AIB Group Plc — Interim / Quarterly Report 2023

Nov 10, 2023

OUR PURPOSE IS TO BACK OUR CUSTOMERS TO ACHIEVE THEIR DREAMS AND AMBITIONS.

AIB Group operates predominantly in Ireland and the United Kingdom. Our shares are quoted on the Irish and London stock exchanges and we are a member of the FTSE4Good Index. Our three core operating segments are:

RETAIL BANKING

Retail Banking supports our personal and small 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, AIB Merchant Services, Payzone, Nifti and AIB life.

CAPITAL MARKETS

Capital Markets serves AIB's large and medium-sized business customers as well as our private banking customers, providing deep-sector expertise combined with our comprehensive product offering. In 2021, Goodbody became part of Capital Markets.

AIB UK

AIB UK operates in the 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

Whether it is navigating day-to-day life as we adapt to a greener way of living, planning for the future or growing a business, our ambition as a Group is to be at the heart of our customers' financial lives.

INSIDE THIS REPORT

OVERVIEW

• Business Performance
• Chief Executive's Review
• Our Strategic Progress
• Highlights

BUSINESS REVIEW

• Operating and Financial Review
• Capital

RISK MANAGEMENT

• Update on risk management and governance
• Credit risk
• Liquidity and funding risk

FINANCIAL STATEMENTS

• Condensed consolidated interim financial statements (unaudited)
• Notes to the condensed consolidated interim financial statements
• Statement of Directors' Responsibilities
• Independent review report to AIB Group plc
• Forward looking statements

This Half-Yearly Financial Report contains forward looking statements with respect to certain of the Group's plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. See page 125.

BUSINESS PERFORMANCE

H1 2023 RESULTS

FINANCIAL PERFORMANCE

HY 2023
HY 2022

Profit before tax up 84% to €987m Operating profit¹ of €1,205m (operating income up 73% with operating expenses up 15%), an impairment charge of €91m and exceptional items of €130m

HY 2023
HY 2022	€5.4bn

New lending up 2%

Mortgage lending in Ireland in line with prior period, with growth in personal and corporate lending partially offset by lower property lending

RETURN ON TANGIBLE EQUITY³ CET1 RATIO (FULLY LOADED) ABSOLUTE COST BASE⁵

Return on tangible equity (RoTE) benefiting from increased profitability

Interest income up 98%

Benefiting from the impact of a higher interest rate environment and higher average customer loan volumes. Net interest margin (NIM) of 2.94%, up 146 basis points

€5.6bn €61.2bn €2.1bn

Net loans increased 3% to €61.2bn Net loans up €1.6bn driven by the Ulster Bank corporate and commercial portfolio acquisition and strong new lending exceeding redemptions

Strong capital position, well in excess of regulatory requirements

PROFIT BEFORE TAX NET INTEREST INCOME NET CREDIT IMPAIRMENT (CHARGE) / WRITEBACK

Maintaining cautious, forward looking approach

Asset quality remains resilient. H1 impairment charge driven by commercial property to address the potential adverse impacts from higher interest rates and lower valuations

NEW LENDING NET LOANS NON-PERFORMING EXPOSURES²

HY 2023	€5.6bn	30 Jun 2023	€61.2bn 30 Jun	2023 €2.1bn
HY 2022	€5.4bn	31Dec 2022	€59.6bn 31 Dec	2022 €2.2bn

NPE ratio now 3.3% Non-performing exposures (NPEs) decreased by €0.1bn to €2.1bn

Cost income ratio⁵ 41%, prior period 61%. Costs up 15% primarily reflecting inflationary impacts and larger customer base

MEDIUM-TERM FINANCIAL TARGETS (END 2024)

RETURN ON TANGIBLE EQUITY³ CET1 RATIO (FULLY LOADED) ABSOLUTE COST BASE⁵ TARGET TARGET TARGET >13% >13.5% <€1.75bn

Deliver sustainable returns; RoTE >13% in 2024 Appropriate capital target of CET1 >13.5% Costs <€1.75bn in 2024 with cost income ratio

of circa 50%

• 1. Operating profit before impairment losses and exceptional items.
• 1. NPEs refers to non-performing loans (NPLs) and excludes €95m of off-balance sheet commitments.
• 1. Return on Tangible Equity is based on the targeted CET1 capital on a fully loaded basis. For definition and basis of calculation, see pages 27 and 31.

• Excluded the impact of the proposed buyback -0.4%.

• Before exceptional items, bank levies and regulatory fees. For exceptional items, see pages 18 and 27.

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NON-FINANCIAL PERFORMANCE

Our approach continues to evolve in line with ESG reporting frameworks, which may result in variations in methodologies and reported outcomes over time.

Amount of new lending per year for climate action Number of active customers on digital channels

€1.1bn 2.15m

AIB continues to provide strong support to fund renewable energy projects, and energy-efficient commercial and residential buildings

TARGET TARGET €2bn per year >2.25m by 2023

CUSTOMER SATISFACTION INCLUSION & DIVERSITY

Transactional Net Promoter Score¹ Measured after customer transactions for key touch points

31 Dec 2022

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 +4 year to date. We remain committed to further enhancing their experience in H2 2023 and beyond

TARGET TARGET

GREEN FINANCE DIGITALLY ACTIVE CUSTOMERS

H1 2023 increase in digitally active customers driven by mobile enablement

Women as % of management

$$
+43 \hspace{1.5cm} 42\%
$$

+43 30 Jun 2023 HY 2023

+39 HY 2022

Maintained gender balance across Board, Executive Committee and all management. Focus on sustaining a strong pipeline of female leaders, particularly at senior management level

+53 by 2023 Gender Balanced (Ongoing)²

• 1. Transactional Net Promoter Score (NPS) is an aggregation of 20 customer journeys across Homes, Personal, SME, Digital, Retail, Direct and Day-to-Day Banking.
• 1. The Equileap annual Gender Equality Global Report & Ranking equates 'gender balanced' with between 40% and 60% women.

2.15m 2.10m

42% 42%

• AIB Group plc Half-Yearly Financial Report 2023
• 3

CHIEF EXECUTIVE'S REVIEW

AS WE ENTER THE FINAL STAGES OF IMPLEMENTING OUR THREE-YEAR STRATEGY, I AM PROUD OF WHAT THE GROUP AND OUR PEOPLE HAVE BEEN ABLE TO DELIVER

Colin Hunt Chief Executive Officer

DELIVERING FOR OUR STAKEHOLDERS

While global instability and inflationary challenges persist, the Irish economy is resilient and AIB remains a key provider of capital and credit for our growing customer base.

Against an international backdrop of economic and political uncertainty, AIB Group continued to benefit from the resilient performance of the Irish economy and the execution of our own transformation strategy, accelerating our growth trajectory during the first six months of 2023.

Building on our exceptional customer franchise, our multi-channel customer delivery platforms, and continued leadership in key market segments including green lending products and services, the Group delivered a very strong financial and operational performance in the first half of the year.

Amongst the key challenges faced by governments, businesses and households during the period, inflation remains front and centre. Price levels have fallen from last year's highs but structural shifts in the cost of energy, food and other essentials have increased the strain on many budgets. These effects have been compounded by the tightening of monetary policy by the ECB in its efforts to tame the inflationary forces that war in Europe has unleashed.

AIB is acutely aware of the impact on some of our customers of the series of rapid interest rate increases announced by the ECB since last summer. While we have not detected any material impact on loan repayment capacity to date, we remain alert to the risk of this outcome over time. We have already engaged, and remain ready to engage further, with customers who are experiencing financial challenges.

In an environment of rising interest rates, AIB is also focused on delivering product pricing on both sides of the balance sheet in a measured manner.

Notwithstanding these challenges at both a macro and customer-specific level, the Irish economy continues to perform strongly. Solid single-digit growth projections, effective full employment,

buoyant tax returns and continued high savings levels are amongst the key metrics that sustain business and consumer confidence and contribute significantly to AIB's ongoing growth and profitability.

In return, AIB continues to play its part as a key provider of capital and credit for the economy and its growing population. In this context, the Group's robust balance sheet and liquidity ratios serve as a foundation for prudent lending growth and an increasing range of products and services to a customer base that has expanded to over 3.2 million.

As we enter the final stages of implementing our three-year strategy, I am proud of what the Group and our people have been able to deliver given the fundamental changes to the domestic banking landscape. As we move towards the final withdrawal of Ulster Bank and KBC from the Irish market, the Group opened c. 185,000 accounts in H1 2023, of which 60% were opened digitally, this is in addition to the c. 450,000 accounts opened in 2022. Having now completed the acquisition of Ulster Bank's corporate and commercial loans, we welcomed the last of these customers to AIB in recent weeks. And following CCPC approval in January for the acquisition of Ulster Bank's tracker mortgage portfolio,involving c. 42,000 customers and c. €5bn of mortgages, we welcomed c. 80% of these customers in July and expect migration to complete in the second half of this year. We look forward to supporting all of our new customers with their banking needs through the enhanced range of financial services and products which AIB Group now provides.

A key focus of our strategy is to provide our customers with attractive savings, wealth and investment offerings, and we reached two milestones in this area in the last six months. Goodbody, which we acquired in the autumn of 2021, is now fully integrated in the Group and in April, we launched Goodbody-Private, offering

high net worth AIB customers the wealth products and services of Goodbody through a collaboration with AIB Private Banking. Goodbody-Private maximises the delivery of Goodbody's recognised experience and capability through AIB distribution channels.

In June, AIB life, the joint venture between AIB and Great-West Lifeco, was officially launched. The new company is the first full-service, technology-led life company to be designed and built in the Irish market in a generation. It has been built from the ground up, with modern technology that is fully cloud-based, and is now exclusively available to all AIB customers with support from AIB's existing network of 120 Financial Advisors nationwide. Once the customers have been suitably advised, they gain access to the new AIB life hub via the AIB Mobile Banking app.

As I have previously stated, concluding legacy issues is of paramount importance to AIB. 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 ongoing. An independent appeals process has been established and is available to all investors.

Financial Performance

Continuing our momentum from 2022, we have achieved a strong financial performance in the first half of this year, and we are reporting a half-year profit before tax of €987m. This includes an operating profit of €1,205m before impairment charge and exceptional items.

Total operating income of €2,209m was 73% higher than in the first half of 2022. Net interest income of €1,772m increased by €877m or 98% compared to the halfyear to June 2022 reflecting the impact of a higher interest rate environment and growth in customer loan volumes. Net interest margin (NIM) increased by 146 basis points to 2.94% in the half-year to June 2023 compared to 1.48% in the half-year to June 2022.

Other income of €437m increased by €58m compared to the half-year to June 2022 primarily reflecting the forward contract for the acquisition of Ulster Bank's tracker mortgage portfolio and a 7% increase in net fee and commission income partly offset by a reduction in other items.

Total operating expenses of €897m increased by 15% compared to the halfyear to June 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 variable pay. The Group's cost income ratio in the half-year to June 2023 was 41% compared to 61% in the half-year to June 2022.

Overall credit quality remains robust against the backdrop of inflation and higher interest rates. There was a net credit impairment charge of €91m in the half-year to June 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. Our overall approach remains conservative, comprehensive and forward-looking and is reflected in an expected credit loss coverage rate of 2.6%.

Exceptional items of €130m include a charge of €63m related to the aforementioned Belfry investment property funds, reflecting an increased provision for customer redress of €59m and associated costs of €4m. Exceptional items also include inorganic transaction costs.

New lending of €5.6bn in half-year to June 2023 was €0.2bn higher compared to the half-year to June 2022. Irish mortgage lending of €1.7bn was in line with the halfyear to June 2022. Property related lending was down 20% to €1bn reflecting the Group's prudent approach to this sector. Non-property lending of €2.2bn was up 12% driven by higher corporate and renewable energy & infrastructure lending partially offset by subdued SME lending. Personal lending was up 29% to €0.6bn.

Gross loans at €62.8bn were up €1.6bn or 3% primarily driven by the further migration of loans from Ulster Bank and new lending exceeding redemptions.

As at 30 June 2023, 91% 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 >97% of our new lending being of strong or satisfactory credit quality in the first six months of 2023.

Non-performing loans as a percentage of gross loans to customers were 3.3% at 30 June 2023 compared to 3.5% at 31 December 2022. We remain committed to reducing non-performing exposures (NPEs) to c. 3% of gross loans by the end of 2023 given the impact on cost, capital requirements and balance sheet resilience. Legacy, pre-Covid NPEs now stand at 0.3% of gross loans.

AIB's funding and liquidity ratios remain robust. While customer deposits continue to accumulate, our Loan to Deposit Ratio increased to 59% at 30 June 2023 compared to 58% at 31 December 2022.

We continue to have strong liquidity metrics (Liquidity Coverage Ratio 164% and Net Stable Funding Ratio 158%).

Debt securities issued of €6.7bn decreased by €0.5bn from 31 December 2022 primarily due to maturities of €1.3bn partially offset by a further MREL related social bond issuance of €0.75bn.

The Group has a strong capital base with a reported CET1 ratio of 15.7% at 30 June 2023, well in excess of regulatory requirements and our medium-term target of greater than 13.5%.

Digital

Our digital base of c. 2.15 million customers continues to grow, with Mobile proving to be the most popular channel. We now have c. 1.85 million customers active on this channel, accounting for nearly 3 million daily interactions, and we have seen a 12% increase in the average daily usage of Mobile since the start of 2023. Encouragingly, we continue to see increasing levels of digital adoption across all customer segments, with growth in the over-65 age group up a further 18% since the start of 2023.

Digital Wallet payments continue to prove popular with our customers. We have witnessed an impressive 60% increase in the use of this channel along with an 80% increase in the value of transactions, year-on-year. In the same period, the value of eCommerce transactions has increased by 31%.

Today, online applications for our main personal products continue to rise. In the first six months of the year, 88% of personal loans, 62% of overdrafts and 59% of credit cards were applied for online, while a quarter of our mortgage applications were made online.

We once again witnessed a large increase in new current accounts in the first six months of the year and over 60% of those accounts were opened remotely, via our AIB Mobile Banking App. While continuing to transform our credit processes, we enhanced our digital offering to our c.70k business customers. In June, as well as updating our Business Online channel, we launched the AIB Business app, offering prompt, convenient and secure banking for business owners and managers on the move.

As our customers have become more digitally active, so too have fraudsters, targeting our customers on an ongoing basis. We continue to take this very seriously. We are committed to protecting

customers against the threats associated with fraud, making significant investments to enhance our fraud monitoring systems in response to new threats and existing trends. Recognising that this type of fraud typically starts with fake communication, AIB runs an education programme for customers, which is ongoing, and continues to advocate for a cross-sectoral, multi-stakeholder approach.

Sustainable Communities

In the first six months of the year, the Group made great strides in addressing both our own and our financed emissions, while deepening our support for our communities and partnering with credible, research-based organisations. We remain steadfast in realising our Net Zero ambitions.

Having secured a Corporate Power Purchase Agreement with NTR plc in October 2022 to provide up to 80% of the Group's energy needs from renewable sources – along with additional capacity for the national grid – the construction of two solar farms has gained momentum, with the first expected to be ready for energisation in H2 2023. In parallel, we set financed emissions targets for c. 75% of the Group's loan book in 2022 and in April, having received validation for these targets from the Science Based Targets Initiative (SBTi), we became the first bank in the world to secure a Maintenance target for our Electricity Generation portfolio.

While providing direct support to our customers, we are also building relationships with industry and innovative organisations to achieve the common goal of transitioning to a Net Zero society. As such, in June, AIB announced a new partnership with GreenTech HQ, an entrepreneurial hub in Enniscorthy, Co. Wexford focused on developing green solutions, and became the exclusive financial institution partner with the Farm Zero C project, which aims to reduce greenhouse gas emissions and increase the productivity and resilience of dairy farms using a cross-disciplinary approach. More recently, in July, University College Cork announced the appointment of Professor Valeria Andreoni as the AIB Professor in Sustainable Business, a new position in the university that will play a pivotal role in advancing research, education and engagement initiatives that focus on promoting sustainability within the business sector.

While we continued to support our community partners FoodCloud, AsIAm, Junior Achievement Ireland and GOAL, we engaged our customers in 2023 by facilitating their support for charity causes that matter to them. We began the year

responding to the devastating earthquake in Turkey and Syria by enabling our customers to donate directly to GOAL's emergency appeal via the AIB Mobile Banking app. Our customers' donations raised a fantastic €460k in total.

In May, we launched our second annual AIB Community €1 Million Fund, and received c. 16k nominations from our customers, employees and the public for charities across Ireland and the UK. We look forward to naming the 70 successful recipients in September as well as enabling our customers to increase that support directly through our app.

In January, we raised €750m through the issuance of our second social bond, bringing the total amount raised by our ESG bonds to €5bn since 2020. The transaction in January marked the largest orderbook of all AIB's outstanding senior debt, and in June we received the 'Most Impressive Financial Institution ESG Bond Issuer' accolade at the GlobalCapital awards.

Culture and our People

With the domestic labour market operating near full capacity, attracting, developing and retaining the best talent remains a key focus for us.

We have maintained our strong employer brand by enhancing our employee value proposition through career development opportunities, a culture of accountability and inclusivity and the development of a more progressive reward structure. Our employee engagement strategy incorporates new ways of listening that enable us to focus on the issues that matter to our people. In Q2, 82% of colleagues were satisfied with AIB as a place to work, an increase of 6% since Q4 2022.

In the first six months of 2023, we continued to build an inclusive workplace that enables everyone to reach their potential through a bank-wide universal inclusion campaign, progressive people policies, a wide range of Inclusion & Diversity training, and the continued diversification of our talent pipeline through apprenticeship and internship programmes. We empower our people to take ownership of their careers through initiatives such as our 'Invest in You Week', which was held in January this year, showcasing career development opportunities, with over 4,300 colleagues participating in events and seminars.

We remain steadfast in our commitment to truly embed a culture that champions customers' interests underpinned by values and behaviours that support the delivery of high-quality service and fair

customer outcomes. Throughout the first half of the year, we maintained a strong emphasis on the promotion of a culture of accountability throughout the organisation. With the strong support of our Board and Executive Committee, the Group is well prepared for the implementation in 2024 of the Individual Accountability Framework regulation, which is intended to improve executive accountability within the Irish financial services sector. We continue to place an emphasis on our Speak Up agenda creating a supportive environment across all entities where colleagues can raise issues.

In line with the easing of some Government restrictions in December 2022, we updated our Remuneration Policy to reflect our intention to provide healthcare benefits from 2024 and a variable remuneration scheme based on performance in 2023, payable in 2024. The Group's remuneration policies and practices support our strategy and values and promote long-term sustainable success for the organisation.

Two announcements were made in the first half of 2023 regarding our Executive Committee. After a distinguished career spanning more than 30 years, Jim O'Keeffe, MD of Retail Banking, decided to leave AIB to pursue other opportunities. Fergal Coburn, Chief Technology Officer, after more than 22 years of dedicated service in AIB, also announced his departure from the Group. I would like to take this opportunity to thank both Jim and Fergal for their enormous contribution over many years. A process to appoint their successors is well advanced and announcements will be made in due course.

Outlook

Overall, it has been a relatively solid performance by the Irish economy in the first half of 2023 and the outlook remains favourable despite the subdued global backdrop.

Growth in the world economy is projected to be restrained in 2023-24 as a result of high inflation, the restrictive stance of monetary policy and associated tightening of financial conditions. The OECD is forecasting growth rates of 2.7% and 2.9% for the global economy in 2023 and 2024, respectively, with a much smaller rise of 1.4% in GDP in OECD countries in both years.

Against this background and with significant capacity constraints also emerging in the domestic economy, Irish growth will slow significantly this year from the very high rates seen in 2021-22. Indeed, GDP contracted in the opening quarter of 2023, as a result of a fall in output from the multinational sector.

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There has also been a further softening in activity levels and prices in the CRE sector. Most indicators, though, point to a strong performance by the economy over the first half of the year. Employment rose by 1.9% in the first quarter, while preliminary estimates from the CSO are that the unemployment rate fell to an all-time low of 3.8% during the second quarter.

