includes various types of deposits and credit
current accounts, all of which are unsecured.
Debt restructuring
This is the process whereby customers in arrears, facing cash flow or financial distress, renegotiate the terms of
their loan agreements in order to improve the likelihood of repayment. Restructuring may involve altering the terms
of a loan agreement including a partial write down of the balance. In certain circumstances, the loan balance may be
swapped for an equity stake in the counterparty.
Debt securities
Assets on the Group’s balance sheet representing certificates of indebtedness of credit institutions, public bodies
and other undertakings.
Debt securities in issue
Liabilities of the Group which are represented by transferable certificates of indebtedness of the Group to the bearer
of the certificates.
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AIB Group plc
Default
When a customer breaches a term and/or condition of a loan agreement, a loan is deemed to be in default for case
management purposes. Depending on the materiality of the default, if left unmanaged it can lead to loan impairment.
Default is also used in a CRD IV context when a loan is greater than 90 days past due and/or the borrower is
unlikely to pay his credit obligations. This may require additional capital to be set aside.
Derecognition
The removal of a previously recognised financial asset or financial liability from the Group’s statement of
financial position.
ECB refinancing rate
The main refinancing rate or minimum bid rate is the interest rate which banks have to pay when they borrow from
the ECB under its main refinancing operations.
ECLs
Eurozone
Expected credit loss (“ECLs”) – The weighted average of credit losses (of a loan, lease or other financial asset)
based on changes in the expected credit loss either over a 12-month period or its lifetime.
The eurozone consists of the following nineteen European Union countries that have adopted the euro as their
common currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.
Exposure at default
The expected or actual amount of exposure to the borrower at the time of default.
Exposure value
Forbearance
For on balance sheet exposures, it is the amount outstanding less provisions and collateral held taking into account
relevant netting agreements. For off-balance sheet exposures, including commitments and guarantees, it is the
amount outstanding less provisions and collateral held taking into account relevant netting agreements and credit
conversion factors.
Forbearance is the term used when repayment terms of a loan contract have been renegotiated in order to make
these terms more manageable for borrowers. Standard forbearance techniques have the common characteristic
of rescheduling principal or interest repayments, rather than reducing them. Standard forbearance techniques
employed by the Group include: – interest only; a reduction in the payment amount; a temporary deferral of payment
(a moratorium); extending the term of the mortgage; and capitalising arrears amounts and related interest.
Funding value
adjustment
Funding value adjustment (“FVA”) is an adjustment to the valuation of OTC derivative contracts due to a bank’s
funding rate exceeding the risk-free rate.
GDP
Guarantee
Home loan
Gross Domestic Product (''GDP'') is a monetary measure of the value of all final goods and services produced in
a period of time (quarterly or yearly). GDP estimates are commonly used to determine the economic performance
and standard of living of a whole country or region, and to make international comparisons.
An undertaking by the Group/other party to pay a creditor should a debtor fail to do so.
A loan secured by a mortgage on the primary residence or second home of a borrower.
Interest rate risk in the
banking book (IRRBB)
The current or prospective risk to both the earnings and capital of the Group as a result of adverse movements in
interest rates that affect the banking book positions.
Internal Capital
Adequacy Assessment
Process
Internal liquidity
adequacy assessment
process
Internal Capital Adequacy Assessment Process (“ICAAP”): The Group’s own assessment, through an examination
of its risk profile from regulatory and economic capital perspectives, of the levels of capital that it needs to hold.
The Internal Liquidity Adequacy Assessment Processes (“ILAAP”) is a key element of the risk management
framework for credit institutions. ILAAP is defined in the EBA’s SREP Guidelines as “the processes for the
identification, measurement, management and monitoring of liquidity implemented by the institution pursuant to
Article 86 of Directive 2013/36/EU”. It thus contains all the qualitative and quantitative information necessary to
underpin the risk appetite, including the description of the systems, processes and methodology to measure and
manage liquidity and funding risks.
