AIB expects to be able to supplement increased dividend payments with share buybacks in the next year, the Irish bank said on Friday.
The bank said it expects to reach a more than 13 per cent return on tangible equity (ROTE) by 2024, up from the 10 per cent forecast for 2023.
In an update of its medium-term targets, Ireland's largest mortgage lender said it expects annual costs to rise to €1.75 billion in 2024, from the €1.65 billion expected this year, with its cost-to-income ratio dropping to about 50 per cent from 60 per cent across that period.
It kept its fully loaded core tier 1 capital ratio target - a key measure of financial strength - at above 13.5 per cent. AIB said it seeks to move towards that target from the 15.4 per cent it stood at the end of September by prudently increasing shareholder returns.
Interest income
AIB said in October that it expects its net interest income to rise by more than 15 per cent this year, the second time it upgraded the forecast to reflect the faster pace of European Central Bank interest rate hikes that Irish banks are particularly geared towards.
It said on Friday that strong revenue momentum, sustainable loan book growth and a growing customer base supporting fees and commissions would drive the higher returns on equity.
AIB is also benefitting from rivals KBC and NatWest's Ulster Bank exiting the Irish market, leaving it, Bank of Ireland and Permanent TSB as the only major on-street banks.
Bank of Ireland said on Friday that it had received final approval to complete its €5 billion deal to buy most of KBC's Irish performing assets and expected the transaction to close by end of the first quarter next year.
AIB had opened 350,000 new accounts by the end of September and chief executive Colin Hunt said the changing banking landscape had also influenced the revised medium-term targets.
"While global economic headwinds exist, the Irish economy continues to deliver economic growth and demonstrate resilience," Hunt said in a statement. - Reuters