Housing completions also continued to trend upwards in Q1. The strength of the economy has seen further growth in tax revenues, which rose by 11% in the first half of 2023. The Department of Finance is now projecting a cumulative budget surplus of close to €45bn over the period 2023-2025. Meanwhile, household savings remain very high, while private sector debt levels are very low. The Irish economy also continues to be supported by ongoing large inflows of foreign direct investment, which remained at a high level in the first six months of 2023.

There is a wide range of forecasts for GDP growth in 2023 owing to the considerable volatility in the output of manufactured goods from the multinational sector, which also impacts exports. Modified domestic demand is projected to rise by c. 3.5% this year and around 3% in 2024. Meanwhile, Irish inflation fell sharply over the opening half of the year, helped by lower energy costs. The HICP rate stood at 4.8% in June, down from 8.2% in December and the peak of 9.6% reached last summer. The HICP rate is seen averaging 5.3% this year, falling to around 3% in 2024.

The first half of 2023 saw continued momentum in the sell down of the State's shareholding in AIB. We very much welcomed the announcement in June, by the Minister for Finance, Mr Michael McGrath, regarding the sell down of approximately 5% of the issued ordinary capital of the Group, which brought the State's shareholding to 46.9%. This was another important development in the process of returning the State's investment in the Group and a normalisation of the share register. This also marked a significant milestone for the Group as we returned to majority private ownership. AIB owes Irish taxpayers an immense debt of gratitude for their support during the financial crisis.

I wish to thank my fellow Board and Executive Committee members, and all my colleagues across the Group for their ongoing support, energy and enthusiasm. Their collective efforts are delivering tangible results and as we enter the final phase to close out our current three-year strategic cycle, and look forward to the next three years, I am confident that the Group is well positioned to continue to build on this momentum through 2023 and beyond.

Colin Hunt

Chief Executive Officer 27 July 2023

EMPLOYMENT LEVELS RISE WHILE UNEMPLOYMENT REMAINS LOW

OUR STRATEGIC PROGRESS

GROWTH AND TRANSFORMATION

In the first six months of 2023, as the Group approaches the close of our current three-year strategic cycle, AIB has continued to drive progress across our five Strategic Pillars, delivering transformation, an enhanced product suite and inorganic initiatives, along with an enlarged customer base.

Strategic Pillar	Initiative	H1 2023 Update
CUSTOMER FIRST	DELIVERING FOR CUSTOMER NEEDS ACROSS THE GROUP	• Opened a further c. 185,000 new accounts, as we continued to welcome customers from exiting banks • Launched AIB life, our joint venture with Great-West Lifeco, providing a suite of life, pensions and savings products to AIB customers • Launched Goodbody-Private, providing Goodbody's full product and service offering to AIB Private Banking customers • CCPC clearance received for acquisition of c. €5bn Ulster Bank's tracker mortgage portfolio; migration expected to complete in H2
SIMPLE & EFFICIENT	CHANGE DELIVERY, RESILIENCE FOCUS	• Launched AIB Business – a new mobile banking app for business customers, available to over 70k businesses • Passed a major milestone with over €1bn in new business loans written through our new Business Credit platform (nCino), achieving high automation rates with two-thirds of applications auto-decisioned • Launched a new Agile change model across the enterprise, increasing the efficiency and effectiveness of our transformation delivery and modernising our overall change approach
RISK & CAPITAL	CAPITAL, CREDIT AND LEGACY ITEMS	• Completed a directed buyback with the Irish State in April • Paid an ordinary dividend of 6.2c per share on 12 May, an increase of 37.8% versus 2022 • State shareholding reduced from c. 56.89% to c. 46.90% in June, as a result of disposals as part of a pre-arranged trading plan, a directed buyback and a share placing in an accelerated book build to institutional investors
TALENT & CULTURE	TALENT DEVELOPMENT; UNIVERSAL INCLUSION	• Employee engagement strategy that incorporates new ways of listening – 82% of colleagues satisfied with AIB as a place to work • Updated Remuneration Policy to reflect our intention to provide healthcare benefits from 2024 and a variable remuneration scheme based on performance in 2023, payable in 2024 • Continued momentum on building an inclusive workplace through universal inclusion campaigns, progressive people policies, diversification of our talent pipeline and training for all employees
SUSTAINABLE COMMUNITIES	ENVIRONMENT	• Became the first bank in the world to secure a scientifically validated electricity generation maintenance target from the SBTi, recognising the existing low-carbon intensity of AIB's electricity generation loan book • Partnered with the Farm Zero C project, which aims to create a climate neutral model for dairy farming
SOCIAL • Second social bond issuance; a €750m transaction that marked the largest orderbook of all AIB's outstanding senior debt • Launched the AIB Community €1 Million Fund 2023 to support another 70 local charities; c. 16k nominations received from our customers, our people and members of the public
	GOVERNANCE • Returned to majority private ownership with reduced State shareholding and enhanced liquidity with free-float of 53.10% in June • Appointment of Professor Valeria Andreoni as the AIB Professor in Sustainable Business at University College Cork
Key:	Digitalisation	Ways of working Business model Sustainability

HIGHLIGHTS

BACKING CUSTOMERS AND COMMUNITIES

AIB Group continued to support our customers and the communities in which we operate throughout the first half of 2023. From products to partnerships, infrastructure to inclusion, we are working with all of our stakeholders to ensure a sustainable future while remaining at the heart of our customers' financial lives.

MAKING EVERYDAY BANKING EASY

So far this year, AIB has held 30 Easy Banking workshops around the country. Employees from different branches supported by our partners in the community, An Post and An Garda Siochána, engaged with customers to help them build confidence using our digital channels.

BACKING OUR PEOPLE

AIB Group was recognised at two HR industry awards in the first half of the year: GradIreland Graduate Recruitment Awards – voted most popular recruiter in the Banking, Investment and Financial Services category, for the fourth year in a row; and the Irish HR Champion Awards, for our leadership development programme 'LEAD'.

GOODBODY INTEGRATION

In April, the Group launched Goodbody-Private, offering customers the wealth products and services of Goodbody through a collaboration with AIB Private Banking. This offering includes an extensive investment and pension capability together with financial, succession, inheritance and estate planning and structuring.

GOAL SYRIA & TURKEY EARTHQUAKE APPEAL

In February, we supported the humanitarian agency GOAL through the promotion of the GOAL Syria & Turkey Crisis Appeal, raising c. €460,000 in customer donations through the AIB Mobile Banking app.

EWART BUILDING OPEN FOR BUSINESS

In February, we completed one of the biggest refinance deals in Belfast City Centre property with the developer MRP. The £85m iconic Ewart Building has been restored and redeveloped, and will accommodate over 2,000 employees.

SUPPORTING THE CIRCULAR ECONOMY

Earlier this year, AIB UK financed the development of two anaerobic digestion plants in Co. Tyrone: Kellenergy and Hollypark Farm Energy. These plants will turn organic waste materials into biogas, generating electricity.

COMMITMENT TO UNIVERSAL INCLUSION

For the second year, AIB is backing the Technological University Dublin (TU Dublin) Entrepreneurship Programme for People with Disabilities as part of our ongoing commitment to Inclusion & Diversity both in our workforce and in our communities.

PARTNERSHIP WITH GREENTECH HQ

In June, AIB Group announced a new partnership with GreenTech HQ Global Innovation Hub, an innovation ecosystem for companies and ecopreneurs. The objective is to provide education for businesses to help them succeed, support their communities and protect the planet.

SUSTAINABLE HEALTHCARE

In March, AIB supported the University of Pittsburgh Medical Center (UPMC) on its continued growth in Ireland with the acquisition of the Sports Surgery Clinic in Dublin. The facilities are enabled for Sustainability-Linked Loan and eligible for Social Bond inclusion.

MENTORING WOMEN IN SMEs

Earlier this year, we extended our I&D supports to our customers through the launch of the AIB Mentoring Access Initiative for Women in SMEs, an exciting initiative in partnership with the Irish Management Institute (IMI) and the 30% Club Ireland, providing access to mentoring for 30 women from the SME sector to mentoring programmes.

IGNITING IRELAND'S FUTURE SPARKS

This year's AIB Future Sparks Programme completed in May with 642 second-level schools in Ireland registered to take part. An interdisciplinary programme, Future Sparks encourages the development of relevant life skills to support young people as they navigate major life moments.

RENEWING OUR COMMITMENT TO GAA

AIB has extended our sponsorship of the GAA Club Championships, which we have proudly supported since 1991, and the All-Ireland Senior Football Championship, which we have sponsored since 2015, both for an additional five years. We are also in our 10th season as lead sponsor of the AIB All-Ireland Camogie Club Championship. #backedbyAIB

Clonduff captain Jenna Boden lifting the trophy after her side's victory in the AIB All-Ireland Intermediate Camogie Club Championship 2022 final match.

02 BUSINESS REVIEW

14 Operating and Financial Review 29 Capital

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 period on period. 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 27. These measures should be considered in conjunction with IFRS measures as set out in the condensed consolidated interim financial statements from page 77. A reconciliation between the IFRS and management performance summary income statements is set out on page 28.

Figures presented in the operating and financial review may be subject to rounding and thereby differ to the risk management section and the condensed consolidated interim financial statements.

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 period.

	Half-year	Half-year
	June 2023	June 2022	%
Management performance - summary income statement	€ m	€ m	change
Net interest income	1,772	895	98
Other income(1)	437	379	15
Total operating income(1)	2,209	1,274	73
Personnel expenses(1)	(434)	(372)	17
General and administrative expenses(1)	(316)	(262)	20
Depreciation, impairment and amortisation(1)	(147)	(148)	—
Total operating expenses(1)	(897)	(782)	15
Bank levies and regulatory fees(1)	(107)	(101)	6
Operating profit before impairment losses and exceptional items(1)	1,205	391	—
Net credit impairment (charge)/writeback	(91)	309	—
Operating profit before exceptional items(1)	1,114	700	59
Income from equity accounted investments	3	5	-43
Profit before exceptional items(1)	1,117	705	58
Restitution costs	(63)	(101)
Inorganic transaction costs	(53)	(21)
(Loss)/gain on disposal of loan portfolios	(13)	40
Restructuring costs	(1)	(60)
Other	—	(26)
Total exceptional items(1)	(130)	(168)
Profit before taxation	987	537	84
Income tax charge	(133)	(60)	—
Profit for the period	854	477	79

(1) 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.

Net interest income

Net interest income

	Half-year	Half-year
	June 2023	June 2022	%
Net interest income	€ m	€ m	change
Interest income(1)	2,079	909	—
Interest expense(1)	(307)	(14)	—
Net interest income	1,772	895	98
Average interest earning assets	121,677	121,666	—
	%	%	Change
Net interest margin (NIM)	2.94	1.48	1.46

Net interest income

		u
--	--	---	--

€1,772m Net interest income of € 1,772 million increased by € 877 million or 98%

compared to the half-year to June 2022.

The Group operated in a negative or low interest rate environment in the half-year to June 2022. Since July 2022 the ECB has increased euro interest rates on a graduated basis by 400 basis points. In addition, since the start of 2022 the Bank of England has increased the base rate by 475 basis points and the Federal Reserve has increased the federal funds rate by 500 basis points.

Interest income

Interest income of € 2,079 million in the half-year to June 2023 increased by € 1,170 million compared to the half-year to June 2022 primarily due to:

• Increased asset yields driven by higher euro, sterling and US dollar interest rates.
• Higher average customer loan volumes reflecting the acquisition of Ulster Bank corporate and commercial loans and as new lending exceeded redemptions.

Interest expense

Interest expense of € 307 million in the half-year to June 2023 increased by € 293 million compared to the half-year to June 2022 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 the half-year to June 2022 included the impact of the negative pricing strategy which was discontinued in the second half of 2022.
• Increased interest expense on deposits by banks whereas the half-year to June 2022 included the impact of TLTRO III funding at negative rates.

Net interest margin

2.94% NIM increased by 146 basis points to 2.94% in the half-year to June 2023

compared to 1.48% in the half-year to June 2022 driven by the higher interest rate environment.

Average interest earning assets of € 121.7 billion in the half-year to June 2023 were in line with the half-year to June 2022.

Average balance sheet Half-year Half-year

			30 June 2023			30 June 2022
	Average	Interest	Average	Average	Interest(1)	Average
	balance		rate	balance		rate
Assets	€ m	€ m	%	€ m	€ m	%
Loans and advances to customers(2)	61,219	1,116	3.68	57,713	920	3.21
Investment securities	16,255	303	3.77	16,743	45	0.54
Loans and advances to banks(3)	44,203	660	3.01	47,210	(56)	(0.24)
Average interest earning assets	121,677	2,079	3.45	121,666	909	1.51
Non-interest earning assets	8,181			6,963
Total average assets	129,858	2,079		128,629	909
Liabilities & equity
Deposits by banks(3)	913	16	3.52	11,264	(24)	(0.43)
Customer accounts	43,887	55	0.25	51,655	(22)	(0.09)
Other debt issued	6,989	186	5.38	5,690	33	1.19
Subordinated liabilities	1,417	45	6.33	1,557	21	2.66
Lease liabilities	252	5	4.11	336	6	3.35
Average interest earning liabilities	53,458	307	1.16	70,502	14	0.04
Non-interest earning liabilities	63,710			44,821
Equity	12,690			13,306
Total average liabilities & equity	129,858	307		128,629	14
Net interest income		1,772	2.94		895	1.48

(1) Negative interest income on assets in the half-year to June 2023 of € 1 million (half-year to June 2022: € 83 million) is offset against interest income. Negative interest expense on liabilities in the half-year to June 2023 Nil (half-year to June 2022: € 70 million) is offset against interest expense.

(2) Income on Loans and advances to customers includes the negative impact of € 223 million from cash flow hedges in the half-year to June 2023 (half-year to June 2022 included the positive impact of € 65 million). See note 3 Interest and similar income in the condensed consolidated interim financial statements.

(3) Loans and advances to banks and Deposits by banks include Securities financing.

BUSINESS REVIEW – 1. OPERATING AND FINANCIAL REVIEW CONTINUED

Other income

Other income(1)

	Half-year	Half-year
	June 2023	June 2022	%
Other income(1)	€ m	€ m	change
Net fee and commission income	306	286	7
Net trading income/(loss)	110	57	93
– Loan acquisition forward contracts	138	26	—
– Equity investment hedges	(10)	13	—
– Other	(18)	18	—
Net gain on equity investments (FVTPL)	12	14	-14
Net gain on loans and advances to customers (FVTPL)	6	15	-63
Other operating income	3	7	-57
Other income	437	379	15

Other income(1)

€437m	Other income of € 437 million
	increased by € 58 million compared

to the half-year to June 2022.

	Half-year	Half-year
	June 2023	June 2022	%
Net fee and commission income	€m	€m	change
Customer accounts	119	111	7
Card income	69	49	40
Customer related foreign exchange	40	40	-1
Lending related fees	26	25	6
Stockbroking client fees and commissions	23	25	-9
Other fees and commissions	29	36	-20
Net fee and commission income	306	286	7

Net fee and commission income of € 306 million in the half-year to June 2023 increased by € 20 million or 7% compared to the half-year to June 2022 primarily reflecting higher card interchange fees and higher transaction volumes driven by the onboarding of customers from banks exiting the Irish market.

A gain of € 138 million was recognised in the half-year to June 2023 in respect of loan acquisition forward contracts comprising of a gain of € 126 million on Ulster Bank tracker (and linked) mortgages and € 12 million on Ulster Bank corporate and commercial loans (half-year to June 2022: € 26 million)(2) .

Net trading loss (excluding the loan acquisition forward contracts and equity investment hedges) of € 18 million in the half-year to June 2023 primarily reflected unfavourable movements on non-customer foreign exchange contracts. This compared to a gain of € 18 million in the half-year to June 2022 which also included favourable movements on derivative valuation adjustments (XVA) and other interest rates related gains.

Net income from equity investments(3) was € 2 million in the halfyear to June 2023 compared to € 27 million in the half-year to June 2022, as the prior period benefited from a higher gain on revaluation and disposal of equity investments.

Net gain on loans and advances to customers (FVTPL) of € 6 million in the half-year to June 2023 (half-year to June 2022: € 15 million) represents income recognised on previously restructured loans carried at fair value through profit or loss.

Other operating income in the half-year to June 2023 was € 3 million compared to € 7 million in the half-year to June 2022.

IFRS basis

On an IFRS basis other income, including a net loss of € 12 million on exceptional items(1), was € 425 million in the halfyear to June 2023 compared to € 411 million in the half-year to June 2022.

(1) Other income before exceptional items. A net loss of € 12 million on exceptional items in the half-year to June 2023 comprises: € 12 million loss on disposal of loan portfolios. A net gain of € 32 million in the half-year to June 2022 comprises: € 27 million gain on disposal of loan portfolios, a gain on disposal of property of € 3 million, a net gain on loans and advances to customers (FVTPL) of € 1 million and net fee and commission income of € 1 million.

(2) For further information see note 33 Fair value of financial instruments in the condensed consolidated interim financial statements.

(3) Net income on equity investments comprises a net gain on equity investments (FVTPL) of € 12 million in the half-year to June 2023 (half-year to June 2022: € 14 million) and a loss on equity investment hedges of € 10 million in the half-year to June 2023 (half-year to June 2022: gain of € 13 million).

Operating expenses

Total operating expenses(1)

	Half-year	Half-year
	June 2023	June 2022	%
Operating expenses(1)	€ m	€ m	change
Personnel expenses	434	372	17
General and administrative
expenses	316	262	20
Depreciation, impairment and
amortisation	147	148	—
Total operating expenses	897	782	15
Staff numbers at period end(2)	10,133	9,027	12
Average staff numbers(2)	9,814	8,946	10

Total operating expenses(1)

€897m	Total operating expenses of
	€ 897 million increased by

€ 115 million or 15% compared to the half-year to June 2022.

Personnel expenses

Personnel expenses increased by € 62 million compared to the half-year to June 2022 primarily due to salary inflation, higher average staff numbers and an allowance for variable pay.

Staff numbers at the half-year to June 2023 were 12% higher compared to the half-year to June 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 € 54 million compared to the half-year to June 2022 driven by inflationary pressures, the cost of onboarding customers from banks exiting the Irish market and technology related transformation costs.

Depreciation, impairment and amortisation

Depreciation, impairment and amortisation was broadly in line with the half-year to June 2022.

Cost income ratio(1)

41%	Costs of € 897 million and income
	of € 2,209 million resulted in a cost

income ratio of 41% in the half-year to June 2023 compared to 61% in the half-year to June 2022.

Bank levies and regulatory fees

€107m

	Half-year	Half-year
	June 2023	June 2022
Bank levies and regulatory fees	€ m	€ m
Deposit Guarantee Scheme	58	50
Single Resolution Fund	36	38
Other regulatory levies and charges	13	13
Bank levies and regulatory fees	107	101

Bank levies and regulatory fees of € 107 million increased by € 6 million compared to the half-year to June 2022 primarily due to higher Deposit Guarantee Scheme fees.

The Irish bank levy for financial institutions is payable in October each year.

IFRS basis

On an IFRS basis total costs, including bank levies and regulatory fees of € 107 million and the cost of exceptional items(3) of € 118 million, were € 1,122 million in the half-year to June 2023 compared to € 1,083 million in the half-year to June 2022. This results in a cost income ratio (IFRS basis) of 51% in the half-year to June 2023, compared to 83% in the half-year to June 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 € 118 million in the half-year to June 2023 (half-year to June 2022: € 200 million) comprised of: Personnel expenses € 2 million (half-year to June 2022: € 9 million), General and administrative expenses € 116 million (half-year to June 2022: € 157 million) and Depreciation, impairment and amortisation Nil (half-year to June 2022: € 34 million).

BUSINESS REVIEW – 1. OPERATING AND FINANCIAL REVIEW CONTINUED

Net credit impairment charge

€91m

There was a net credit impairment charge of € 91 million in the half-year to June 2023 driven by a charge in relation to commercial property, including additional post model adjustments, to address potential adverse impacts from higher interest rates and lower valuations.