Internal Ratings Based
Approach
The Internal Ratings Based Approach (“IRBA”) allows banks, subject to regulatory approval, to use their own
estimates of certain risk components to derive regulatory capital requirements for credit risk across different asset
classes. The relevant risk components are: Probability of Default (“PD”); Loss Given Default (“LGD”); and Exposure
at Default (“EAD”).
ISDA Master
Agreements
Standardised contracts, developed by the International Swaps and Derivatives Association (“ISDA”), used as an
umbrella under which bilateral derivatives contracts are entered into.
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AIB Group plc
Glossary of Terms continued
Leverage ratio
To prevent an excessive build-up of leverage on institutions’ balance sheets, Basel III introduces a non-risk-based
leverage ratio to supplement the risk-based capital framework of Basel II. It is defined as the ratio of tier 1 capital to
total exposures. Total exposures include on-balance sheet items, off-balance sheet items and derivatives, and
should generally follow the accounting measure of exposure.
Liquidity Coverage
Ratio
Liquidity Coverage Ratio (“LCR”): The ratio of the stock of high quality liquid assets to expected net cash outflows
over the next 30 days under a stress scenario. CRD IV requires that this ratio exceeds 100% on 1 January 2018.
Liquidity risk
The risk that Group does not have sufficient financial resources to meet its obligations as they fall due, or will have
to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows.
Loan to deposit ratio
This is the ratio of loans and advances expressed as a percentage of customer accounts, as presented in the
statement of financial position.
Loan to value
Loans past due
Loan to value (“LTV”) is an arithmetic calculation that expresses the amount of the loan as a percentage of the value
of security/collateral. A high LTV indicates that there is less of a cushion to protect the lender against collateral price
decreases or increases in the loan carrying amount if repayments are not made and interest is capitalised onto the
outstanding loan balance.
When a borrower fails to make a contractually due payment, a loan is deemed to be past due. ‘Past due days’
is a term used to describe the cumulative number of days that a missed payment is overdue. Past due days
commence from the close of business on the day on which a payment is due but not received. In the case of
overdrafts, past due days are counted once a borrower:
• has breached an advised limit;
• has been advised of a limit lower than the then current amount outstanding; or
• has drawn credit without authorisation.
When a borrower is past due, the entire exposure is reported as past due, rather than the amount of any excess
or arrears.
Loss Given Default
Loss Given Default (“LGD”) is the expected or actual loss in the event of default, expressed as a percentage of
‘exposure at default’.
Medium term notes
Medium term notes (“MTNs”) are notes issued by the Group across a range of maturities under the European
Medium Term Notes (“EMTN”) and the Global Medium Term Notes (“GMTN”) programmes.
Minimum requirements
for own funds and
eligible liabilities
(MREL)
National Asset
Management Agency
A European Union wide requirement under the Bank Recovery and Resolution Directive for all European banks and
investment banks to hold a minimum level of equity and/or loss absorbing eligible liabilities to ensure the operation
of the bail-in tool to absorb losses and recapitalise an institution in resolution.
National Asset Management Agency (“NAMA”) was established in 2009 as one of a number of initiatives taken by
the Irish Government to address the serious problems which arose in Ireland’s banking sector as the result of
excessive property lending.
Net interest income
The amount of interest received or receivable on assets net of interest paid or payable on liabilities.
Net interest margin
Net interest margin (“NIM”) is a measure of the difference between the interest income generated on average
interest earning financial assets (lendings) and the amount of interest paid on average interest bearing financial
liabilities (borrowings) relative to the amount of interest-earning assets.
Net Stable Funding
Ratio
Net Stable Funding Ratio (“NSFR”): The ratio of available stable funding to required stable funding over a 1 year
time horizon.
New transaction
lendings
Non-performing
exposures
New transaction lending is defined as incremental increase in drawn balances against facilities granted for a specific
period of time whereby the borrower can draw down or repay amounts as required to manage cash flow. It includes
revolving credit facilities, overdrafts and invoice discounting facilities.
