Best bank: Allied Irish Banks
The awards period marked a triumphant return to performance for Allied Irish Banks (AIB), Ireland’s best bank. Putting behind it its involvement in the years-long industry-wide tracker mortgage scandal in Ireland, for which it was fined €100 million in 2022, the bank posted a very strong recovery in 2023, with record profits that nearly tripled versus the previous year. Revenues rose 62%, driven by net interest income that was up more than 80%.
The bank is in the best shape it has been in since the dark days when it was bailed out by the Irish government during the global financial crisis; and 2023 marked the significant step of returning to majority private ownership, with the government stake falling below 50%. At the time of writing it has fallen further still, to around 33%.
The year saw the bank report a remarkable return on tangible equity (RoTE) of 25.7%, well above its targets. Chief executive Colin Hunt has announced a new three-year strategic cycle for the firm that is focused on greater efficiency as well as improving the sustainability credentials of the bank’s lending book.
The bank claims a 33% share of the mortgage market after what it said were lower switching levels compared with 2022. AIB’s growing customer base helped to drive personal lending up 23%, to €1.2 billion. These volumes were made more manageable by the fact that nearly 90% of loan applications are now done online, using AIB’s well-regarded digital platforms.
The new strategic cycle includes an upgraded RoTE target of 15%, a common equity tier-1 (CET1) capital ratio of at least 14%, expenses of below €2 billion and a cost-to-income ratio of less than 50%. Expenses were €2.14 billion in 2023 – the bank increased headcount by 10% over the period to 10,551. But the cost-to-income ratio was already below 50%. The CET1 ratio was 15.8%.
The credit quality of the bank’s loan book has continued to improve, with stage three loans falling to 2.9% of total loans, compared with 3.3% at the end of 2022. The bank was in a strong enough position to acquire a portfolio of commercial loans and tracker mortgages from Ulster Bank, as that bank withdrew from Ireland. Its commercial real estate exposure is mostly low loan-to-value and it has no exposure to the US.
Best investment bank: Citi
Continued prowess in the aircraft leasing sector – a critical industry in Irish investment banking – has helped to drive Citi to its sixth successive triumph as Ireland’s best investment bank. That it excels here should be no surprise: its leading European aviation leasing business is based in Ireland and Louise O’Mara, head of aviation banking and corporate banking in Ireland, is a 20-year veteran of the firm.
But Citi’s credentials spanned plenty of other areas, illustrated by its dominant position in lending as well as a good showing in debt capital markets.
Irish equity capital markets activity soared relative to recent years, even trumping the bumper pandemic year of 2020. But the jump was almost wholly down to three big accelerated bookbuilds of shares in the New York-listed aviation leasing company, AerCap, as General Electric sold down about $4.7 billion. Inevitably, Citi was one of many bookrunners on all three deals, but it was in a small group of those taking the lion’s share of the distribution.
And while that was the extent of Citi’s ECM credentials in Ireland, it did not mark the limit of its work for AerCap, with the bank shepherding this important client through a number of different processes over the year. These included being a coordinator on the refinancing of its senior unsecured $4 billion revolving credit facility, acting as administrative agent on a new senior unsecured term loan, arranging the refinancing of a revolver for AerCap subsidiary FodiatorFunding, and being joint active bookrunner on an exchange offer for $1.5 billion of senior notes.
In M&A, Citi worked on the biggest deal to close in the period, advising Saudi Arabia’s Aircraft Leasing on its $3.6 billion acquisition of Pembroke, Standard Chartered’s aviation leasing business. It was also an adviser to Bank of Ireland on that institution’s acquisition of a $600 million-equivalent portfolio of performing assets from Belgium’s KBC.
Citi is also mandated on a deal that will be the biggest for some time in Ireland, the $20 billion agreed acquisition by Smurfit Kappa of WestRock, an Irish packaging company, which is expected to close in 2024 and where Citi is one of two lead advisers to Smurfit Kappa. The bank was also the sole bookrunner on the $1.5 billion bridge loan backing the deal.
That was just one highlight of the bank’s leading lending business in the country, where it was on seven of the 10 biggest deals, including the AerCap revolvers and also the $6.5 billion-equivalent three-tranche leveraged loan for Flutter Entertainment. A smaller, but in some ways more notable mandate, was the sole coordinating role the bank played on Ryanair’s debut revolver, which was converting an existing term loan.
In bond issuance, which remained much quieter than the 2019 to 2021 period, the bank featured on deals including a €2 billion triple-tranche for building materials group CRH, the second-biggest deal of the year, and a green bond for Bank of Ireland.
Best bank for ESG: Bank of Ireland
Bank of Ireland increased its green finance activity in 2023, achieving notable emissions reductions and supporting national environmental programmes.
The bank’s sustainability-related financing grew by 35% to €11.1 billion. Green mortgages represented a large share of this and accounted for about half of new mortgage drawdowns. The bank also issued €2.25 billion in bonds through its green bond framework, bringing total green issuance to approximately €4.75 billion.
The bank achieved a 42% reduction in emissions from its operations from a 2020 baseline. It recorded emissions reductions of 6% across the residential mortgage loan book and 11% in the commercial real estate portfolio versus 2020.
In a notable example of its product innovation, the lender launched Enviroflex sustainability-linked loans in 2023, now available to over a third of Irish dairy farmers. These loans offer discounted flexible finance for farmers investing in renewable and solar technologies, and implementing upgrades to their dairy operations.
Additionally, Bank of Ireland served as the sole finance partner of Ireland’s new national Deposit Return Scheme, established to help the country achieve EU recycling targets for the estimated two billion drinks bottles and cans consumed annually. The lender has committed €27.5 million in financing for the development and rollout of the scheme.
The bank was also the first to market with the Strategic Banking Corporation of Ireland’s Growth and Sustainability Loan Scheme, a long-term, low-cost scheme supporting businesses investing in climate action and environmental sustainability.