The net credit impairment charge of € 91 million in the half-year to June 2023 reflected a € 91 million charge on loans and advances to customers (net remeasurement of expected credit loss ("ECL") allowance charge of € 107 million and recoveries of amounts previously written-off of € 16 million). There was also a € 9 million charge on investment debt securities, a € 3 million charge on securities financing and a € 2 million charge on loans and advances to banks offset by a € 14 million writeback on off balance sheet exposures.

There was a net credit impairment writeback of € 309 million in the half-year to June 2022 comprising a € 308 million writeback on loans and advances to customers (net remeasurement of ECL allowance writeback of € 276 million and recoveries of amounts previously written off of € 32 million). There was also a € 1 million writeback on securities financing.

For further information see pages 34 to 72 in the Risk Management section.

Income tax charge

€133m

The income tax charge was € 133 million in the half-year to June 2023 (half-year to June 2022: € 60 million), representing an effective tax rate of 13.5% (half-year to June 2022: 11.2%). The effective tax rate is influenced by the geographic mix of profit streams which may be taxed at different rates.

For further information see note 11 Taxation and note 21 Deferred taxation of the condensed consolidated interim financial statements.

Total exceptional items

€130m

	Half-year June 2023	Half-year June 2022
Total exceptional items	€ m	€ m
Restitution costs	(63)	(101)
Inorganic transaction costs	(53)	(21)
(Loss)/gain on disposal of loan portfolios	(13)	40
Restructuring costs	(1)	(60)
- Termination benefits	(2)	(3)
- Property transformation	—	(36)
- UK portfolio sale	1	(13)
- Other restructuring	—	(8)
Other	—	(26)
Total exceptional items	(130)	(168)

These gains/costs were viewed as exceptional by management.

Restitution costs include a charge of € 63 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 an increased provision for customer redress of € 59 million and associated costs of € 4 million (half-year to June 2022 charge of € 87 million). The half-year to June 2022 also included costs related to the tracker mortgage examination of € 14 million.

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 the half-year to June 2023 reflects a loss of € 13 million relating to the disposals 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 included 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.

Assets

Net loans to customers

€61.2bn

New lending €5.6bn

	30 June	31 December
	2023	2022	%
Assets	€ bn	€ bn	change
Gross loans to customers	62.8	61.2	3
ECL allowance	(1.6)	(1.6)	1
Net loans to customers	61.2	59.6	3
Investment securities	16.5	16.3	2
Loans and advances to banks	37.9	39.7	-4
Securities financing	7.6	6.3	21
Other assets	8.1	7.9	1
Total assets	131.3	129.8	1

Net loans to customers

€61.2bn Net loans, excluding the positive impact of foreign exchange

movements of € 0.2 billion, increased by € 1.4 billion 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 € 0.7 billion of Ulster Bank corporate and commercial loans in the half-year to June 2023 bringing the total fair value of loans migrated to € 2.9 billion.

On 22 July 2023 the Group completed the migration of € 4.0 billion of eligible Ulster Bank tracker (and linked) mortgages with the migration of the remaining eligible loans expected to be completed by the end of 2023.

New lending

€5.6bn New lending of € 5.6 billion in the half-year to June 2023 was

€ 0.2 billion higher compared to the half-year to June 2022. New lending comprises € 4.8 billion term lending in the half-year to June 2023 (€ 4.6 billion in the half-year to June 2022) and € 0.8 billion transaction lending (€ 0.8 billion in the half-year to June 2022).

Summary of movement in loans to customers

The table below sets out the movement in loans to customers from 1 January 2023 to 30 June 2023.

	Performing	Non-performing	Loans to
	loans	loans	customers
Loans to customers	€ bn	€ bn	€ bn
Gross loans (opening balance 1 January 2023)	59.0	2.2	61.2
New lending	5.6	—	5.6
Redemptions of existing loans	(4.6)	(0.3)	(4.9)
Portfolio acquisition	0.7	—	0.7
Net movement to non-performing	(0.3)	0.3	—
Restructures and write-offs	—	(0.1)	(0.1)
Foreign exchange & other movements	0.3	—	0.3
Gross loans (closing balance 30 June 2023)	60.7	2.1	62.8
ECL allowance	(0.9)	(0.7)	(1.6)
Net loans (closing balance 30 June 2023)	59.8	1.4	61.2

Irish mortgage lending of € 1.7 billion was in line with the half-year to June 2022. Non-property lending of € 2.2 billion was up 12% driven by higher corporate and renewable energy & infrastructure lending partially offset by subdued SME lending. Property related lending was down 20% to € 1.0 billion reflecting the Group's prudent approach to this sector. Personal lending was up 29% to € 0.6 billion.

Non-performing loans	Non-performing loans ratio
€2.1bn	3.3%

Non-performing loans decreased by € 0.1 billion or 3% to € 2.1 billion at 30 June 2023.

Non-performing loans ratio

Non-performing loans as a percentage of gross loans to customers was 3.3% at 30 June 2023 compared to 3.5% at 31 December 2022.

ECL allowance	Non-performing loans cover
€1.6bn	37%

The ECL allowance on loans at amortised cost of € 1.6 billion at 30 June 2023 was in line with 31 December 2022.

Non-performing loans cover

The ECL allowance cover rate on non-performing loans has increased to 37% at 30 June 2023 compared to 35% at 31 December 2022.

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 34 to 72.

	At amortised cost				At FVTPL(1)
	Residential	Other	Property and	Non-property
Loan portfolio profile	mortgages	personal	construction	business	Total	Total	Total
30 June 2023	€ bn	€ bn	€ bn	€ bn	€ bn	€ bn	€ bn
Gross loans to customers	30.4	2.8	9.3	20.1	62.6	0.2	62.8
Of which: Stage 2	1.1	0.3	3.7	3.2	8.3		8.3
Non-performing loans	0.6	0.2	0.5	0.7	2.0	0.1	2.1
Total ECL allowance	0.3	0.2	0.4	0.7	1.6		1.6
Total ECL allowance cover (%)	0.9 %	6.3 %	4.4 %	3.9 %	2.6 %
ECL allowance cover Stage 2 (%)	3.6 %	14.3 %	5.6 %	12.7 %	8.4 %
ECL allowance cover non-performing (%)	30.9 %	67.5 %	33.6 %	36.6 %	36.6 %
31 December 2022	€ bn	€ bn	€ bn	€ bn	€ bn	€ bn	€ bn
Gross loans to customers	30.3	2.7	8.6	19.4	61.0	0.2	61.2
Of which: Stage 2	1.1	0.3	1.4	3.2	6.0		6.0
Non-performing loans	0.6	0.2	0.4	0.8	2.0	0.2	2.2
Total ECL allowance	0.3	0.2	0.3	0.8	1.6		1.6
Total ECL allowance cover (%)	0.9 %	6.5 %	3.7 %	4.3 %	2.7 %
ECL allowance cover Stage 2 (%)	3.3 %	13.7 %	8.4 %	14.1 %	10.7 %
ECL allowance cover non-performing (%)	31.2 %	64.4 %	29.3 %	34.7 %	35.1 %

Investment securities

Investment securities of € 16.5 billion, primarily held for liquidity purposes, increased € 0.2 billion from 31 December 2022.

Loans and advances to banks

Loans and advances to banks of € 37.9 billion, including € 36.1 billion of cash and balances at central banks, were € 1.8 billion lower than 31 December 2022. The reduced placement with banks was primarily due to loan book growth, increased securities financing and net reduction in debt issuance partly offset by higher customer account balances.

Securities financing

Securities financing of € 7.6 billion has increased by € 1.3 billion from 31 December 2022.

Other assets

Other assets of € 8.1 billion comprised:

• Deferred tax assets of € 3.0 billion(2), broadly in line with 31 December 2022.
• Derivative financial instruments of € 2.5 billion, 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 relate predominantly to the property and construction asset class.

(2) For further information see note 21 Deferred taxation in the condensed consolidated interim financial statements.

Liabilities & equity

30 June	31 December
2023	2022	%
€ bn	€ bn	change
103.7	102.4	1
0.4	0.5	-18
6.7	7.2	-7
1.4	1.4	1
6.3	6.0	4
118.5	117.5	1
12.8	12.3	5
131.3	129.8	1
%	%	Change
59	58	1

Customer accounts

€103.7bn Customer accounts, excluding the positive impact of currency

movements of € 0.2 billion, increased by € 1.1 billion compared to 31 December 2022 driven by an increase in Retail Banking partly offset by a reduction in Capital Markets and AIB UK.

Loan to deposit ratio

The loan to deposit ratio increased to 59% at 30 June 2023 compared to 58% at 31 December 2022.

Deposits by banks

Deposits by banks of € 0.4 billion decreased by € 0.1 billion compared to 31 December 2022.

Debt securities in issue

Debt securities of € 6.7 billion decreased by € 0.5 billion from 31 December 2022 primarily due to maturities of € 1.3 billion partly offset by a further MREL related social bond issuance of € 0.8 billion.

Subordinated liabilities

Subordinated liabilities of € 1.4 billion are in line with 31 December 2022.

Other liabilities

Other liabilities of € 6.3 billion comprised:

• Derivative financial instruments of € 3.0 billion, in line with 31 December 2022.
• Securities financing € 0.8 billion, € 0.1 billion decrease from 31 December 2022.
• Remaining liabilities of € 2.5 billion, € 0.4 billion increase from 31 December 2022.

Equity

€12.8bn	Equity increased by € 0.5 billion to € 12.8 billion compared to

€ 12.3 billion at 31 December 2022 mainly driven by the profit for the period partly offset by distributions paid.

Segment overview

The Group's performance is 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 3.1 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 homes and 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 nonperforming 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 markets propositions.

AIB UK

AIB UK offers corporate, retail and business banking services in two distinct markets;

• a sector-led corporate bank supporting mid to large corporates focused on renewables, infrastructure, housing, commercial real estate, health and manufacturing/industrial businesses across both Great Britain and Northern Ireland, where the Bank has recognised expertise. Services include lending, treasury, trade facilities, asset finance and invoice discounting.
• 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 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

In the second half of 2022 the Group made changes to the methodologies used to allocate cost and income across operating segments in order to enhance the management of standalone segment performance. Under the Group's revised cost allocation methodology, substantially all of the costs of the Group's control, support and Treasury functions are now allocated to Retail Banking, Capital Markets and AIB UK whereas the previous methodology resulted in overheads which were managed centrally being reported in the Group segment. In addition, certain Bank levies and regulatory fees, such as the Irish bank levy, which were previously reported in Group segment are now allocated to the Retail Banking and Capital Market segments. Figures for the prior period have been restated on a comparative basis.

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.

Retail Banking

	Half-year	Half-year
Retail Banking	June 2023	June 2022	%
contribution statement	€ m	€ m	change
Net interest income	1,082	471	—
Other income	345	204	69
Total operating income	1,427	675	111
Total operating expenses	(621)	(539)	15
Bank levies and regulatory fees	(9)	(9)	—
Operating contribution before impairments and exceptional items	797	127	—
Net credit impairment (charge)/ writeback	(46)	224	—
Operating contribution before exceptional items	751	351	114
Income from equity accounted investments	1	2	-50
Contribution before exceptional items	752	353	113

Net interest income

€1,082m Net interest income has increased by € 611 million compared to the half-year to June 2022 driven by the favourable impact of a higher interest rate environment and an increase in average loan volumes.

Other income

€345m Other income increased by € 141 million compared to the half-year to June 2022 driven by a gain in respect of a 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 driven by the onboarding of customers from banks exiting the Irish market.

Total operating expenses

€621m Total operating expenses increased by € 82 million compared to the half-year to June 2022 due to higher personnel as well as general and administrative expenses.

Net credit impairment charge

€46m There was a net credit impairment charge of € 46 million in the half-year to June 2023 comprising a € 49 million charge on loans and advances to customers (driven by personal € 25 million and non-property business € 21 million) partially offset by a € 3 million writeback for off balance sheet exposures. There was a net credit impairment writeback of € 224 million in the half-year to June 2022.

	30 June	30 June
Retail Banking	2023	2022	%
balance sheet metrics	€ bn	€ bn	change
Mortgages	1.7	1.7
Personal	0.6	0.5
Property	0.1	—
Non-property business	0.4	0.5
New lending	2.8	2.7	3
	30 June	31 December
	2023	2022
	€ bn	€ bn
Mortgages	29.0	28.7
Personal	2.7	2.6
Property	0.5	0.5
Non-property business	3.2	3.0
Gross loans	35.4	34.8	2
ECL allowance	(0.7)	(0.7)	—
Net loans	34.7	34.1	2
Current accounts	47.4	45.4	4
Deposits	32.0	30.4	5
Customer accounts	79.4	75.8	5

New lending

€2.8bn New lending was 3% higher at € 2.8 billion driven by robust mortgage lending, which was in line with the prior period, and growth in personal lending.

Net loans

€34.7bn Net loans increased by € 0.6 billion primarily due to growth in performing loans of € 0.7 billion driven by the acquisition of Ulster Bank commercial loans of € 0.3 billion and new lending exceeding redemptions.

ECL allowance

€0.7bn The ECL allowance of € 0.7 billion at 30 June 2023 was in line with 31 December 2022.

Customer accounts

€79.4bn Customer accounts increased by € 3.6 billion compared to 31 December 2022 and includes inflows from banks exiting the Irish market.

23

BUSINESS REVIEW – 1. OPERATING AND FINANCIAL REVIEW CONTINUED

Capital Markets

	Half-year	Half-year
Capital Markets	June 2023	June 2022	%
contribution statement	€ m	€ m	change
Net interest income	402	258	56
Other income	98	129	-24
Total operating income	500	387	29
Total operating expenses	(183)	(154)	19
Bank levies and regulatory fees	(4)	(4)	—
Operating contribution before impairments and exceptional items	313	229	37
Net credit impairment (charge)/ writeback	(26)	86	—
Operating contribution before exceptional items	287	315	-9
Income from equity accounted investments	—	1	—
Contribution before exceptional items	287	316	-9

Net interest income

€402m Net interest income increased by € 144 million compared to the half-year to June 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

€98m Other income decreased by € 31 million compared to the half-year to June 2022 driven by lower income from equity investments and from the loan acquisition forward contract to acquire corporate and commercial loans from Ulster Bank.

Total operating expenses

€183m Total operating expenses increased by € 29 million compared to the half-year to June 2022 due to higher personnel as well as general and administrative expenses.

Net credit impairment charge

€26m There was a net credit impairment charge of € 26 million in the half-year to June 2023 comprising a € 36 million charge on loans and advances to customers (driven by a charge on property of € 92 million partially offset by a writeback on non-property business € 56 million) and a € 10 million writeback for off balance sheet exposures.

There was a net credit impairment writeback of € 86 million in the half-year to June 2022.

	30 June	30 June
Capital Markets	2023	2022	%
balance sheet metrics	€ bn	€ bn	change
Property	0.6	0.9
Non-property business	1.5	1.2
New lending	2.1	2.1	-4
	30 June 2023	31 December 2022
	€ bn	€ bn
Mortgages	0.5	0.5
Personal	0.1	0.1
Property	6.6	6.4
Non-property business	12.7	12.2
Gross loans	19.9	19.2	4
ECL allowance	(0.7)	(0.7)	—
Net loans	19.2	18.5	4
Investment securities	2.3	2.2	5
Current accounts	10.6	12.4	-15
Deposits	4.1	3.8	8
Customer accounts	14.7	16.2	-9

New lending

€2.1bn New lending of € 2.1 billion was in line with the half-year to June 2022 with growth in corporate and renewable energy & infrastructure offset by lower property lending.

Net loans

€19.2bn Net loans of € 19.2 billion at 30 June 2022 
 increased by € 0.7 billion compared to 
 31 December 2022 driven by the acquisition 
 of Ulster Bank corporate and commercial loans 
 of € 0.4 billion and new lending exceeding 
 redemptions.

ECL allowance

• €0.7bn The ECL allowance of € 0.7 billion as at 30 June 2023 was in line with 31 December 2022.

Investment securities

• €2.3bn Investment securities of € 2.3 billion were € 0.1 billion higher than 31 December 2022.

Customer accounts

€14.7bn Customer accounts decreased by € 1.5 billion compared to 31 December 2022.

24

AIB UK

	Half-year	Half-year
AIB UK	June 2023	June 2022	%
contribution statement	£ m	£ m	change
Net interest income	177	107	65
Other income	20	27	-25
Total operating income	197	134	47
Total operating expenses	(75)	(69)	9
Operating contribution before
impairments and exceptional items	122	65	88
Net credit impairment charge	(4)	(1)	—
Operating contribution before exceptional items	117	64	83
Income from equity accounted
investments	2	2	4
Contribution before exceptional
items	119	66	81
Contribution before exceptional
items € m	136	78	74

Net interest income

£177m Net interest income increased by £ 70 million compared to the half-year to June 2022 driven by the favourable impact of a higher interest rate environment partly offset by lower average loan volumes primarily due to the exit from the SME market in Great Britain.

Other income

£20m Other income of £ 20 million decreased by £ 7 million compared to the half-year to June 2022 as the prior period benefited from favourable movements on derivative valuation adjustments.

Total operating expenses

£75m Total operating expenses increased by £ 6 million compared to the half-year to June 2022.

Net credit impairment charge

£4m There was a net credit impairment charge of £ 4 million in the half-year to June 2023 compared to £ 1 million in the half-year to June 2022.

	30 June	30 June
AIB UK	2023	2022	%
balance sheet metrics	£ bn	£ bn	change
AIB GB	0.5	0.4	—
AIB NI	0.1	0.1	—
New lending	0.6	0.5	23
	30 June 2023	31 December 2022
	£ bn	£ bn
AIB GB	5.3	5.1	4
AIB NI	1.1	1.3	-15
Gross loans	6.4	6.4	—
ECL allowance	(0.2)	(0.2)	—
Net loans	6.2	6.2	—
Current accounts	4.5	5.2	-13
Deposits	2.9	2.9	—
Customer accounts	7.4	8.1	-9

New lending

£0.6bn New lending of £ 0.6 billion in the half-year to June 2023 increased by £ 0.1 billion or 23% compared to the half-year to June 2022.

Net loans

£6.2bn Net loans of £ 6.2 billion were in line with 31 December 2022.

ECL allowance

£0.2bn The ECL allowance of £ 0.2 billion at 30 June 2023 was in line with 31 December 2022.

Customer accounts

£7.4bn Customer accounts of £ 7.4 billion at 30 June 2022 were £ 0.7 billion lower compared to 31 December 2022 driven by the Group's decision to exit the SME market in Great Britain and an increase in spending activity due to higher costs of living.

BUSINESS REVIEW – 1. OPERATING AND FINANCIAL REVIEW CONTINUED

Group

	Half-year	Half-year
Group	June 2023	June 2022	%
contribution statement	€ m	€ m	change
Net interest income	86	39	—
Other income	(29)	14	—
Total operating income	57	53	8
Total operating expenses	(7)	(7)	—
Bank levies and regulatory fees	(94)	(88)	7
Operating contribution before
impairments and exceptional items	(44)	(42)	5
Net credit impairment charge	(14)	—
Contribution before exceptional
items	(58)	(42)	38

	30 June	31 December
Group	2023	2022	%
balance sheet metrics	€ bn	€ bn	change
Investment securities	14.2	14.1	1
Securities financing	7.6	6.3	21
Customer accounts	1.0	1.2	-17

Net interest income

€86m Net interest income of € 86 million increased by € 47 million compared to the half-year to June 2022 reflecting the impact of a higher interest rate environment.

Other income

(€29m) Other income decreased by € 43 million compared to the half-year to June 2022 as the prior period benefited from favourable movements on derivative valuation adjustments, a gain on the disposal of investment securities and other interest rates related gains.

Total operating expenses

€7m Total operating expenses of € 7 million were in line with the half-year to June 2022.

Bank levies and regulatory fees

€94m	Bank levies and regulatory fees increased by
	€ 6 million compared to the half-year to June 2022
	primarily due to higher Deposit Guarantee
	Scheme fees.

