AIB’s CET1 ratio at 13.4% in EBA stress test shows capital resilience

Published 01/08/2025, 18:00
AIB’s CET1 ratio at 13.4% in EBA stress test shows capital resilience

DUBLIN - AIB Group (OTC:AIBRF) plc demonstrated strong capital resilience in the European Banking Authority’s (EBA) 2025 EU-wide stress test, maintaining a 13.4% Common Equity Tier 1 (CET1) ratio under the adverse scenario, according to a statement released Friday.

The bank reported capital depletion of 2.98% in the hypothetical adverse scenario, a significant improvement compared to the 6.32% depletion recorded in the 2023 exercise. The bank attributed this improvement primarily to increased net interest income resulting from the higher interest rate environment.

AIB’s CET1 ratio of 13.4% in the adverse scenario remains well above the bank’s total SREP capital requirements of 5.85%, which consists of Pillar 1 (4.5%) and Pillar 2 requirement (1.35%).

The stress test, conducted by the EBA in cooperation with the Central Bank of Ireland, the European Central Bank, the European Commission, and the European Systemic Risk Board, applied a static balance sheet assumption as of December 2024 and covered a three-year time horizon from 2025 to 2027.

The adverse scenario simulated a hypothetical severe escalation of geopolitical tensions with increasingly inward-looking trade policies globally, leading to increased energy and commodity prices, supply chain disruptions, and adverse effects on private consumption and investment.

AIB’s actual CET1 ratio stood at 15.11% as of December 2024, with a restated ratio of 16.38% following Basel IV implementation on January 1, 2025. The bank reported a CET1 ratio of 16.4% for the first half of 2025, which does not include interim profits pending a final decision on payout at year end.

The EBA stress test does not contain a pass-fail threshold but is designed to help competent authorities assess banks’ ability to meet prudential requirements under stressed scenarios, according to the press release statement.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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