Non-performing exposures are defined by the European Banking Authority to include material exposures which are
more than 90 days past due (regardless of whether they are credit impaired) and/or exposures in respect of which
the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the
existence of any past due amount or the number of days the exposure is past due.
Off-balance sheet items Off-balance sheet items include undrawn commitments to lend, guarantees, letters of credit, acceptances and other
items as listed in Annex I of the CRR.
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AIB Group plc
Offsetting
Offsetting, or ‘netting’, is the presentation of the net amounts of financial assets and financial liabilities in the
statement of financial position as a result of Group’s rights of set-off.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or
from external events. It includes legal risk, but excludes strategic and business risk. In essence, operational risk is
a broad canvas of individual risk types which include product and change risk, outsourcing, information security,
cyber, business continuity, health and safety risks, people risk and legal risk.
Private equity
investments
Equity securities in operating companies not quoted on a public exchange, often involving the investment of capital
in private companies.
Probability of Default
Probability of Default (“PD”) is the likelihood that a borrower will default on an obligation to repay.
Regulatory capital
Regulatory capital is determined in accordance with rules established by the SSM/ECB for the consolidated Group
and by local regulators for individual Group companies.
Re-pricing risk
Re-pricing risk is a form of interest rate risk (i.e. a type of market risk) that occurs when asset and liability positions
are mismatched in terms of re-pricing (as opposed to final contractual) maturity. Where these interest rate gaps are
left unhedged, it can result in losses arising in the Group’s portfolio of financial instruments.
Repurchase agreement Repurchase agreement (“Repo”) is a short-term funding agreement that allows a borrower to create a collateralised
loan by selling a financial asset to a lender. As part of the agreement, the borrower commits to repurchase the
security at a date in the future repaying the proceeds of the loan. For the counterparty to the transaction, it is termed
a reverse repurchase agreement or a reverse repo.
Residential mortgage-
backed securities
Residential mortgage-backed securities (“RMBS”) are debt obligations that represent claims to the cash flows from
pools of mortgage loans, most commonly on residential property.
Risk weighted assets
Risk weighted assets (“RWAs”) are a measure of assets (including off-balance sheet items converted into asset
equivalents e.g.credit lines) which are weighted in accordance with prescribed rules and formulas as defined in the
Basel Accord to reflect the risks inherent in those assets.
Securities financing
transactions
Securities financing transactions allow investors and firms to use assets, such as the shares or bonds they own,
to secure funding for their activities.
Securitisation
Securitisation is the process of aggregation and repackaging of non-tradable financial instruments such as loans and
advances, or company cash flows into securities that can be issued and traded in the capital markets.
Single Resolution Fund The Single Resolution Fund (SRF) is an emergency fund that can be called upon in times of crisis.
Single Supervisory
Mechanism
The Single Supervisory Mechanism (“SSM”) is a system of financial supervision comprising the European Central
Bank (“ECB”) and the national competent authorities of participating EU countries. The main aims of the SSM are to
ensure the safety and soundness of the European banking system and to increase financial integration and stability
in Europe.
Special purpose entity
Special purpose entity (“SPE”) is a legal entity which can be a limited company or a limited partnership created to
fulfil narrow or specific objectives. A company will transfer assets to the SPE for management or use by the SPE to
finance a large project thereby achieving a narrow set of goals without putting the entire firm at risk. This term is
used interchangeably with SPV (special purpose vehicle).
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AIB Group plc
Glossary of Terms continued
Stage allocation:
Under IFRS 9, loans and advances to customers, other than POCIs are classified into one of three stages:
Stage 1
Stage 2
Stage 3
POCI
Includes newly originated loans and loans that have not had a significant increase in credit risk since
initial recognition.
Includes loans that have had a significant increase in credit risk since initial recognition but do not have objective
evidence of being credit impaired.
Includes loans that are defaulted or are otherwise considered to be credit impaired.