Net credit impairment charge

€14m There was a net credit impairment charge of € 14 million in the half-year to June 2023 reflecting a € 9 million charge on investment debt securities, a € 3 million charge on securities financing and a € 2 million charge on loans and advances to banks.

Investment securities

€14.2bn Investment securities of € 14.2 billion, primarily held for liquidity purposes increased by € 0.1 billion from 31 December 2022.

Securities financing

€7.6bn Securities financing of € 7.6 billion has increased by € 1.3 billion from 31 December 2022.

Customer accounts

	l .0bn

€1.0bn Customer accounts were € 1.0 billion at 30 June 2023 compared to € 1.2 billion at 31 December 2022.

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	Interest income/expense for balance sheet categories divided by corresponding average balance.
Average balance	Average balances for interest-earning assets are based on daily balances. Average balances for interest-earning liabilities are based on a combination of daily/ monthly balances, with the exception of customer accounts and deposits by banks which are based on daily balances.
Absolute cost base	Total operating expenses excluding exceptional items, bank levies and regulatory fees.
Cost income ratio	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	Performance measures have 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 between the IFRS and management performance summary income statements is set out on page 28. 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, reflecting customer redress compensation and associated costs. The half-year to June 2022 also included costs related to the tracker mortgage examination.
	– Inorganic transaction costs includes 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 relates to the disposals of non-performing loan portfolios.
	– Restructuring costs reflect the implementation of the Group's revised 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 reflected a charge in respect of the Central Bank of Ireland enforcement investigation in respect of tracker mortgages at AIB and EBS.
Loan to deposit ratio	Net loans and advances to customers divided by customer accounts.
Net interest margin	Net interest income divided by average interest-earning assets.
Non-performing exposures	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 at amortised cost as a percentage of non-performing loans at amortised cost.
Non-performing loans ratio	Non-performing loans as a percentage of total gross loans.
Return on Tangible Equity (RoTE)	Profit after tax less AT1 coupons paid, divided by targeted CET1 capital on fully loaded basis. Details of the Group's RoTE is set out in the Capital Section on page 31.
Management performance – summary income statement	The following line items in the management performance summary income statement are considered APMs:
	• Other income • Bank levies and regulatory fees • Total operating income • Operating profit before impairment losses and • Personnel expenses exceptional items • General and administrative expenses • Operating profit before exceptional items • Depreciation, impairment and amortisation • Profit before exceptional items • Total operating expenses • Total exceptional items

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.

			Half-year		Half-year
IFRS – summary income statement			June 2023 € m		June 2022 € m
Net interest income			1,772		895
Other income			425		411
Total operating income			2,197		1,306
Total operating expenses			(1,122)		(1,083)
Operating profit before impairment losses			1,075		223
Net credit impairment (charge)/writeback			(91)		309
Operating profit			984		532
Income from equity accounted investments			3		5
Profit before taxation			987		537
Income tax charge			(133)		(60)
Profit for the period			854		477
Adjustments – between IFRS and management performance
Other income	of which: exceptional items
	Net fee & commission income	—		(1)
	Net gain on loans and advances to customers (FVTPL)	—		(1)
	Gain on disposal of property	—		(3)
	Loss/(gain) on disposal of loan portfolios	12	12	(27)	(32)
Total operating expenses	of which: bank levies and regulatory fees		107		101
	of which: exceptional items
	Restitution costs	63		101
	Inorganic transaction costs	53		21
	Restructuring costs	2		48
	Other	—	118	30	200
			Half-year		Half-year
			June 2023		June 2022
Management performance – summary income statement			€ m		€ m
Net interest income			1,772		895
Other income(1)			437		379
Total operating income(1)			2,209		1,274
Total operating expenses(1)			(897)		(782)
Bank levies and regulatory fees(1)			(107)		(101)
	Operating profit before impairment losses and exceptional items(1)		1,205		391
Net credit impairment (charge)/writeback			(91)		309
Operating profit before exceptional items(1)			1,114		700
Income from equity accounted investments			3		5
Profit before exceptional items(1)			1,117		705
Total exceptional items(1)			(130)		(168)
Profit before taxation			987		537
Income tax charge			(133)		(60)
Profit for the period			854		477

(1) 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.

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 2.9' on page 206 of the Group's Annual Financial Report 2022.

Regulatory capital and capital ratios(1)

	Transitional basis		Fully loaded basis
	30 June 31 December		30 June	31 December
	2023 € m	2022 € m	2023 € m	2022 € m
Equity	12,792	12,266	12,792	12,266
Less: Additional Tier 1 Securities Foreseeable charges(2)/proposed ordinary dividend(3)	(1,115)	(1,115)	(1,115)	(1,115)
	(544)	(166)	(544)	(166)
Regulatory adjustments:
Intangible assets and goodwill	(539)	(537)	(539)	(537)
Cash flow hedging reserves	1,433	1,470	1,433	1,470
IFRS 9 CET1 transitional add-back	232	411	—	—
Pension	(20)	(12)	(20)	(12)
Deferred tax	(2,381)	(2,192)	(2,639)	(2,724)
Calendar provisioning(4)	(92)	(115)	(92)	(115)
Other(5)	(103)	(65)	(103)	(65)
	(1,470)	(1,040)	(1,960)	(1,983)
Total common equity tier 1 capital	9,663	9,945	9,173	9,002
Additional tier 1 capital
Additional tier 1 issuance	1,115	1,115	1,115	1,115
Other	(3)	(3)	(3)	(3)
Total additional tier 1 capital	1,112	1,112	1,112	1,112
Total tier 1 capital	10,775	11,057	10,285	10,114
Tier 2 capital
Subordinated debt	1,500	1,500	1,500	1,500
Instruments issued by subsidiaries that are given
recognition in tier 2 capital	28	27	30	29
IRB Excess of provisions over expected losses eligible	145	135	145	135
IFRS 9 tier 2 transitional adjustment	(123)	(135)	—	—
Other	(3)	(3)	(3)	(3)
Total tier 2 capital	1,547	1,524	1,672	1,661
Total capital	12,322	12,581	11,957	11,775
Risk-weighted assets
Credit risk	53,975	50,886	53,833	50,661
Market risk	339	291	339	291
Operational risk	4,302	4,302	4,302	4,302
Credit valuation adjustment and settlement risk	108	79	108	79
Total risk-weighted assets	58,724	55,558	58,582	55,333
	%	%	%	%
Common equity tier 1 ratio	16.5	17.9	15.7	16.3
Tier 1 ratio	18.3	19.9	17.6	18.3
Total capital ratio	21.0	22.6	20.4	21.3

(1) Prepared under the regulatory scope of consolidation. Capital ratios as at 30 June 2023 have been presented including the benefit of the retained profit in the period. Under Article 26 (2) of the Capital Requirements Regulation (CRR), financial institutions may include independently verified interim profits in their regulatory capital only with the prior permission of the competent authority, namely the ECB, and such permission is being sought.

(2) Consistent with Article 2 Regulation (EU) No 241/2014 a foreseeable charge has been deducted which represents the maximum dividend payout ratio under the Group's internal dividend policy, applied to the interim profit for 2023.

(3) The proposed ordinary dividend was € 166 million in respect of 2022. Equity at 30 June 2023 was reduced by this dividend payment in May 2023.

(4) 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.

(5) Other includes prudent valuation adjustment which has increased with the addition of the Ulster Bank tracker (and linked) mortgage portfolio forward contract.

Capital requirements

The table below sets out the Group's capital requirements at 30 June 2023.

	30 June
Regulatory Capital Requirements	2023
CET1 Requirements
Pillar 1	4.50 %
Pillar 2 requirement (P2R)	1.55 %
Combined buffer requirement	4.56 %
Capital Conservation Buffer (CCB)	2.50 %
O-SII buffer	1.50 %
Countercyclical buffer (CCyB) Impact	0.56 %
CET1 Requirement	10.61 %
AT1	2.02 %
Tier 2	2.69 %
Total Capital Requirement	15.32 %

In addition, under Article 104a any shortfall in AT1 and Tier 2 must be held in CET1. The AT1 shortfall at 30 June 2023 is 12bps and accordingly increases the CET1 requirement to 10.73%. The table does not include Pillar 2 Guidance ("P2G") which is not publicly disclosed.

The Bank of England ("BOE") has announced the increase of the UK Countercyclical capital buffer ("CCyB") to 2% on 5 July 2023 (equating to an estimated 0.40% Group requirement).

The Central Bank of Ireland ("CBI") reintroduced the CCyB for Irish exposures at 0.5% in June 2023, increasing to 1.0% on 24 November 2023 (equating to an estimated 0.7% Group requirement) and to 1.5% on 7 June 2024.

Acquisition of Ulster Bank tracker (and linked) mortgage portfolio

Following receipt of CCPC approval, the Group has deemed it has an irrevocable commitment to take on the Ulster Bank tracker (and linked) mortgage portfolio and therefore, has recognised additional RWAs as an Article 3 adjustment ("Application of stricter requirements by institutions") at 30 June 2023. The overall impact is an increase in the Group's RWAs of c. € 1.7 billion (c. -0.5% CET1).

Capital ratios at 30 June 2023 Fully Loaded Ratio

The fully loaded CET1 ratio decreased to 15.7% at 30 June 2023 from 16.3% at 31 December 2022.

The decrease of -0.6% is mainly due to the increase in Risk Weighted Assets ("RWAs"). Profit after tax of € 0.9 billion (+1.5%) is offset by a foreseeable charge in respect of dividends (-1.0%), a share buyback programme completed in April (-0.4%) and other capital adjustment (+0.1%).

RWA increases include the Ulster Bank tracker (and linked) mortgage portfolio acquisition (-0.5%), increases in respect of IRB models (-0.4%) with increases in new lending offset by further application of CRR RWA related efficiencies.

The fully loaded total capital ratio decreased to 20.4% at 30 June 2023 from 21.3% at 31 December 2022 primarily due to higher RWAs and the other CET1 movements outlined above.

Transitional Ratio

The transitional CET1 ratio decreased to 16.5% at 30 June 2023 from 17.9% at 31 December 2022. The decrease is mainly due to the fully loaded movements outlined and an additional year's phasing of the deferred tax asset deduction as well as further recognition of IFRS 9 provisions recorded in 2020 as per Regulation (EU) 2020/873 ("CRR Quick Fix" in response to the COVID-19 pandemic).

At 30 June 2023 the transitional total capital ratio decreased to 21.0% from 22.6% at 31 December 2022.

Model Redevelopment

The Group has received a decision in relation to its redeveloped mortgage model which was submitted for approval in 2021. 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).

Finalisation of Basel III

The Group continues to closely monitor regulatory developments to ensure that the Group maintains a strong capital position. The final Basel III requirements in respect of Counterparty Credit Risk have been implemented as part of CRR2.

Further regulatory developments in respect of the finalisation of Basel III are expected in the near term. Exact implementation details will be confirmed once the finalised requirements are transposed into law (i.e. the CRR is further updated). Initial assessments signal upward pressure on RWAs, mostly in relation to operational risk.

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 30 June 2023 the Group has an MREL ratio of 31.4% of RWAs (31 December 2022: 33.7%).

The Group's MREL ratio is in excess of the target for 2023 and there is currently sufficient loss absorption and re-capitalisation capability. In the six months to 30 June 2023, the Group issued a € 0.75 billion social bond.

The Group has estimated its January 2024 requirement is 29.4% of RWA including the combined buffer requirement.

The Group continues to monitor changes in MREL requirements together with developments in the SRB's MREL Policy which has the potential to impact on the Group's MREL target.

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 June 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; S&P's expectation for the Irish economy to grow this year, AIB's asset quality to remain robust, higher interest rates and market consolidation to support AIB's business momentum.

	30 June 2023
Long term ratings	Moody's	S&P
Long term	A3	BBB
Outlook	Stable	Stable
Investment grade	P	P

	31 December 2022
Long term ratings	Moody's	S&P
Long term	A3	BBB
Outlook	Stable	Positive
Investment grade	P	P

Allied Irish Banks, p.l.c.

	30 June 2023
Long term ratings	Moody's	S&P
Long term	A1	A
Outlook	Stable	Stable
Investment grade	P	P
		31 December 2022
Long term ratings	Moody's	S&P
Long term	A1	A
Outlook	Stable	Positive

Return on Tangible Equity ("RoTE")

The RoTE for the six months to 30 June 2023 is 21.5% (2022: 9.6%).

Return on Tangible Equity	Half Year June 2023	2022
(RoTE)	€ m	€ m
Profit after tax	854	765
AT1 coupons paid	(33)	(65)
Attributable earnings	821	700
Average RWA	56,963	53,846
RWA * 13.5% CET1 target	7,690	7,269
Return on Tangible Equity	21.5 % (1)	9.6 %

(1) Annualised RoTE.

Note: RoTE is considered an Alternative Performance Measure.

RISK MANAGEMENT

• Update on risk management and governance Credit risk
• Overview
• Credit profile of the loan portfolio
• Analysis of loan portfolio by segment, internal credit ratings and ECL staging
• Internal credit grading profile by ECL staging
• Loans and advances to customers Asset class by segment
• Loans and advances to customers Residential mortgages
• Loans and advances to customers Republic of Ireland residential mortgages
• Loans and advances to customers Other personal
• Loans and advances to customers Property and construction
• Loans and advances to customers Non property business
• Gross loans movements and ECL allowance movements
• Credit ratings
• Forbearance
• Liquidity and funding risk

RISK MANAGEMENT

Update on risk management and governance

The Group has a strong risk management approach to identify all risk types including emerging risks in order to protect its customers and achieve the Group's strategy. This is outlined in the Group's Risk Management Framework, including the key principles and practices used to manage the Group's risks, providing a robust mechanism to ensure that new risks are promptly identified, assessed, managed and appropriately overseen from a risk governance perspective. Further details on how risk is managed within the Group are set out in the Risk Management section of the Annual Financial Report 2022 on pages 129 to 207. There has been no significant change to the Group's Risk Management Framework or approach during the period.

The Group's Principal risks and uncertainties are identified by risk management practices as well as the annual Material Risk Assessment (MRA) process. The Group considers risks that arise from the impact of external market developments, geopolitical events or other emerging risks which could potentially impact on our customers, earnings, capital and liquidity, as well as on our operations or reputation.

There have been no changes to the principal risks set out on pages 23 to 25 of the Annual Financial Report 2022. The Group's ten principal risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. Other factors not yet identified, or not currently material, may adversely affect the Group.

Economic uncertainties have dominated the risk agenda. In general, the economic environment of the first six months of 2023 has been better than expected with the sharp tightening of monetary policy taking time to have an effect. The persistence of inflation continued in the first half of the year, has led to higher interest rates from central banks, and market expectations for these higher rates to persist for longer.

New threats have manifested themselves which required the Group to consider their impact on its risk profile. These threats included the failure of Silicon Valley Bank ('SVB') in March 2023, and the collapse of some other US and European banks. While having no direct impacts on the Group, they created significant uncertainty in the banking sector especially the perceived threat of contagion. The fact that the sharp tightening of monetary policy played a key role in these developments highlighted the need for vigilance in the current environment as the pace and scale of such tightening can expose underlying fault lines where they exist.

In an environment of rising interest rates and cost pressures for both new and existing borrowers, the Group continues to ensure that high standards of prudent lending are maintained and those in vulnerable circumstances are treated appropriately. In this regard the Group continues to ensure that, where appropriate forbearance solutions are necessary, these are tailored to individual customer circumstances and aligned to regulatory guidance and expectations.

Critical Judgements at 30 June 2023:

• Economic data in recent months has generally exceeded expectations (particularly for the Irish economy) though uncertainty remains regarding the lagged impact of high interest rates on the economy. In addition, the risk of a wage-price spiral could exacerbate the problem of elevated (particularly core) inflation as the labour market reaches capacity constraints. The tightening of financial conditions also risks contagion effects into the banking and commercial real estate (CRE) sectors that could generate substantial headwinds to economic activity over the next year or so.
• On foot of this, the Group's view is that, notwithstanding more encouraging economic indicators in the first half of 2023, risks to the economic outlook remain tilted to the downside. For the purposes of IFRS 9 ECL reporting, the following weightings for end-June 2023 have been applied: Base scenario 50% (change +5% compared to year-end 2022), Upside scenario 10% (no change), Downside 1 scenario 30% (no change) and Downside 2 scenario 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 39. Under the 100% Downside 2 ('Credit Crunch') scenario, a 19% increase in ECL compared to the reported ECL allowance stock is estimated.
• ECL allowance stock relating to post model adjustments (PMAs) has increased by € 58 million in the period to € 666 million (31 December 2022: € 608 million). ECL allowance stock relating to PMAs as a percentage of total ECL stock also increased slightly to 41% (31 December 2022: 37%). The increase in PMAs is driven by charges in relation to commercial property to address potential adverse impacts from higher interest rates and lower valuations in performing and non-performing property loans. Further details are outlined in the management judgements section on pages 40 and 41.

Details on the various aspects of the Group's credit risk management are outlined on pages 135 to 151 of the Annual Financial Report 2022 with the Group's accounting policies for financial assets included in note 1 to the consolidated financial statements on pages 239 to 241.

There have been no changes to the Group's accounting policies for financial assets since 31 December 2022. In determining ECL allowance, the Group keeps under constant review its bases of measurement, methodologies and judgements as outlined on pages 140 to 151 of the Annual Financial Report 2022.

Macroeconomic scenarios and weightings*

The macroeconomic scenarios used by the Group for ECL allowance calculations have been developed in a consistent way with that set out in the Annual Financial Report 2022 and have been subject to the Group's established governance process.

Macroeconomic scenarios*

Economic recovery remains fragile in a number of major economies (such as the US and the Euro Area). Economic activity has held up better than expected to date in 2023, particularly in Ireland, with headline inflation in decline, an improvement in some business survey data especially for services, and a full reopening of the economy in China. Nevertheless, the Group's view is that the risks to the outlook still remain tilted to the downside. The key risks to the economic outlook during the reporting period are a persistence of high inflation (particularly core inflation) and high interest rates, unintended side-effects of a tightening of financial conditions on the banking and non-bank financial sector as well as the CRE market.

The Group has applied four scenarios in the calculation of ECL that, in its view, reflect the heightened degree of uncertainty regarding the economic outlook, as at the reporting date. These four scenarios consist of a base case scenario, in addition to three alternative scenarios (consisting of one upside and two downside scenarios that consider inter alia varying degrees of pessimism in relation to inflation, a tightening of financial conditions leading to a credit crunch and the impact of the war in Ukraine on global economic activity). 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.

Base case: The backdrop remains challenging as the global economy has entered a period of subdued global growth, elevated inflation and high interest rates. Stresses have also emerged in parts of the financial system. Advanced economies, in particular, are expected to see a sharp deceleration in growth rates in the period 2023-2024 from those recorded last year. Uncertainty also remains elevated.

Irish GDP is projected to grow by circa 4% per annum on average over the period 2023-2025. AIB forecasts are on the conservative side as there could be downward revisions to global growth forecasts in the months ahead from a likely tightening of credit conditions. Prospects are for weaker activity in the US and Euro Area with GDP growth of 1.0% and 0.8% in 2023, respectively, while both economies are at risk of a technical recession (i.e. two consecutive quarters of negative growth) as the year progresses. Activity is likely to pick up moderately in 2024 (growth in GDP of 1.2% is expected in both economies) as a further squeeze in real household incomes is alleviated somewhat by lower inflation while some of the tightening in monetary conditions in 2022-2023 is reversed. The UK economy is expected to contract by 0.5% in 2023 and expand by just 0.2% in 2024, picking up to 1% growth in 2025.

Unemployment has fallen to very low levels in nearly all economies. It is expected to rise only moderately during 2023-2025 (e.g., averaging 4.9% and 4.6% in Ireland and the UK, respectively, over this period) as most labour markets remain characterised by a shortage of workers and high job vacancies. Inflation hit 40-year highs last year and has now started to fall back, helped by sharp declines in wholesale energy prices. However, core inflation rates remain sticky and are expected to fall only slowly. Thus, it is likely to be late 2024/2025 before inflation falls back to its 2% target level. In Ireland, inflation is projected to ease from an average of 5% in 2023 to 2.2% in 2025.

