AIB signalled on Wednesday it will push through more than €150 million of additional cost cuts in order to meet a key profitability target, even though the Covid-19 has delayed its achievement by a year.
The bank said that it will aim to reduce its annual running expenses to €1.35 billion by 2023, having set out in March to end 2022 with a cost base of €1.5 billion, keeping it in check with last year’s figure. That plan included cutting 1,500 jobs over three years against the backdrop of rising salaries and other running costs.
Chief executive Colin Hunt reaffirmed his main goal of having a return on tangible equity (RoTE) – a key measure of profitability relative to shareholders’ equity – of more than 8 per cent, almost double last year’s level. However, the timeline for reaching this has been pushed out by a year to 2023.
The bank is also sticking to its aim of having a common equity Tier 1 Capital ratio – a measure of the bank’s rainy-day capital reserves – of more than of 14 per cent. It is expected to give more details of how it will achieve its objectives during investor presentations on Wednesday morning.
“Covid-19 has dramatically changed the operating environment, presenting both challenges and opportunities and accelerating the trends of digitalisation, changing ways of working and sustainability,” Mr Hunt said. “In short, it has made significant change both necessary and possible. Accordingly, we are recommitting to our target to deliver a ROTE of greater than 8 per cent.”
The Irish Times reported last month that Mr Hunt is also expected to look at office space in Dublin as part of a refreshed plan, as remote working will remain a feature of the modern workplace after the pandemic. Aside from the group’s new headquarters on Molesworth Street, the bank has taken out significant office space in recent years across locations such as Heuston South Quarter, Central Park in Leopardstown and Hume House in Ballsbridge.