POCIs are assets originated credit impaired and that have a discount to the contractual value when measured at fair
value.
Stress testing
Stress testing is a technique used to evaluate the potential effects on an institution’s financial condition of an
exceptional but plausible event and/or movement in a set of financial variables.
Structured securities
This involves non-standard lending arrangements through the structuring of assets or debt issues in accordance
with customer and/or market requirements. The requirements may be concerned with funding, liquidity, risk transfer
or other needs that cannot be met by an existing off the shelf product or instrument. To meet this requirement,
existing products and techniques must be engineered into a tailor-made product or process.
Subordinated liabilities
Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors
and other creditors of the issuer.
Syndicated and
international lending
Syndicated and international lending involves lending to entities by leveraging off their equity structures having
considered the cash generating capacity of the business and its capacity to repay any associated debt. Leveraging
structures are typically used in management and private equity buy-outs, mergers and acquisitions. Syndicated
and international lending is extended typically to non-investment grade borrowers and carries commensurate rates
of return.
Tier 1 capital
Tier 2 capital
A measure of a bank’s financial strength defined by the Basel Accord. It captures common equity tier 1 capital and
other instruments in issue that meet the criteria for inclusion as additional tier 1 capital. These are subject to certain
regulatory deductions.
Broadly includes qualifying subordinated debt and other tier 2 securities in issue. It is subject to adjustments relating
to the excess of expected loss on the IRBA portfolios over the accounting expected credit losses on the IRBA
portfolios, securitisation positions and material holdings in financial companies.
Tracker mortgage
A mortgage with a variable interest rate which tracks the European Central Bank (“ECB”) rate, at an agreed margin
above the ECB rate and will increase or decrease within five days of an ECB rate movement.
Trade date and
settlement date
accounting
Value at Risk
1. Trade date accounting records the transaction on the date on which an agreement has been entered (the trade
date), instead of on the date the transaction has been finalised (the settlement date).
2. Under the settlement date accounting approach, the asset is recognised on the date on which it is received by
the Group, on disposal, the asset is not derecognised until the asset is delivered to the buyer.
The Group’s core risk measurement methodology is based on an historical simulation application of the industry
standard Value at Risk (“VaR”) technique. The methodology incorporates the portfolio diversification effect within
each standard risk factor (interest rate, credit spread, foreign exchange, equity, as applicable). The resulting VaR
figures, calculated at the close of business each day, are an estimate of the probable maximum loss in fair value
over a one day holding period that would arise from an adverse movement in market rates. This VaR metric is
derived from an observation of historical prices over a period of one year and assessed at a 95% statistical
confidence level (i.e. the VaR metric may be exceeded at least 5% of the time).
Wholesale funding
Wholesale funding refers to funds raised from wholesale market sources. Examples of wholesale funding include
senior unsecured bonds, covered bonds, securitisations, repurchase transactions, interbank deposits and deposits
raised from non-bank financial institutions.
Yield curve risk
A type of market risk that refers to the possibility that an interest rate yield curve changes its shape unexpectedly
(e.g. flattening, steepening, non-parallel shift), resulting in losses arising in the Group’s portfolio of interest
rate instruments.
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AIB Group plc
Principal Addresses
AIB Group plc
10 Molesworth Street,
Dublin 2 D02 R126.
Telephone: + 353 1 660 0311
Allied Irish Banks, p.l.c.
10 Molesworth Street,
Dublin 2 D02 R126.
Telephone: + 353 1 660 0311
AIB Mortgage Bank Unlimited Company
10 Molesworth Street,
Dublin 2 D02 R126.
Telephone: +353 1 660 0311
EBS d.a.c.
10 Molesworth Street,
Dublin 2 D02 R126.
Telephone: + 353 1 665 9000
AIB Group (UK) p.l.c.
92 Ann Street,
Belfast BT1 3HH.
Telephone: + 44 345 600 5925
AIB (NI)
92 Ann Street,
Belfast BT1 3HH.