*Forms an integral part of the condensed consolidated interim financial statements

Macroeconomic scenarios and weightings* continued Official interest rates are expected to peak in the first half of 2023, at 4.875% in the US, 3.75% in the Eurozone and 4.5% in the UK (in the Euro Area, these are expected to remain at 3% from Q2 2025 onwards). House price inflation is forecast to slow to 1.0% in Ireland by end 2023, while a fall of 8% is expected in UK house prices during this year. From 2025 onwards, moderate growth of 2.0-2.5% in house prices is projected for both markets. CRE prices fell sharply in Ireland and UK in the second half of 2022 and are expected to decline by a further 8-9% in 2023 with a modest recovery in CRE prices in both markets from 2024 onwards.

Downside 1 ('Persistently high inflation'): Amidst deepening geopolitical fragmentation, fresh upward pressure on commodity prices with higher wage demands and other costs to businesses and inflation becomes more embedded remaining very high in 2023-2024. Central banks are forced to continue raising interest rates into Q2 2024. Conditions in financial markets continue to tighten, with further rises in bond yields and credit spreads and a resumption of falls on stock markets.

As a result, the major economies all experience a significant recession in 2023, with the downturn continuing in the UK in 2024. This is followed by a sluggish recovery in activity. In Ireland's case, GDP growth slows sharply to 2% in 2023 and 2024. GDP is lower by 3.3-3.5% in 2025 in most economies compared to the base and is almost 5% lower in Ireland. There is a marked rise in unemployment everywhere, climbing to circa 8% in both Ireland and the UK. Inflation takes longer to ease in this scenario (e.g., in 2024 it averages 5% compared to 2.8% in the Base scenario for Ireland).

There are very big falls in property prices. House prices in Ireland & the UK are predicted to decline by between 10% and 15%, respectively, in 2023-2024. There are even bigger falls in CRE prices of 15%-16% in both markets in 2023-24.

Central banks are assumed to raise rates to 5.25%, 5.75% and 6.125% in the Euro Area, UK and US, respectively, by mid-2024. Rates are then cut aggressively from Q4 2024 onwards as inflation falls sharply.

Downside 2 ('Credit crunch'): Monetary tightening has had a more negative impact on economic activity than central banks anticipated. The sharp rise in interest rates continues to expose vulnerabilities in the financial system in advanced economies during 2023, as well creating further difficulties servicing and refinancing elevated debts and deficits in Emerging Market Economies. Banks take a far more cautious approach to lending activities, with a consequent marked tightening of credit and financial conditions. 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 in effect 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 2023-24. Activity in the US, UK and Euro Area economies are circa 7% lower by 2025 than in the Base scenario while Irish GDP (with growth stagnating) is 8.8% lower. There is a modest pick up in global and domestic activity from 2025 onwards after interest rates are lowered aggressively in 2023-2024 following a sharp fall-back in inflation.

Labour markets are severely impacted with Irish unemployment rising sharply to average 11% by 2026 while in the larger economies, such as the UK and the US, the rate climbs 10.5% and 9.3%, respectively.

Given that the main advanced economies enter a deep recession in 2023-2024, there are very large property price falls in Ireland and the UK. Irish and UK residential property prices fall by 25% and 29%, respectively by Q2 2025, followed by only modest recoveries in 2026-27. CRE prices in Ireland and the UK fall by 35-36% by Q2 2025 also followed by a slow recovery in 2026-27.

Central banks lower rates aggressively from Q2 2023 onwards as economies enter a deep recession such that, by Q4 2024, rates are at 1% in both the Euro Area and the UK while in the US, they reach 1.625% as inflation eases back to 2% in these economies.

Upside ('Quick economic recovery'): A combination of an end to the War in Ukraine during 2023 and a faster than anticipated rundown of personal and corporate savings, boosts business and consumer confidence, and has a positive impact on financial markets and lifting global growth.

In this scenario, GDP is some 3.3% higher in most economies than in the base case by 2025. Irish GDP growth averages 5% over the period 2023-2025. World GDP growth then decelerates to trend over 2026-2027. As a result, unemployment falls further in all economies. With more robust demand in the economy, inflation increases somewhat but is slower to decline than in the base case, only easing back to 2% by end 2026/2027.

Irish and UK property prices perform much better than in the base case scenario. Irish house price rise by 4-4.5% per annum over 2023-25, with UK prices up 2-3%. Meanwhile, CRE rise by 3-3.5% on average per annum over 2023-2025 in both countries.

Central banks continuing hiking rates in the second half of 2023 and to much higher levels than in the base case. Rates rise to a peak of 5.875% in the US, 5.5% in the UK, 4.5% in the Eurozone by end 2023. They are kept on hold at these levels until the second half of 2027.

*Forms an integral part of the condensed consolidated interim financial statements

Macroeconomic scenarios and weightings* continued

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 30 June 2023 (average over 2023-2027) and at 31 December 2022 (average over 2023-2027). Further detail on the scenarios as at 31 December 2022 can be found in the Annual Financial Report 2022 on pages 144 to 148.

			5 year (2023-2027) average forecast	June 2023	December 2022 5 year (2023-2027) average forecast
Macroeconomic factor (%)	Base	Downside 1 ('Persistently high inflation')	Downside 2 ('Credit crunch')	Upside ('Quick economic recovery')	Base	Downside 1 ('Lower growth in 2023')	Downside 2 ('Energy shock and persistently high inflation')	Upside ('Quick economic recovery')
Republic of Ireland
GDP growth	3.6	3.1	2.1	4.3	3.6	3.4	2.6	4.3
Residential property price growth	2.1	—	(4.5)	3.6	2.5	0.2	(4.3)	3.8
Unemployment rate	5.0	7.2	9.4	3.9	5.0	6.8	8.5	3.9
Commercial property price growth	0.6	(1.6)	(6.7)	2.7	1.0	(1.6)	(6.6)	2.7
Employment growth	1.6	0.9	—	1.9	1.6	1.1	0.2	1.9
Average disposable income growth	5.1	4.6	3.2	6.1	5.1	4.3	3.4	6.0
Inflation	2.8	3.8	2.6	3.4	2.7	2.7	3.9	3.5
United Kingdom
GDP growth	0.7	—	(0.6)	1.4	0.4	0.3	(0.3)	1.5
Residential property price growth	(0.2)	(1.6)	(5.7)	2.2	0.2	(1.6)	(5.7)	2.2
Unemployment rate	4.7	7.2	9.1	3.7	5.1	6.8	8.3	3.7
Commercial property price growth	1.0	(2.0)	(6.9)	2.9	0.2	(2.2)	(6.9)	2.6
Inflation	3.0	4.2	2.8	4.1	3.3	3.3	4.4	4.2

*Forms an integral part of the condensed consolidated interim financial statements

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 30 June 2023. Page 147 of the Annual Financial Report 2022 provides the same detail for the 31 December 2022 scenarios.

										30 June 2023
					Base	('Persistently high inflation')			Downside 1
Macroeconomic factor	2023 %	2024 %	2025 %	2026 %	2027 %	2023 %	2024 %	2025 %	2026 %	2027 %
Republic of Ireland
GDP growth	4.0	3.7	4.0	3.5	3.0	2.0	2.0	3.2	4.0	4.5
Residential property price growth	1.0	2.0	2.5	2.5	2.5	(8.0)	(2.5)	5.0	3.0	2.5
Unemployment rate	4.8	5.0	5.0	5.0	5.0	5.8	7.1	7.8	7.9	7.5
Commercial property price growth	(9.0)	3.0	3.0	3.0	3.0	(12.5)	(4.5)	3.0	3.0	3.0
Employment growth	1.5	1.5	1.7	1.6	1.5	0.4	0.2	0.8	1.4	2.0
Average disposable income growth	6.3	5.3	4.7	4.6	4.5	5.5	4.8	4.0	4.0	4.5
Inflation	5.0	2.8	2.2	2.0	2.0	7.5	5.0	2.5	2.0	2.0
United Kingdom
GDP growth	(0.5)	0.2	1.0	1.3	1.5	(1.6)	(2.2)	0.5	1.5	1.7
Residential property price growth	(8.0)	1.0	2.0	2.0	2.0	(11.0)	(4.5)	1.5	3.0	3.0
Unemployment rate	4.2	4.6	5.0	5.0	4.8	5.5	7.0	8.0	8.0	7.5
Commercial property price growth	(8.0)	2.0	3.0	4.0	4.0	(12.5)	(3.0)	1.5	2.0	2.0
Inflation	6.3	2.5	2.0	2.0	2.0	8.5	5.5	3.0	2.0	2.0

	Downside 2 ('Credit crunch')					Upside ('Quick economic recovery')
Macroeconomic factor	2023 %	2024 %	2025 %	2026 %	2027 %	2023 %	2024 %	2025 %	2026 %	2027 %
Republic of Ireland
GDP growth	0.5	—	1.8	3.5	4.5	5.5	4.5	5.0	3.7	3.0
Residential property price growth	(11.5)	(12.5)	(1.0)	1.0	1.5	4.0	4.5	4.0	3.0	2.5
Unemployment rate	6.3	8.7	10.6	11.0	10.5	4.3	4.1	3.8	3.6	3.6
Commercial property price growth	(17.5)	(18.5)	(4.0)	2.5	4.0	4.0	3.0	2.5	2.0	2.0
Employment growth	(0.5)	(1.4)	(1.0)	0.7	2.0	2.3	2.1	2.0	1.7	1.5
Average disposable income growth	4.0	2.5	2.5	3.0	3.8	8.0	6.5	6.0	5.2	5.0
Inflation	4.5	2.3	2.0	2.0	2.0	5.5	4.0	3.0	2.5	2.0
United Kingdom
GDP growth	(3.0)	(4.0)	0.5	1.5	2.0	0.8	1.4	1.8	1.7	1.4
Residential property price growth	(14.0)	(16.0)	(1.0)	1.0	1.5	3.0	2.0	2.0	2.0	2.0
Unemployment rate	6.3	8.5	10.0	10.5	10.0	3.8	3.7	3.6	3.7	3.8
Commercial property price growth	(17.0)	(18.5)	(5.5)	2.5	4.0	3.5	4.0	3.0	2.0	2.0
Inflation	5.8	2.2	2.0	2.0	2.0	7.5	5.0	3.7	2.5	2.0

The key differences to the scenario forecasts versus December 2022 relate to a slight downward revision to inflation in our main markets, a further weakening of house prices, particularly in the UK in 2023, arising from higher interest rates despite a less pessimistic outlook for the UK economy where there have been upwards revisions to GDP growth and lower unemployment rate.

Overall, macroeconomic data have generally been better than expected in the first half of 2023 and consensus forecasts have been revised upward as a result. However, recent developments in relation to the banking sector and associated market volatility

pose a risk to the real economy and could lead to a tightening in financial conditions, weaker lending activity and lower confidence. As a result, the Group has maintained a conservative stance in terms of our projections.

The four scenarios detailed above are designed to capture a reasonable range of plausible outcomes. The ECL allowance reflects a weighted average of the credit loss estimates under the four scenarios.

*Forms an integral part of the condensed consolidated interim financial statements

Macroeconomic scenarios and weightings* continued

The weights for the scenarios are ultimately based on expert judgement, with reference to external market information where possible, though the decision is also informed by analysis using more formal econometric methods, e.g., using Early Warning Indicators of future turning points in economic activity to assess the relative probabilities of moderate and more severe downturns.

The weights that have been applied as at the reporting date are:

Scenario	Weighting		Weighting
	30 June 2023		31 December 2022
Base	50 %	Base	45 %
Downside 1 ('Persistently high inflation')	30 %	Downside 1 ('Lower growth in 2023')	30 %
		Downside 2 ('Energy shock and persistently
Downside 2 ('Credit crunch')	10 %	high inflation')	15 %
Upside ('Quick economic recovery')	10 %	Upside ('Quick economic recovery')	10 %

Data releases for many economies in recent months have been somewhat more encouraging than was the case in December 2022. For example, Irish unemployment has trended downwards accompanied by strong employment gains, inward foreign direct investment remains fairly robust as has corporation and other tax receipts, while wage inflation remains quite moderate. In the UK, the economy is expected to experience a mild recession during 2023 with growth likely to remain below trend during 2024 while expectations of recession have fallen back in the US and Euro Area.

The Group's view is that risks remain tilted to the downside, with headwinds facing the global economy. The higher weighting (relative to the upside scenario) that has been assigned to the combined downside scenarios, as at 30 June 2023, reflects this assessment. The key drivers of these include inter alia uncertainty surrounding the lagged impact of aggressive monetary policy tightening on economic activity which has recently exposed vulnerabilities in the financial and commercial real estate sectors, particularly in the US, that could tip the economy there into recession. Moreover, persistently high underlying inflation remains a cause for concern.

Scenario	Weighting		Weighting
	30 June 2023		31 December 2022
Base	50 %	Base	45 %
Downside 1 ('Persistently high inflation')	30 %	Downside 1 ('Lower growth in 2023')	30 %
Downside 2 ('Credit crunch')	10 %	Downside 2 ('Energy shock and persistently high inflation')	15 %

In assessing the adequacy of the ECL allowance, the Group has considered 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 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.

*Forms an integral part of the condensed consolidated interim financial statements

38

Sensitivities

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 are provided which indicate the approximate impact on the current ECL allowance before the application of probability weights to the forward looking macroeconomic scenarios. The sensitivities provide an indication of ECL movements largely based on changes in model parameters with post model adjustments sensitivity predominantly reflected only where scenario specific features form an integral part of the adjustment. Further details on post model adjustments are outlined on pages 40 and 41.

Relative to the base scenario, in the 100% downside 'Persistently high inflation' and 'Credit crunch' scenarios, the ECL allowance increases by 11% and 25% respectively. In the 100% upside scenario, the ECL allowance declines by 5%, showing that the ECL impact of the two downside scenarios is greater than that of the upside scenario. For 30 June 2023, a 100% downside 'Persistently high inflation' and 'Credit crunch' scenario sees a higher ECL allowance sensitivity of € 172 million and € 408 million respectively compared to base (€ 86 million and € 322 million respectively compared to reported). Slightly higher relative impacts are observed for the AIB UK portfolio on an overall reported basis.

					ECL allowance at 30 June 2023
	Reported	100% Base	100% Downside Scenario 1 ('Persistently high inflation')	100% Downside Scenario 2 ('Credit crunch')	100% Upside Scenario ('Quick economic recovery')
	Total	Total	Total	Total	Total
Loans and advances to customers	€ m	€ m	€ m	€ m	€ m
Residential mortgages	280	269	284	336	260
Other personal	178	174	182	194	170
Property and construction	405	391	426	453	371
Non-property business	775	724	829	951	685
Total	1,638	1,558	1,721	1,934	1,486
Off-balance sheet loan commitments	48	43	49	69	39
Financial guarantee contracts	16	15	18	21	12
	1,702	1,616	1,788	2,024	1,537
Of which:
AIB UK segment	225	211	247	263	183

					ECL allowance at 31 December 2022
	Reported	100% Base	100% Downside Scenario ('Lower growth in 2023')	100% Downside Scenario ('Energy shock and persistently high inflation')	100% Upside Scenario ('Quick economic recovery')
	Total	Total	Total	Total	Total
Loans and advances to customers	€ m	€ m	€ m	€ m	€ m
Residential mortgages	283	275	284	318	271
Other personal	177	175	179	185	173
Property and construction	320	298	331	385	282
Non-property business	838	790	878	977	711
Total	1,618	1,538	1,672	1,865	1,437
Off-balance sheet loan commitments	59	55	60	65	53
Financial guarantee contracts	19	17	20	22	13
	1,696	1,610	1,752	1,952	1,503
Of which:
AIB UK segment	245	214	259	336	196

Management judgements*

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. All 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.

The PMAs approved for 30 June 2023 (and 31 December 2022 comparison) are set out below and categorised as follows:

• NPE resolution strategy ECL adjustments where the current model does not take into account alternative resolution strategies such as portfolio sales and to ensure that downside risks are appropriately 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.

						30 June 2023
	Residential mortgages	Other personal	Property and construction	Non-property business	Inter bank exposure	Total
Management judgements	€ m	€ m	€ m	€ m	€ m	€ m
NPE resolution	136	2	73	77	—	288
Emerging headwinds	43	11	114	126	—	294
Macroeconomic factors	20	—	—	—	—	20
Other	—	—	—	50	14	64
PMA total	199	13	187	253	14	666

						31 December 2022
	Residential mortgages	Other personal	Property and construction	Non-property business	Inter bank exposure	Total
Management judgements	€ m	€ m	€ m	€ m	€ m	€ m
NPE resolution	140	—	37	73	—	250
Emerging headwinds	43	11	69	124	—	247
Macroeconomic factors	20	—	10	20	—	50
Other	—	—	—	61	—	61
PMA total	203	11	116	278	—	608

NPE resolution

At 30 June 2023, the PMA related to mortgages which have been classified as non-performing for a considerable length of time has been retained to reflect expected outcomes from alternative strategies which may be adopted, such as portfolio sales. LGD models are based on empirical internal data assuming business as usual resolution and given that the models do not account for alternative strategies, post model adjustments have been applied to reflect the potential outcomes, pending model redevelopment.

Post model adjustments related to non-performing property and non-property business loans are required as the loss allowance associated with these loans does not adequately account for alternative resolution strategies, such as portfolio loan sales. At 30 June 2023 the increased post model adjustment for nonperforming property loans reflects the potential reduction in asset values, particularly within commercial real estate.

Emerging headwinds

Particular focus from management continues to be on assessing portfolios impacted by the combined effects of cost of living challenges, persistent inflationary pressures and rising interest rates 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 could be an increase in credit risk which could have a negative impact on the asset quality of the Group's loan portfolios.

Within Capital Markets a PMA of € 95 million on property is to address potential adverse sector impacts due to a reduction in commercial property values and higher interest rates.

A stage movement PMA transferring € 1.6 billion (of which € 0.2 billion relates to AIB UK) of commercial investment property exposures to Stage 2 reflects a proactive and forward-looking approach. This predominately relates to the commercial investment office portfolio and reflects changes in market dynamics due to increased interest rates and is based on a sensitivity analysis which included stressing asset values, where a potential Interest cover breach under stress could occur or where loans are unlikely to meet business as usual refinance terms.

The Capital Markets non-property business PMA (€ 67 million) due to the potential impact of inflation (including higher energy costs) and higher interest rates on non-property business has been retained but at a reduced level reflecting resilient performance of the underlying portfolios and cases completing forbearance probation periods.

*Forms an integral part of the condensed consolidated interim financial statements

Credit risk – Overview Management judgements* continued Emerging headwinds continued

Within the Retail Banking portfolio, a PMA of € 72 million has been retained to reflect the potential credit quality impacts due to persistent and forecast additional interest rate increases and the increased cost of living. The PMA has been applied within the performing portion of the residential mortgage portfolio, € 43 million, other personal portfolio, € 11 million, and nonproperty business portfolio, € 18 million.

Within AIB UK, a PMA of £ 51 million (£ 35 million non-property business and £ 16 million property) also reflects the impact of higher interest rates and a projected decline in commercial real estate values.

Macroeconomic factors

In Retail Banking, an ECL adjustment continues to be applied to reflect limitations within the mortgage model relating to the house price index ('HPI') growth. This is to ensure that the ECL remains appropriate for the underlying portfolio acknowledging the limitations within the model. This adjustment amounted to € 20 million at 30 June 2023.

Other

Syndicated & International Finance ('SIF')

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 needed to be increased for this portfolio.

Accordingly, expert credit judgement has determined a post model adjustment is required of € 50 million at 30 June 2023.

Bank PD Model

The Group's IFRS 9 PD model for exposure to Bank counterparties has been subject to ongoing recalibration enhancements. At 30 June 2023 a post model adjustment of € 14 million has been incorporated to reflect the expected impact from the deployment of the recalibrated model in the second half of 2023.