Telephone: + 44 345 600 5925
Allied Irish Bank (GB)
St Helen’s, 1 Undershaft,
London EC3A 8AB.
Telephone: + 44 207 647 3300
All numbers are listed with international codes. To dial a location from within the same jurisdiction, drop the country code after the + sign and place a
0 before the area code.
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AIB Group plc
Index
A
Accounting policies
Annual General Meeting
Approval of financial statements
Associated undertakings
Auditor’s remuneration
Average balance sheets and interest rates
B
Board Audit Committee
Board Committees
Board and Executive Officers
Business model risk
C
Capital adequacy risk
Capital
Capital reserves
Capital redemption reserves
Chairman’s statement
Chief Executive’s review
Commitments
Company secretary
Conduct risk and culture risk
Contingent liabilities and commitments
Capital contributions
Corporate Governance report
Credit impairment – income statement
Credit ratings
Credit risk
Critical accounting judgements and estimates
Currency information
Customer accounts
D
Debt securities in issue
Deferred taxation
Deposits by central banks and banks
Derivative financial instruments
Directors
Directors’ interests
Directors’ remuneration
Dividends
Page
E
217
329
314
305
245
35
85
77
76
189
192
49
284
284
8
10
288
77
190
288
284
66
245
Earnings per share
ECL
ECL allowance on financial assets
Employees
Exchange rates
Equity risk
F
Fair value of financial instruments
Finance leases and hire purchase contracts
Financial and other information
Financial assets and financial liabilities by contractual
residual maturity
Financial calendar
Financial liabilities by undiscounted contractual maturity
Financial statements
Forbearance
G
Gain on financial assets
Glossary
Going concern
Governance and oversight
I
Income statement
Independent auditor’s report
127 and 174
Intangible assets
Interest and similar income
Interest and similar expense
Interest rate risk in the banking book
Interest rate sensitivity
Internal Audit
Investment securities
Investments in Group undertakings
Irish Government
Investments accounted for using the equity method
126
235
313
275
276
268
275
248
70
115
106
314
Page
282
130
261
313
313
188
296
260
313
181
329
182
210
175
243
331
219
66
210
200
264
242
242
184
186
88
262
290
311
263
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L
Liquidity risk
Loans and advances to banks
Loans and advances to customers
Lease liabilities
Liquidity and funding risk
M
Market risk
Model risk
N
Net fee and commission income
Net trading income
Nomination and Corporate Governance Committee
Non-adjusting events after the reporting period
Notes to the financial statements
O
Off-balance sheet arrangements and transferred
financial assets
Offsetting financial assets and financial liabilities
Operating and financial review
Operational risk
Other equity interests
Other liabilities
Other operating income
P
Pension risk
Principal addresses
Property, plant and equipment
Prospective accounting changes
Provisions for liabilities and commitments
Page
R
177
259
260
277
177
184
193
243
243
93
314
216
291
284
34
189
283
277
244
187
337
265
234
278
Regulatory capital and capital ratios
Regulatory compliance
Regulatory compliance risk
Related party transactions
Report of the Directors
Retirement benefits
Risk appetite
Risk framework
Risk governance structure
Risk identification and assessment process
Risk management
Risk management and internal controls
S
Schedule to the Directors’ report
Segmental information
Securities financing
Share capital
Statement of cash flows
Statement of comprehensive income
Statement of changes in equity
Statement of Directors’ Responsibilities
Statement of financial position
Stock exchange listings
Subordinated liabilities and other capital instruments
Subsidiaries and structured entities
Supervision and regulation
Sustainable Business Advisory Committee
T
Taxation
Technology & Data Advisory Committee
Trading portfolio financial assets
Trading portfolio financial liabilities
Transferred financial assets
V
Viability statement
W
Website
Page
49
313
191
305
114
270
26
26
122
123
122
111
117
238
261
281
304
211
213
199
212
329
280
290
120
110
246
109
247
247
291
113
329