Other post model adjustments in this category are not individually significant.

ECL governance*

The key governance points in the ECL approval process during the half-year to 30 June 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.

*Forms an integral part of the condensed consolidated interim financial statements

Key Credit Profile Metrics at 30 June 2023:

• Overall credit quality remains robust against the backdrop of inflation and higher interest rates. There was a net credit impairment charge of € 91 million in the half-year to 30 June 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. Our overall approach remains proactive, comprehensive and forward-looking and is reflected in an expected credit loss coverage rate of 2.6%. (31 December 2022: 2.7%).
• Total gross loans and advances to customers have increased from € 61.2 billion to € 62.8 billion in the half-year to 30 June 2023 which reflects new lending of € 5.6 billion exceeding redemptions / repayments of € 4.9 billion in addition to a further € 0.7 billion relating to the Ulster Bank corporate and commercial portfolio acquisition.
• Total new lending in the half-year to 30 June 2023 was € 5.6 billion which reflects an increase of € 0.2 billion versus the comparable period last year (30 June 2022: € 5.4 billion). Mortgage lending was broadly in line with the half-year to 30 June 2022 while personal lending and non-property business lending increased by 29% and 12% respectively, however property lending decreased by 20%.
• Stage 2 loans have increased by € 2.2 billion to € 8.2 billion (30 December 2022: € 6.0 billion). The increase was driven by the property and construction portfolio with an increase in Stage 2 loans of € 2.3 billion to € 3.7 billion (30 December 2022: € 1.4 billion) due to a net € 1.1 billion transferring from Stage 1 to Stage 2 primarily due to loans triggering a qualitative significant increase in credit risk event during the period. A further € 1.6 billion of commercial investment exposures (predominately commercial investment – office) transferred to Stage 2 as a result of a post model adjustment reflecting a proactive and forward-looking credit management approach to this sector following changes in market dynamics due to increased interest rates and stressing asset values where a potential Interest cover breach under stress could occur or where loans are unlikely to meet business as usual refinance terms.

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 summarises financial instruments in the statement of financial position:*

				Half-year to 30		Half-year
			30 June 2023*	June 2023*			31 December 2022*	30 June 2022*
			Statement	Income			Statement of financial	Income
			of financial	statement		statement
		position					position
	Exposure	ECL	Carrying	Net credit	Exposure	ECL	Carrying	Net credit
		allowance	amount	impairment (charge)/		allowance	amount	impairment writeback/
				writeback				(charge)
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Cash and balances at central banks	36,088	—	36,088	—	38,138	—	38,138	—
Loans and advances to banks	1,845	(2)	1,843	(2)	1,502	—	1,502	—
Loans and advances to customers:
at amortised cost	62,648	(1,638)	61,010	(91)	60,982	(1,618)	59,364	308
at FVTPL	174	n/a	174	n/a	249	n/a	249	n/a
	62,822	(1,638)	61,184	(91)	61,231	(1,618)	59,613	308
Securities financing	7,631	(4)	7,627	(3)	6,283	(1)	6,282	1
Investment debt securities(1)	16,214	(3)	16,211	(9)	15,971	(3)	15,968	(2)
Other – Stockbroking client debtors	84	(1)	83	—	36	(1)	35	—
– Items in course of collection	62	—	62	—	51	—	51	—
Loan commitments	15,861	(48)	(48)	11	15,060	(59)	(59)	—
Financial guarantee contracts	765	(16)	(16)	3	802	(19)	(19)	2
Total				(91)				309

(1) ECL allowance amounting to € 3 million (31 December 2022: € 3 million) included in carrying amount of investment securities at amortised cost.

For further details on the net credit impairment charge in the six months to 30 June 2023, see 'Net credit impairment (charge)/ writeback' (note 10).

*Forms an integral part of the condensed consolidated interim financial statements

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.

The following table analyses loans and advances to customers at amortised cost by segment, internal credit ratings and ECL staging:

Amortised cost

					30 June 2023					31 December 2022
	Retail Banking	Capital Markets	AIB UK	Group	Total	Retail Banking	Capital Markets	AIB UK	Group	Total
Gross carrying amount	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Residential mortgages	28,992	489	948	—	30,429	28,764	528	987	—	30,279
Other personal	2,719	45	77	—	2,841	2,600	49	74	—	2,723
Property and construction	492	6,487	2,285	—	9,264	452	6,166	1,999	—	8,617
Non-property business	3,221	12,700	4,172	21	20,114	3,026	12,177	4,145	15	19,363
Total	35,424	19,721	7,482	21	62,648	34,842	18,920	7,205	15	60,982
Analysed by internal credit ratings(1)
Strong	24,601	13,563	5,176	1	43,341	24,294	12,813	4,763	—	41,870
Satisfactory	8,131	4,165	1,441	20	13,757	7,654	4,023	1,448	15	13,140
Total strong/satisfactory	32,732	17,728	6,617	21	57,098	31,948	16,836	6,211	15	55,010
Criticised watch	1,170	966	274	—	2,410	1,241	496	203	—	1,940
Criticised recovery	374	553	264	—	1,191	431	1,178	405	—	2,014
Total criticised	1,544	1,519	538	—	3,601	1,672	1,674	608	—	3,954
Non-performing	1,148	474	327	—	1,949	1,222	410	386	—	2,018
Gross carrying amount	35,424	19,721	7,482	21	62,648	34,842	18,920	7,205	15	60,982
Analysed by ECL staging
Stage 1	32,520	14,023	5,808	21	52,372	31,805	15,317	5,725	15	52,862
Stage 2	1,690	5,224	1,347	—	8,261	1,749	3,193	1,094	—	6,036
Stage 3	1,129	474	327	—	1,930	1,201	410	386	—	1,997
POCI	85	—	—	—	85	87	—	—	—	87
Total	35,424	19,721	7,482	21	62,648	34,842	18,920	7,205	15	60,982
ECL allowance – statement of financial position
Stage 1	96	85	44	—	225	88	132	43	—	263
Stage 2	114	478	106	—	698	112	440	94	—	646
Stage 3	479	161	66	—	706	468	133	99	—	700
POCI	9	—	—	—	9	9	—	—	—	9
Total	698	724	216	—	1,638	677	705	236	—	1,618
ECL allowance cover percentage	%	%	%	%	%	%	%	%	%	%
Stage 1	0.3	0.6	0.8	—	0.4	0.3	0.9	0.8	—	0.5
Stage 2	6.8	9.2	7.9	—	8.5	6.4	13.8	8.6	—	10.7
Stage 3	42.4	34.0	20.0	—	36.6	39.0	32.4	25.6	—	35.1
POCI	10.3	—	—	—	10.3	10.7	—	—	—	10.7
					Half-year 30 June 2023					Half-year 30 June 2022
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of ECL allowance	60	40	7	—	107	(193)	(85)	2	—	(276)
Recoveries of amounts
previously written-off	(11)	(4)	(1)	—	(16)	(27)	(2)	(3)	—	(32)
Net credit impairment charge/
(writeback)	49	36	6	—	91	(220)	(87)	(1)	—	(308)
	%	%	%	%	%	%	%	%	%	%
Net credit impairment charge/ (writeback) on average loans	0.14	0.19	0.08	—	0.15	(0.32)	(0.27)	(0.01)	—	(0.26)

(1) Further analysis of internal credit grade profile by ECL staging is set out on page 47. Further details on the internal credit ratings are outlined on pages 136 and 137 of the Annual Financial Report 2022.

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio

The following table analyses loans and advances to customers at FVTPL by segment and internal credit ratings:

FVTPL

					30 June 2023				31 December 2022
	Retail Banking	Capital Markets	AIB UK	Group	Total	Retail Banking	Capital Markets	AIB UK	Group	Total
Carrying amount	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Property and construction	—	151	—	—	151	—	226	—	—	226
Non-property business	—	23	—	—	23	—	23	—	—	23
Total	—	174	—	—	174	—	249	—	—	249

Analysed by internal credit ratings

Strong	—	23	—	—	23	—	96	—	—	96
Satisfactory	—	—	—	—	—	—	—	—	—	—
Total strong/satisfactory	—	23	—	—	23	—	96	—	—	96
Total criticised	—	—	—	—	—	—	—	—	—	—
Non-performing	—	151	—	—	151	—	153	—	—	153
Total	—	174	—	—	174	—	249	—	—	249

Gross loans and advances to customers

Total gross loans and advances to customers increased by € 1.6 billion in the half-year to June 2023. Of the total portfolio of € 62.8 billion, € 62.6 billion is measured at amortised cost with the remaining € 0.2 billion being measured at fair value through profit or loss. The increase in the half-year to June 2023 was influenced by a further € 0.7 billion relating to the Ulster Bank corporate and commercial portfolio acquisition. New lending activity of € 5.6 billion represented a slight increase of € 0.2 billion compared to the same period last year, however this was largely offset against redemptions/repayments which amounted to € 4.9 billion. New lending in Retail Banking accounted for € 2.8 billion and largely related to new mortgage lending (€ 1.7 billion) which was in line with the half-year to June 2022. Capital Markets accounted for € 2.1 billion which predominately reflected increases in corporate lending offset by reductions in property related lending. Overall, from a segment perspective, Capital Markets and Retail Banking increased by € 0.7 billion and € 0.6 billion respectively, while AIB UK also increased by € 0.3 billion.

Of the total loans to customers, € 57.1 billion or 91% are rated as either 'strong' or 'satisfactory' which is an increase of € 2.0 billion (31 December 2022: € 55.1 billion or 90%), this increase was evidenced across all business units. The 'criticised' classification includes 'criticised watch' of € 2.4 billion and 'criticised recovery' of € 1.2 billion, the total of which decreased by € 0.3 billion in the half-year to June 2023. The 'criticised watch' portfolio increased by € 0.5 billion, however this increase was influenced by the 'criticised recovery' portfolio which decreased by € 0.8 billion due to the upgrading of customers predominately in the non-property business portfolio exiting forbearance measures. The total performing book has increased by € 1.6 billion to € 60.7 billion or 97% of gross loans and advances to customers (31 December 2022: € 59.1 billion and 96%).

Overall the credit quality of the total portfolio has remained robust however emerging stress from current inflationary pressures and rising interest rates is manifesting in an increase in Stage 2 migration. Stage 2 loans have increased by € 2.2 billion to € 8.2 billion as Stage 1 loans decreased by € 0.5 billion to € 52.4 billion.

The increase in Stage 2 loans was driven by the property and construction portfolio following € 1.1 billion transferring from Stage 1 to 2 primarily due to loans triggering a qualitative significant increase in credit risk event during the period. A further € 1.6 billion of commercial investment exposures (predominately commercial investment – office) transferred to Stage 2 as a result of a post model adjustment reflecting a proactive and forward looking credit management approach to this sector following changes in market dynamics due to increased interest rates and stressing asset values where a potential Interest cover breach under stress could occur or where loans are unlikely to meet business as usual refinance terms. These transfers to Stage 2 in the property and construction portfolio were slightly offset by repayments of € 0.3 billion and net stage transfers out of Stage 2 of € 0.2 billion.

Stage 3 loans have decreased by € 0.1 billion to € 1.9 billion. Redemptions/repayments, write-offs and disposals totalling € 0.4 billion were offset by net transfers to Stage 3 of € 0.3 billion. Transfers to Stage 3 in the period predominately related to cases in the property and non-property business portfolios.

Non-performing loans

The table below sets out the Group's non-performing loans and advances to customers by asset class and by time in default at 30 June 2023 and 31 December 2022:

					30 June 2023
	Residential mortgages	Other personal	Property and construction	Non-property business	Total
Non-performing loans	€ m	€ m	€ m	€ m	€ m
At amortised cost	643	163	452	691	1,949
At FVTPL	—	—	151	—	151
Total non-performing loans and advances to customers	643	163	603	691	2,100
Non-performing loans as a % of total loans and advances
to customers	2.1 %	5.7 %	6.4 %	3.4 %	3.3 %
ECL allowance as a % of non-performing loans and
advances to customers at amortised cost	31 %	67 %	34 %	37 %	37 %
Split of non-performing loans and advances by time in default
Legacy/Pre 31 December 2018	126	9	30	28	193
Non Legacy/Post 31 December 2018	517	154	573	663	1,907
	643	163	603	691	2,100

					31 December 2022
	Residential mortgages	Other personal	Property and construction	Non-property business	Total
Non-performing loans	€ m	€ m	€ m	€ m	€ m
At amortised cost	657	180	406	775	2,018
At FVTPL	—	—	153	—	153
Total non-performing loans and advances to customers	657	180	559	775	2,171
Non-performing loans as a % of total loans and advances
to customers	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 %
Split of non-performing loans and advances by time in default
Legacy/Pre 31 December 2018	155	11	38	36	240
Non Legacy/Post 31 December 2018	502	169	521	739	1,931
	657	180	559	775	2,171

Total Group non-performing loans have decreased by € 0.1 billion or 3% to € 2.1 billion in the half-year to 30 June 2023 (31 December 2022: € 2.2 billion) reflecting net underlying decreases. The total Group non-performing loans portfolio consists of € 2.0 billion in loans and advances to customers measured at amortised cost together with € 0.1 billion of loans measured at FVTPL.

The ECL allowance cover rate on non-performing loans (at amortised cost) has increased to 37% in the half-year to 30 June 2023 (31 December 2022: 35%). The increase is primarily driven by post model adjustments relating to a cohort of non-mortgage loans which have been included in the scope of alternative recovery strategies such as portfolio sales, as well as the ongoing and persistent impact of economic uncertainty on non-legacy property and non-property business exposures. Non-performing loans as a percentage of total loans and advances to customers is 3.3% compared to 3.5% at 31 December 2022.

Exposures that entered into default prior to 31 December 2018 amount to € 0.2 billion or 0.3% of total loans and advances to customers (31 December 2022 € 0.2 billion or 0.4%) and are classified as legacy. The reduction in the period of 20% is due to cures and the remaining balances relate to exposures which may form part of alternative recovery strategies.

Exposures that have defaulted after 31 December 2018 amount to € 1.9 billion or 3.0% of total loans and advances to customers (31 December 2022: € 1.9 billion or 3.1%) and are classified as non-legacy. These exposures are spread across all asset classes, and notwithstanding the impact of inflation and rising interest rates have reduced slightly in the period. The non-property business portfolio (€ 0.7 billion) continues to be the largest impacted sector within this cohort.

ECL allowance

The ECL allowance on loans and advances to customers has remained unchanged in the half-year to 30 June 2023 at € 1.6 billion. The level of ECL allowance has been maintained to reflect the current economic outlook against the emerging stress from inflationary pressures and rising interest rates. The total ECL cover rate has decreased slightly from 2.7% at 31 December 2022 to 2.6% at 30 June 2023.

Income statement

The table below analyses the key components of the income statement for loans and advances to customers at 30 June 2023 and 30 June 2022.

Amortised cost					30 June 2023					30 June 2022
	Residential mortgages	Other personal	Property and construction	Non property business	Total	Residential mortgages	Other personal	Property and construction	Non property business	Total
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net stage transfers	7	16	16	17	56	(20)	21	10	(4)	7
Net remeasurement	5	5	23	(12)	21	2	3	(11)	(28)	(34)
New loans originated/top-ups	1	5	9	7	22	1	5	6	6	18
Redemptions/repayments	(2)	(2)	(8)	(26)	(38)	(3)	(2)	(13)	(27)	(45)
Impact of credit or economic risk parameters	(4)	1	(5)	(8)	(16)	(3)	(8)	(22)	(15)	(48)
Impact of model and overlay changes	(4)	2	74	(10)	62	(32)	(24)	(30)	(88)	(174)
Total net remeasurement of ECL allowance	3	27	109	(32)	107	(55)	(5)	(60)	(156)	(276)
Recoveries of amounts previously written-off	(4)	(2)	(3)	(7)	(16)	(9)	(3)	(8)	(12)	(32)
Net credit impairment charge / (writeback)	(1)	25	106	(39)	91	(64)	(8)	(68)	(168)	(308)

There was a € 91 million net credit impairment charge in the six months to 30 June 2023 which comprised a net remeasurement of ECL allowance charge of € 107 million and recoveries of amounts previously written-off of € 16 million (30 June 2022: € 308 million writeback comprising a net remeasurement writeback of € 276 million and € 32 million of recoveries).

Credit quality remained relatively stable during the period against a backdrop of inflation and rising interest rates with credit monitoring not identifying any material impact on the portfolio.

The key drivers of the net remeasurement of ECL allowance charge of € 107 million consist of the following components and activity:

• Net stage transfers resulted in a € 56 million charge, predominantly within the non-property business, property and construction and other personal sectors. Net remeasurements within stage and new loans originated totalled € 43 million and were largely offset by redemption and repayment activity of € 38 million, which continues to have the largest impact within Stage 2 with a € 26 million writeback driven by loans that fully repaid. Further details on the ECL allowance movements are outlined on pages 66 to 70.
• In order to reflect the continued uncertain economic environment with inflation and rising interest rates and the potential adverse impacts on the commercial real estate sector, additional ECLs have been taken to capture these increased risks through post model adjustments resulting in a net charge of € 62 million for the period. Further details on post model adjustments are outlined on pages 40 and 41.
• Within the IFRS 9 models, € 16 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 macroeconomic activity has generally been better than expected in the half-year to 30 June 2023. Further details on the macroeconomic scenarios and weightings are outlined on page 34 to 38.

Recoveries of amounts previously written-off of € 16 million (30 June 2022: € 32 million) included € 7 million recoveries (30 June 2022: € 23 million) due to cash recoveries received against legacy non-performing exposures. The remaining € 9 million (30 June 2022: € 9 million) relates to interest recognised as a result of loans curing from Stage 3.

Internal credit grade profile by ECL staging

The table below analyses the internal credit grading profile by ECL staging for loans and advances to customers:

Amortised cost

					30 June 2023*					31 December 2022*
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Total
	40,139	3,198	—	4	43,341	40,708	1,159	—	3	41,870
Strong	11,484	2,270	—	3	13,757	11,365	1,772	—	3	13,140
Satisfactory
Total strong/satisfactory	51,623	5,468	—	7	57,098	52,073	2,931	—	6	55,010
Criticised watch	662	1,747	—	1	2,410	0 668	0 1,271	0 —	0 1	0 1,940
Criticised recovery	85	1,046	—	60	1,191	119	1,834	—	61	2,014
	747	2,793	—	61	3,601	787	3,105	—	62	3,954
Total criticised	2	—	1,930	17	1,949	2	—	1,997	19	2,018
Non-performing
Gross carrying amount	52,372	8,261	1,930	85	62,648	52,862	6,036	1,997	87	60,982
ECL allowance	(225)	(698)	(706)	(9)	(1,638)	(263)	(646)	(700)	(9)	(1,618)
Carrying amount	52,147	7,563	1,224	76	61,010	52,599	5,390	1,297	78	59,364
Analysis by asset class
Residential mortgages
Strong	23,243	181	—	4	23,428	23,104	206	—	3	23,313
Satisfactory	5,112	131	—	3	5,246	4,950	136	—	3	5,089
Total strong/satisfactory	28,355	312	—	7	28,674	28,054	342	—	6	28,402
Criticised watch	310	546	—	1	857	340	570	—	1	911
Criticised recovery	1	194	—	60	255	2	246	—	61	309
Total criticised	311	740	—	61	1,112	342	816	—	62	1,220
Non-performing	—	—	626	17	643	—	—	638	19	657
Gross carrying amount	28,666	1,052	626	85	30,429	28,396	1,158	638	87	30,279
ECL allowance	(42)	(38)	(191)	(9)	(280)	(40)	(38)	(196)	(9)	(283)
Carrying amount	28,624	1,014	435	76	30,149	28,356	1,120	442	78	29,996
Other personal
	1,289	60	—	—	1,349	1,245	66	—	—	1,311
Strong	1,011	121	—	—	1,132	941	110	—	—	1,051
Satisfactory
Total strong/satisfactory	2,300	181	—	—	2,481	2,186	176	—	—	2,362
Criticised watch	98	82	—	—	180	87	79	—	—	166
Criticised recovery	—	17	—	—	17	—	15	—	—	15
	98	99	—	—	197	87	94	—	—	181
Total criticised	—	—	163	—	163	1	—	179	—	180
Non-performing
Gross carrying amount	2,398	280	163	—	2,841	2,274	270	179	—	2,723
ECL allowance	(28)	(40)	(110)	—	(178)	(24)	(37)	(116)	—	(177)
Carrying amount	2,370	240	53	—	2,663	2,250	233	63	—	2,546
Property and construction
Strong	3,975	2,718	—	—	6,693	5,404	721	—	—	6,125
Satisfactory	1,096	659	—	—	1,755	1,341	374	—	—	1,715
Total strong/satisfactory	5,071	3,377	—	—	8,448	6,745	1,095	—	—	7,840
Criticised watch	41	225	—	—	266	56	56	—	—	112 0
Criticised recovery	14	84	—	—	98	19	240	—	—	259
Total criticised	55	309	—	—	364	75	296	—	—	371
Non-performing	—	—	452	—	452	—	—	406	—	406
Gross carrying amount	5,126	3,686	452	—	9,264	6,820	1,391	406	—	8,617
ECL allowance	(45)	(208)	(152)	—	(405)	(84)	(117)	(119)	—	(320)
Carrying amount	5,081	3,478	300	—	8,859	6,736	1,274	287	—	8,297
Non-property business
Strong	11,632	239	—	—	11,871	10,955	166	—	—	11,121
Satisfactory	4,265	1,359	—	—	5,624	4,133	1,152	—	—	5,285
Total strong/satisfactory	15,897	1,598	—	—	17,495	15,088	1,318	—	—	16,406
Criticised watch	213	894	—	—	1,107	185	566	—	—	751
Criticised recovery	70	751	—	—	821	98	1,333	—	—	1,431
Total criticised	283	1,645	—	—	1,928	283	1,899	—	—	2,182
Non-performing	2	—	689	—	691	1	—	774	—	775
Gross carrying amount	16,182	3,243	689	—	20,114	15,372	3,217	774	—	19,363
ECL allowance	(110)	(412)	(253)	—	(775)	(115)	(454)	(269)	—	(838)
Carrying amount	16,072	2,831	436	—	19,339	15,257	2,763	505	—	18,525

*Forms an integral part of the condensed consolidated interim financial statements

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio

Credit exposure by midpoint PD grade

The below table 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 30 June 2023 and 31 December 2022. The 'internal credit grading profile by ECL staging' table on page 47 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.

							30 June 2023					31 December 2022
Quality Code	Lower Bound PD	Upper Bound PD	Stage 1 € m	Stage 2 € m	Stage 3 € m	POCI € m	Total € m	Stage 1 € m	Stage 2 € m	Stage 3 € m	POCI € m	Total € m
1 - 3	0.00%		1.23% 44,512	3,764	—	39	48,315	44,907	1,623	—	39	46,569
4 - 7	1.23%	6.94%	7,321	1,887	—	7	9,215	7,375	1,424	—	7	8,806
8 - 10	6.94%	99.99%	537	2,610	—	22	3,169	578	2,989	—	22	3,589
11	100.00%	100.00%	2	—	1,930	17	1,949	2	—	1,997	19	2,018
	Gross carrying amount		52,372	8,261	1,930	85	62,648	52,862	6,036	1,997	87	60,982

At 30 June 2023, 92% of the portfolio is in quality codes 1 to 7 which are typically strong/satisfactory (31 December 2022: 91%), 5% of the portfolio is in quality codes 8 to 10 which are typically criticised (31 December 2022: 6%) and the final 3% in quality code 11 is in default (30 December 2022: 3%).

IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability of default but includes a significant increase in credit risk ('SICR'), including relative movement in IFRS 9 probability of default since initial recognition. There is therefore no direct relationship between internal PD grades and IFRS 9 stage classification.

Credit risk – Credit profile of the loan portfolio – Asset class analysis

Asset class summary – key points:

• The residential mortgage portfolio has increased slightly by € 0.1 billion in the six months to 30 June 2023 to € 30.4 billion with new lending in line with the half-year to 30 June 2022. The staging composition has remained relatively unchanged in the half year to 30 June 2023 with ECL cover maintained at 0.9% (31 December 2022: 0.9%). There was a € 1 million net credit impairment writeback in the period (30 June 2022: € 64 million writeback).
• The other personal portfolio has increased by € 0.1 billion in the six months to 30 June 2023 to € 2.8 billion. New lending activity in the period was largely offset by redemptions/repayments. The stage composition has remained unchanged in the period and total ECL cover reduced slightly to 6.3% (31 December 2022: 6.5%). There was a net credit impairment charge of € 25 million in the period (30 June 2022: € 8 million writeback).
• The property and construction portfolio has increased by € 0.6 billion in the six months to 30 June 2023 to € 9.4 billion, due to new lending and the Ulster Bank corporate and commercial portfolio acquisition. The staging composition has deteriorated particularly Stage 2 which has increased by € 2.3 billion reflecting the Group's proactive and forward looking credit management approach to transfer € 1.6 billion of commercial real estate exposures (predominately commercial investment – office) having considered the potential adverse sector impact. There was a net credit impairment charge of € 106 million in the period (30 June 2022: € 68 million writeback).
• The non-property portfolio has increased by € 0.8 billion in the six months to 30 June 2023 to € 20.2 billion, due to new lending and the Ulster Bank corporate and commercial portfolio acquisition. The staging composition has improved in the period as Stage 1 loans have increased by € 0.8 billion, Stage 2 loans have remained unchanged and Stage 3 loans have reduced marginally by € 0.1 billion. Total ECL cover has reduced by 0.4% to 3.9% (31 December 2022: 4.3%). There was a € 39 million net credit impairment writeback in the period (30 June 2022: € 168 million writeback).

Loans and advances to customers – Residential mortgages

Residential mortgages amounted to € 30.4 billion at 30 June 2023, with the majority (97%) relating to residential mortgages in the Republic of Ireland and the remainder relating to the United Kingdom. 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 owneroccupier € 29.2 billion and buy-to-let € 1.2 billion (31 December 2022: owner-occupier € 28.9 billion and buy-to-let € 1.4 billion).

Income statement

There was a € 1 million net credit impairment writeback in the six months to 30 June 2023 compared to a € 64 million writeback in the same period in 2022. This comprises a net remeasurement of ECL allowance charge of € 3 million and recoveries of previously written-off loans of € 4 million.

The key drivers of the net remeasurement of ECL allowance charge of € 3 million consist of the following components and activity:

• Credit quality remained resilient with net stage transfers from Stage 1 to Stage 2 resulting in a € 7 million charge and a further € 5 million charge was due to net remeasurements within stage.
• There was a € 4 million writeback reflecting a reduction in exposure of the NPE cohort resolution post model adjustment. Further details on post model adjustments are outlined on pages 40 and 41.
• The impact of the updated macroeconomic scenarios and weightings resulted in a € 4 million writeback.

The ECL allowance provision cover level at 30 June 2023 for the Group's residential mortgage portfolio is 0.9% (31 December 2022: 0.9%). For the Stage 3 element of the Group's residential mortgage portfolio, € 0.2 billion of ECLs are held providing cover of 31% (31 December 2022: € 0.2 billion and 31% respectively).

Residential mortgages – page 50

• Residential mortgage portfolio at amortised cost by segment, internal credit ratings and ECL staging

Republic of Ireland residential mortgages – pages 51 to 52

• By ECL staging
• An age profile of the Republic of Ireland residential mortgage portfolio by ECL staging

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.

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio – Asset class analysis

Loans and advances to customers – Residential mortgages

The following table analyses the residential mortgage portfolio at amortised cost by segment, internal credit ratings and ECL staging:

					30 June 2023*					31 December 2022*
	Retail	Capital	AIB UK	Group	Total	Retail	Capital	AIB UK	Group	Total
Gross carrying amount	Banking € m	Markets € m	€ m	€ m	€ m	Banking € m	Markets € m	€ m	€ m	€ m
Owner occupier	27,894	408	893	—	29,195	27,526	429	928	—	28,883
Buy-to-let	1,098	81	55	—	1,234	1,238	99	59	—	1,396
Total	28,992	489	948	—	30,429	28,764	528	987	—	30,279
Analysed by internal credit ratings
Strong	22,303	330	795	—	23,428	22,151	343	819	—	23,313
Satisfactory	5,029	147	70	—	5,246	4,832	168	89	—	5,089
Total strong/satisfactory	27,332	477	865	—	28,674	26,983	511	908	—	28,402
Criticised watch	809	9	39	—	857	865	9	37	—	911
Criticised recovery	250	—	5	—	255	303	2	4	—	309
Total criticised Non-performing	1,059 601	9 3	44 39	— —	1,112 643	1,168 613	11 6	41 38	— —	1,220 657
Gross carrying amount	28,992	489	948	—	30,429	28,764	528	987	—	30,279
Analysed by ECL staging
Stage 1	27,313	471	882	—	28,666	26,976	496	924	—	28,396
Stage 2	1,010	15	27	—	1,052	1,107	26	25	—	1,158
Stage 3	584	3	39	—	626	594	6	38	—	638
POCI	85	—	—	—	85	87	—	—	—	87
Total	28,992	489	948	—	30,429	28,764	528	987	—	30,279
ECL allowance – statement of financial position
Stage 1	41	1	—	—	42	40	—	—	—	40
Stage 2	37	—	1	—	38	37	—	1	—	38
Stage 3	186	—	5	—	191	191	1	4	—	196
POCI	9	—	—	—	9	9	—	—	—	9
Total	273	1	6	—	280	277	1	5	—	283
ECL allowance cover percentage	%	%	%	%	%	%	%	%	%	%
Stage 1	0.2	0.2	—	—	0.1	0.1	—	—	—	0.1
Stage 2	3.7	—	1.1	—	3.6	3.3	—	0.9	—	3.2
Stage 3	31.8	—	12.7	—	30.5	32.3	12.8	10.1	—	30.8
POCI	10.3	—	—	—	10.3	10.6	—	—	—	10.6
				Half-year to 30 June 2023*					Half-year to 30 June 2022*
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of ECL allowance	2	—	1	—	3	(55)	—	—	—	(55)
Recoveries of amounts
previously written-off	(4)	—	—	—	(4)	(8)	—	(1)	—	(9)
Net credit impairment
(writeback)/charge	(2)	—	1	—	(1)	(63)	—	(1)	—	(64)
	%	%	%	%	%	%	%	%	%	%
Net credit impairment (writeback)/ charge on average
loans	(0.01)	—	0.08	—	(0.01)	(0.11)	—	(0.05)	—	(0.11)

*Forms an integral part of the condensed consolidated interim financial statements

% % % % % %

Credit risk – Credit profile of the loan portfolio – Asset class analysis

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:

			30 June 2023*			31 December 2022*
	Owner occupier	Buy-to-let	Total	Owner occupier	Buy-to-let	Total
	€ m	€ m	€ m	€ m	€ m	€ m
Gross carrying amount	28,302	1,179	29,481	27,955	1,337	29,292
Analysed as to ECL staging
Stage 1	26,773	1,011	27,784	26,321	1,151	27,472
Stage 2	927	98	1,025	1,024	109	1,133
Stage 3	520	67	587	526	74	600
POCI	82	3	85	84	3	87
Total	28,302	1,179	29,481	27,955	1,337	29,292
ECL allowance – statement of financial position
Stage 1	41	1	42	39	1	40
Stage 2	35	2	37	35	2	37
Stage 3	173	13	186	172	20	192
POCI	8	1	9	8	1	9
Total	257	17	274	254	24	278
Republic of Ireland residential mortgages
at amortised cost	28,045	1,162	29,207	27,701	1,313	29,014
ECL allowance cover percentage	%	%	%	%	%	%
Stage 1	0.2	0.1	0.1	0.1	0.1	0.1
Stage 2	3.9	2.0	3.7	3.5	1.7	3.3
Stage 3	33.3	19.8	31.7	32.7	27.9	32.1
POCI	9.3	41.2	10.3	9.9	38.4	10.6
		Half-year to 30 June 2023*			Half-year to 30 June 2022*
Income statement	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of ECL allowance	8	(6)	2	(28)	(27)	(55)
Recoveries of amounts previously written-off	(2)	(2)	(4)	(5)	(3)	(8)
Net credit impairment (writeback)/charge	6	(8)	(2)	(33)	(30)	(63)

*Forms an integral part of the condensed consolidated interim financial statements

51

Net credit impairment (writeback)/charge on average loans 0.02 (0.64) (0.01) (0.06) (0.94) (0.11)

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio – Asset class analysis Loans and advances to customers – Republic of Ireland residential mortgages

Residential mortgages in Ireland amounted to € 29.5 billion at 30 June 2023 compared to € 29.3 billion at 31 December 2022. The portfolio has increased by € 0.2 billion in the six months to 30 June 2023. Total drawdowns in the half-year to June 2023 were € 1.7 billion (30 June 2022: € 1.7 billion), of which, 98% were to owner-occupiers. The weighted average indexed loan-to-value of the stock of residential mortgages in the half-year to June 2023 was 50% (31 December 2022: 48%) and Stage 3 residential mortgages was 46% (31 December 2022: 46%). The split of the Irish residential mortgage portfolio is 96% owner-occupier and 4% buy-to-let and comprises € 18.3 billion (62%) on fixed rate, € 6.9 billion (23%) on variable rate and € 4.3 billion (15%) on tracker rate mortgages. (31 December 2022: € 17.6 billion (60%) on fixed rate, € 6.8 billion (23%) on variable rate and € 4.9 billion (17%) tracker rate mortgages).

Non-performing loans remained stable at € 0.6 billion at 30 June 2023 (31 December 2022: € 0.6 billion).

Residential mortgage arrears

Total concentration of loans in arrears (including non-performing loans) by value remained stable at 1.3% in the six months to 30 June 2023, with 1.2% of the owner-occupier portfolio and 3.6% of the buy-to-let portfolio in arrears (1.2% and 3.0% respectively at 31 December 2022). The number of loans in arrears (based on number of accounts) greater than 90 days was 1.2% at 30 June 2023 and remains below the industry average of 4.7%(1). For the owner-occupier portfolio, the number of loans in arrears greater than 90 days at 1.1% were below the industry average of 4.1%(1) . For the buy-to-let portfolio, loans in arrears greater than 90 days at 2.3% were below the industry average of 10.7%(1) .

(1) Source: Central Bank of Ireland ("CBI") Residential Mortgage Arrears and Repossessions Statistics published 16 June 2023, based on number of accounts as at 31 March 2023.

Republic of Ireland residential mortgages – aged analysis

The following table provides an age profile of the Republic of Ireland residential mortgage portfolio by ECL staging.

					30 June 2023					31 December 2022
					At amortised cost					At amortised cost
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Not past due	27,776	966	273	77	29,092	27,464	1,075	292	79	28,910
1 - 30 days	8	37	14	—	59	8	37	14	1	60
31 - 60 days	—	15	11	—	26	—	12	6	—	18
61 - 90 days	—	7	7	—	14	—	9	9	—	18
91 - 180 days	—	—	34	1	35	—	—	30	1	31
181 - 365 days	—	—	56	1	57	—	—	56	2	58
Over 365 days	—	—	192	6	198	—	—	193	4	197
Total gross carrying amount of residential mortgages	27,784	1,025	587	85	29,481	27,472	1,133	600	87	29,292
ECL allowance	(42)	(37)	(186)	(9)	(274)	(40)	(37)	(192)	(9)	(278)
Carrying value	27,742	988	401	76	29,207	27,432	1,096	408	78	29,014
Of which:
Owner-occupier
Not past due	26,767	874	239	75	27,955	26,315	974	248	77	27,614
1 - 30 days	6	32	12	—	50	6	32	12	1	51
31 - 60 days	—	14	6	—	20	—	10	6	—	16
61 - 90 days	—	7	5	—	12	—	8	8	—	16
91 - 180 days	—	—	31	1	32	—	—	29	1	30
181 - 365 days	—	—	54	1	55	—	—	53	1	54
Over 365 days	—	—	173	5	178	—	—	170	4	174
Total	26,773	927	520	82	28,302	26,321	1,024	526	84	27,955

Forbearance

Irish residential mortgages subject to forbearance measures decreased by € 0.1 billion from € 0.7 billion at 31 December 2022 to € 0.6 billion at 30 June 2023. Details on the Group's forbearance portfolio are set out on page 72.

Credit risk – Credit profile of the loan portfolio – Asset class analysis

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:

					30 June 2023*					31 December 2022*
	Retail	Capital	AIB	Group	Total	Retail	Capital	AIB UK	Group	Total
Gross carrying amount	Banking € m	Markets € m	UK € m	€ m	€ m	Banking € m	Markets € m	€ m	€ m	€ m
Credit cards	639	8	22	—	669	644	8	23	—	675
Loans/overdrafts	2,080	37	55	—	2,172	1,956	41	51	—	2,048
Total	2,719	45	77	—	2,841	2,600	49	74	—	2,723
Analysed by internal credit ratings
Strong	1,274	14	61	—	1,349	1,232	17	62	—	1,311
Satisfactory	1,092	28	12	—	1,132	1,015	29	7	—	1,051
Total strong/satisfactory	2,366	42	73	—	2,481	2,247	46	69	—	2,362
Criticised watch	177	1	2	—	180	163	1	2	—	166
Criticised recovery	15	2	—	—	17	14	—	1	—	15
Total criticised	192	3	2	—	197	177	1	3	—	181
Non-performing	161	—	2	—	163	176	2	2	—	180
Gross carrying amount	2,719	45	77	—	2,841	2,600	49	74	—	2,723
Analysed by ECL staging
Stage 1	2,293	39	66	—	2,398	2,171	42	61	—	2,274
Stage 2	265	6	9	—	280	254	5	11	—	270
Stage 3	161	—	2	—	163	175	2	2	—	179
POCI	—	—	—	—	—	—	—	—	—	—
Total	2,719	45	77	—	2,841	2,600	49	74	—	2,723
ECL allowance – statement of financial position
Stage 1	28	—	—	—	28	24	—	—	—	24
Stage 2	40	—	—	—	40	37	—	—	—	37
Stage 3	108	—	2	—	110	114	1	1	—	116
POCI	—	—	—	—	—	—	—	—	—	—
Total	176	—	2	—	178	175	1	1	—	177
ECL allowance cover percentage	%	%	%	%	%	%	%	%	%	%
Stage 1	1.2	—	—	—	1.2	1.1	—	—	—	1.1
Stage 2	14.9	—	—	—	14.9	14.4	—	—	—	13.6
Stage 3	67.2	—	75.6	—	67.3	65.2	24.9	52.5	—	64.6
POCI	—	—	—	—	—	—	—	—	—	—
				Half-year to 30 June 2023*					Half-year to 30 June 2022*
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of
ECL allowance	27	—	—	—	27	(5)	—	—	—	(5)
Recoveries of amounts
previously written-off	(2)	—	—	—	(2)	(3)	—	—	—	(3)
Net credit impairment
charge/(writeback)	25	—	—	—	25	(8)	—	—	—	(8)
	%	%	%	%	%	%	%	%	%	%
Net credit impairment charge/
(writeback) on average loans	0.96	—	—	—	0.96	(0.16)	—	—	—	(0.16)

*Forms an integral part of the condensed consolidated interim financial statements

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio – Asset class analysis

Loans and advances to customers – Other personal At 30 June 2023, the other personal lending portfolio of € 2.8 billion comprises € 2.1 billion in loans and overdrafts and € 0.7 billion in credit card facilities (31 December 2022: € 2.7 billion, € 2.0 billion and € 0.7 billion respectively). Credit quality of the portfolio improved slightly throughout the period, with 13% categorised as less than satisfactory, of which defaulted loans amounted to € 0.2 billion (31 December 2022: 13% and € 0.2 billion).

New lending totalled € 0.6 billion for the six months to 30 June 2023 (30 June 2022: € 0.5 billion), however this was largely offset by redemptions/repayments.

Stage 3 loans, predominantly in Retail Banking, decreased by € 16 million in the half-year to 30 June 2023. At 30 June 2023, the ECL allowance cover was 6% with Stage 3 cover at 67% (31 December 2022: 7% and 65% respectively).

Income statement

There was a net credit impairment charge of € 25 million to the income statement in the six months to 30 June 2023 compared to an € 8 million net credit impairment writeback in the same period in 2022. This comprises a net remeasurement of ECL allowance charge of € 27 million and recoveries of previously written-off loans of € 2 million.

The key drivers of the net remeasurement of ECL allowance charge of € 27 million consist of the following components and activity:

• There was a € 24 million charge driven predominately by € 16 million downward net stage transfers.
• Post model adjustments resulted in a € 2 million charge and the impact of the updated macroeconomic scenarios and weightings resulted in a € 1 million charge.

Credit risk – Credit profile of the loan portfolio – Asset class analysis

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(1):
	Retail	Capital	AIB UK	Group	30 June 2023 Total	Retail	Capital	AIB UK	Group	31 December 2022 Total
	Banking	Markets				Banking	Markets
Gross carrying amount	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Residential Investment	58	1,522	249	—	1,829	46	1,471	223	—	1,740
Student Housing	—	312	497	—	809	—	304	456	—	760
Housing Associations	—	143	585	—	728	—	133	416	—	549
Commercial investment – Office	35	1,515	421	—	1,971	30	1,352	357	—	1,739
Commercial investment – Retail	55	950	83	—	1,088	62	855	88	—	1,005
Commercial investment – Mixed	73	815	108	—	996	66	878	122	—	1,066
Commercial investment – Industrial	30	307	92	—	429	26	290	86	—	402
Total investment	251	5,564	2,035	—	7,850	230	5,283	1,748	—	7,261
Land and development:
Residential development	31	768	145	—	944	28	586	152	—	766
Commercial development	6	83	40	—	129	4	173	30	—	207
Total land and development	37	851	185	—	1,073	32	759	182	—	973
Contractors	204	72	65	—	341	190	124	69	—	383
Total	492	6,487	2,285	—	9,264	452	6,166	1,999	—	8,617
Analysed by internal credit ratings
Strong	158	5,051	1,484	—	6,693	117	4,866	1,142	—	6,125
Satisfactory	192	847	716	—	1,755	180	816	719	—	1,715
Total strong/satisfactory	350	5,898	2,200	—	8,448	297	5,682	1,861	—	7,840
Criticised watch	35	189	42	—	266	33	57	22	—	112
Criticised recovery	29	52	17	—	98	30	196	33	—	259
Total criticised	64	241	59	—	364	63	253	55	—	371
Non-performing	78	348	26	—	452	92	231	83	—	406
Gross carrying amount	492	6,487	2,285	—	9,264	452	6,166	1,999	—	8,617
Analysed by ECL staging
Stage 1	337	3,056	1,733	—	5,126	284	4,828	1,708	—	6,820
Stage 2	77	3,083	526	—	3,686	76	1,107	208	—	1,391
Stage 3	78	348	26	—	452	92	231	83	—	406
POCI	—	—	—	—	—	—	—	—	—	—
Total	492	6,487	2,285	—	9,264	452	6,166	1,999	—	8,617
ECL allowance – statement of financial position
Stage 1	2	25	18	—	45	1	65	18	—	84
Stage 2	6	185	17	—	208	6	103	8	—	117
Stage 3	36	109	7	—	152	30	60	29	—	119
POCI	—	—	—	—	—	—	—	—	—	—
Total	44	319	42	—	405	37	228	55	—	320
ECL allowance cover percentage	%	%	%	%	%	%	%	%	%	%
Stage 1	0.5	0.8	1.0	—	0.9	0.4	1.3	1.0	—	1.2
Stage 2	7.3	6.0	3.3	—	5.6	7.5	9.3	4.1	—	8.5
Stage 3	46.7	31.2	27.2	—	33.7	32.7	26.1	35.2	—	29.4
POCI	—	—	—	—	—	—	—	—	—	—
				Half-year to 30 June 2023					Half-year to 30 June 2022
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of ECL allowance	7	93	9	—	109	(43)	(18)	1	—	(60)
Recoveries of amounts previously written-off	(2)	(1)	—	—	(3)	(7)	(1)	—	—	(8)
Net credit impairment charge/
(writeback)	5 %	92 %	9 %	— %	106 %	(50) %	(19) %	1 %	— %	(68) %
Net credit impairment charge/
(writeback)on average loans	0.99	1.46	0.40	—	1.18	(4.14)	(0.19)	0.01	—	(0.45)

(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.

Credit risk – Credit profile of the loan portfolio – Asset class analysis

Loans and advances to customers – Property and construction

The property and construction portfolio consists of € 9.3 billion in loans and advances to customers measured at amortised cost together with € 151 million of loans measured at FVTPL (total € 9.4 billion).

Property and construction loans measured at FVTPL decreased by € 75 million to € 151 million (31 December 2022: € 226 million), driven by the reclassification of a customer loan to amortised costs in the six months to 30 June 2023 following a re-finance and changes to the terms and conditions relating to this loan.

The portfolio measured at amortised cost amounted to 15% of loans and advances to customers and comprised 85% investment loans (€ 7.9 billion), 11% land and development loans (€ 1.1 billion) and 4% other property and construction loans (€ 0.3 billion). The Capital Markets and AIB UK segments continue to account for the majority of this portfolio at 70% and 25% respectively.

The portfolio measured at amortised cost increased by € 0.7 billion in the period as new lending of € 1.0 billion (30 June 2022: € 1.2 billion), in addition to a further € 0.1 billion increase due to the Ulster Bank corporate and commercial portfolio acquisition, was partially offset by redemptions/repayments.

At 30 June 2023, € 8.4 billion of the portfolio was in a strong/ satisfactory grade, which is an increase of € 0.6 billion in the period. The level of non-performing loans remained relatively stable in the period at € 0.5 billion.

Stage 2 loans have increased by € 2.3 billion to € 3.7 billion at 30 June 2023 (31 December 2022: € 1.4 billion). The increase in Stage 2 loans was driven by € 1.1 billion transferring from Stage 1 to Stage 2 primarily due to loans triggering a qualitative significant increase in credit risk event during the period. A further € 1.6 billion of commercial investment exposures (predominately commercial investment – office) transferred to Stage 2 as a result of a post model adjustment reflecting a proactive and forwardlooking credit management approach to this sector following changes in market dynamics due to increased interest rates and stressing asset values where a potential Interest cover breach under stress could occur or where loans are unlikely to meet business as usual refinance terms.These transfers to Stage 2 were slightly offset by repayments of € 0.3 billion and net stage transfers out of Stage 2 of € 0.2 billion.

Income statement

There was a net credit impairment charge of € 106 million to the income statement in the six months to 30 June 2023 compared to a € 68 million writeback in the same period in 2022. This comprises a net remeasurement of ECL allowance charge of € 109 million and recoveries of previously written-off loans of € 3 million.

The key drivers of the net remeasurement of ECL allowance charge of € 109 million consist of the following components and activity:

• Staging composition deterioration during the period led to a € 29 million charge as € 1.1 billion transferred from Stage 1 to Stage 2, however the total net stage transfers charge was € 16 million. Net remeasurements resulted in a further € 23 million charge while new loans originated charge of € 9 million were largely offset against redemption and repayment activity writeback of € 8 million.
• In order to capture potential adverse sector impacts, additional ECL has been taken to address the increased risks through the use of a € 74 million post model adjustment charge. The main increases in the period reflect a € 34 million charge relating to Stage 3 non-legacy cases to address latent risk in the portfolio. A € 29 million charge relates to the negative outlook for the ROI and UK commercial investment portfolio which also includes the impact of transferring € 1.6 billion of commercial Investment property exposures to Stage 2. A further € 10 million charge reflects where the existing loss allowance associated with aged non-performing property loans does not adequately account for an alternative resolution strategy, including portfolio sale. Further details on post model adjustments are outlined on pages 40 to 41.
• The impact of the updated macroeconomic scenarios and weightings resulted in a € 5 million writeback.

The ECL allowance for the portfolio totalled € 0.4 billion providing ECL allowance cover of 4%. For the Stage 3 portfolio, the ECL allowance cover is 34%. (31 December 2022: € 0.3 billion, 4% and 29% respectively).

Credit risk – Credit profile of the loan portfolio – Asset class analysis Loans and advances to customers – Property and construction Investment

Investment property loans amounted to € 7.9 billion at 30 June 2023 (31 December 2022: € 7.3 billion) of which € 4.5 billion related to commercial investment. The geographic profile of the investment property portfolio is predominately in the Republic of Ireland (€ 5.3 billion) and the United Kingdom (€ 2.1 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 20% of the portfolio at € 1.8 billion. The Irish housing market is currently characterised by a notable weakness in housing supply compared with the underlying level of demand. Consequently, house price inflation has remained high in the half-year to June 2023 despite the higher interest rate environment.
• The student housing residential investment sub-sector represents 9% of the portfolio at € 0.8 billion. Despite 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 8% of the portfolio at € 0.8 billion. Similar to other residential sub-sectors, Social housing is under-supplied by the market and remained resilient in both Ireland and the UK in the halfyear to June 2023.
• The office commercial investment sub-sector represents 21% of the portfolio at € 2.0 billion. This sub-sector is challenged by increasing interest rates and economic uncertainties. ESG requirements and a shift towards hybrid working models are key factors which will likely increase demarcation pressures in office pricing and headline rent between prime and nonprime locations.
• The retail commercial investment sub-sector represents 12% of the portfolio at € 1.1 billion. Given the perceived higher risk profile, the retail sub-sector has been slower to recover post-COVID than other sub-sectors. However, vacancy rates in shopping centres remains steady with many prime centres reporting very high occupancy rates. Despite uncertainties as a result of the current inflationary impact, many operators are performing well and occupier interest is up.
• The industrial commercial investment sub-sector represents 4% of the portfolio at € 0.4 billion. Strong occupancy rates within the sub-sector with very low standing stock vacancy across Dublin industrial parks. Despite slowing global growth, rents remain stable in ROI and on an upward trajectory.
• The mixed commercial investment sub-sector represents 11% of the portfolio at € 1.0 billion.

At 30 June 2023, there was a net credit impairment charge of € 106 million to the income statement on the investment property element of the property and construction portfolio (30 June 2022: € 60 million writeback).

Land and development

Land and development loans amounted to € 1.1 billion at 30 June 2023 (30 December 2022: € 1.0 billion) of which € 0.9 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 of the total property and construction portfolio:

• The residential development sub-sector represents 10% of the portfolio at € 1.0 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 has slowed in the halfyear to June 2023 in line with the impact of increasing interest rates and cost inflation.
• The commercial development sub-sector represents 1% of the portfolio at € 0.1 billion.

At 30 June 2023, there was a net credit impairment writeback of € 2 million to the income statement on the land and development element of the property and construction portfolio (30 June 2022: € 8 million writeback).

Contractors

The contractors sub-sector represents 4% of the portfolio at € 0.3 billion. The demand for this sub-sector is underpinned by public works and residential projects. While continuing to perform, this sub-sector continues to face challenges as a result of the current market and environment such as a shortage in skilled labourers, supply chain disruptions and inflation to input costs.

57

Credit risk – Credit profile of the loan portfolio – Asset class analysis

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:

					30 June 2023					31 December 2022
	Retail Banking	Capital Markets	AIB UK	Group	Total	Retail Banking	Capital Markets	AIB UK	Group	Total
Gross carrying amount	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Agriculture	1,348	396	65	—	1,809	1,191	398	67	—	1,656
Energy	21	1,626	1,430	—	3,077	21	1,395	1,398	—	2,814
Manufacturing	167	2,506	170	—	2,843	166	2,509	189	—	2,864
Distribution:
Hotels	92	1,263	414	—	1,769	109	1,164	431	—	1,704
Licensed premises	126	130	40	—	296	134	116	43	—	293
Retail/wholesale	458	1,208	102	—	1,768	431	1,185	160	—	1,776
Other distribution	94	197	88	—	379	89	190	86	—	365
Total distribution	770	2,798	644	—	4,212	763	2,655	720	—	4,138
	204	1,865	668	—	2,737	197	1,885	550	—	2,632
Transport
Financial	10	280	99	21	410	10	356	96	15	477
Other services	701	3,229	1,096	—	5,026	678	2,979	1,125	—	4,782
Total	3,221	12,700	4,172	21	20,114	3,026	12,177	4,145	15	19,363
Analysed by internal credit ratings
Strong	866	8,168	2,836	1	11,871	794	7,587	2,740	—	11,121
Satisfactory	1,818	3,143	643	20	5,624	1,627	3,010	633	15	5,285
Total strong/satisfactory	2,684	11,311	3,479	21	17,495	2,421	10,597	3,373	15	16,406
Criticised watch	149	767	191	—	1,107	180	429	142	—	751
Criticised recovery	80	499	242	—	821	84	980	367	—	1,431
Total criticised	229	1,266	433	—	1,928	264	1,409	509	—	2,182
Non-performing	308	123	260	—	691	341	171	263	—	775
Gross carrying amount	3,221	12,700	4,172	21	20,114	3,026	12,177	4,145	15	19,363
Analysed by ECL staging
Stage 1	2,577	10,457	3,127	21	16,182	2,374	9,951	3,032	15	15,372
Stage 2	338	2,120	785	—	3,243	312	2,055	850	—	3,217
Stage 3	306	123	260	—	689	340	171	263	—	774
POCI	—	—	—	—	—	—	—	—	—	—
Total	3,221	12,700	4,172	21	20,114	3,026	12,177	4,145	15	19,363
ECL allowance – statement of financial position
Stage 1	25	59	26	—	110	23	67	25	—	115
Stage 2	31	293	88	—	412	32	337	85	—	454
Stage 3	149	52	52	—	253	133	71	65	—	269
POCI	—	—	—	—	—	—	—	—	—	—
Total	205	404	166	—	775	188	475	175	—	838
ECL allowance cover percentage	%	%	%	%	%	%	%	%	%	%
Stage 1	1.0	0.6	0.8	—	0.7	1.0	0.7	0.8	—	0.7
Stage 2	9.2	13.8	11.2	—	12.7	10.3	16.4	10.0	—	14.1
Stage 3	48.7	42.3	20.0	—	36.7	39.1	41.5	24.7	—	34.8
POCI	—	—	—	—	—	—	—	—	—	—
				Half-year to 30 June 2023					Half-year to 30 June 2022
Income statement	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Net remeasurement of ECL allowance Recoveries of amounts previously	24	(53)	(3)	—	(32)	(90)	(67)	1	—	(156)
written-off	(3)	(3)	(1)	—	(7)	(9)	(1)	(2)	—	(12)
Net credit impairment (writeback)/
charge	21	(56)	(4)	—	(39)	(99)	(68)	(1)	—	(168)
	%	%	%	%	%	%	%	%	%	%
Net credit impairment (writeback)/
charge on average loans	0.66	(0.45)	(0.08)	—	(0.20)	(1.55)	(0.31)	(0.01)	—	(0.45)

Credit risk – Credit profile of the loan portfolio – Asset class analysis

Loans and advances to customers – Non-property business 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 (26%) 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 together with a further € 23 million of loans measured at FVTPL (total € 20.2 billion). The FVTPL element of the portfolio has remained unchanged in the period.

The portfolio measured at amortised cost increased by € 0.7 billion to € 20.1 billion in the six months to 30 June 2023 (31 December 2022: € 19.4 billion). New lending accounted for € 2.2 billion (30 June 2022: € 2.0 billion) with a further € 0.6 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 32% of total Group loans and advances to customers in the half-year to 30 June 2023 (31 December 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 half-year to 30 June 2023 at 87% (31 December 2022: 85%). The value of loans graded less than satisfactory (including defaulted loans) decreased from € 3.0 billion at 31 December 2022 to € 2.6 billion at 30 June 2023. The performing forborne portfolio, seen in the criticised recovery category, decreased by € 0.6 billion to € 0.8 billion in the half-year to 30 June 2023 (31 December 2022: €1.4 billion), as borrowers successfully demonstrated repayment capacity over 24 months.

Additional disclosures on the non-property business portfolio are outlined on page 61.

The following are the key themes within the main sub-sectors of the non-property business portfolio:

• The agriculture sub-sector represents 9% of the portfolio at € 1.8 billion. Overall, the sector has benefited from rising commodity prices which have been sufficient to offset the increases in input costs such as feed, fertiliser and fuel, however input costs are expected to remain elevated in 2023. The sub-sector faces challenges to consider and adopt sustainability and associated emissions reduction targets through means such as science-based technology and participation in climate related schemes. The transition of activities to more climate friendly and sustainable methods will continue to be a key challenge in the second half of 2023 and 2024;
• The energy sub-sector comprises 15% of the portfolio at € 3.1 billion. This sub-sector continues to be a strong focus of growth for the Group which reflects the increase of € 0.3 billion in the half-year to 30 June 2023. This was driven by new lending to renewable energy initiatives (wind and solar).

The sector has proven resilient, benefiting from higher prices and inflation adjustment mechanisms;

• The manufacturing sub-sector comprises 14% of the portfolio at € 2.8 billion. Performance was stable as many operators successfully passed through cost increases or mitigated inflationary pressures through operational efficiencies. Notwithstanding the challenges facing this sub-sector such as inflationary and input cost pressures and supply chain challenges, both food and non-food manufacturing are benefiting from strong domestic and international demand;
• The hotels sub-sector comprises 9% of the portfolio at € 1.8 billion. The sector performed strongly on a 'Revenue per Available Room' basis owing to a strong rebound in tourist numbers and recovery of airport flight schedules, a strong events calendar, pass-through of rising costs and reduced supply as rooms are utilised for emergency refugee accommodation. The outlook is however challenging owing to ongoing operational cost inflation (energy, staffing, food and beverage), potential recessionary impact on disposable income and staff availability;
• The licensed premises sub-sector comprises 1% of the portfolio at € 0.3 billion. Trade has recovered in this sub-sector post COVID-19 albeit not to the same extent as accommodation and regional differences are evident (e.g. urban versus rural) while facing similar challenges to the hotels sub-sector (inflation, staffing, consumer sentiment);
• The retail/wholesale sub-sector comprises 9% of the portfolio at € 1.8 billion. Grocery retail/wholesalers continued to trade well with many businesses experiencing increases in profitability despite increased costs which are being passed through. 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 sub-sector comprises 14% of the portfolio at € 2.7 billion and consists primarily of logistic, storage and travel businesses. Cost challenges remain as a result of the current inflationary environment, such as fuel costs, labour (cost and availability) and upgrading to greener fleets. Larger haulage operators benefit from fuel surcharge agreements allowing the efficient pass through of price increases. Demand for logistics and warehousing remains strong as a result of sustained online retail purchasing since COVID-19 albeit light and heat cost is a key consideration. The travel sector has rebounded in the half-year to 30 June 2023 but challenges remain due to inflation and potential recessionary impacts on disposable income;
• The financial sub-sector comprises 2% of the portfolio at € 0.4 billion. This sub-sector is proving resilient despite recent stresses observed in the US and European markets. Insurance businesses continue to perform well during 2023 as a result of the demand for housing and insurance related products; and
• The other services sub-sector comprises 25% of the portfolio at € 5.0 billion, which includes businesses such as solicitors, accounting, audit, tax, computer services, research and development, consultancy, hospitals and nursing homes. Overall, this sub-sector is broad and diverse in nature with a stable performance despite the inflationary pressures which are present in the economy.

59

Credit risk – Credit profile of the loan portfolio – Asset class analysis Loans and advances to customers – Non-property business Income statement

There was a net credit impairment writeback of € 39 million to the income statement in the six months to 30 June 2023 compared to a € 168 million writeback in the same period in 2022. This comprises a net remeasurement of ECL allowance writeback of € 32 million and recoveries of previously written-off loans of € 7 million.

The key drivers of the net remeasurement of ECL allowance writeback of € 32 million consist of the following components and activity:

• Moderate improvements in stage composition led to a € 14 million writeback driven by a € 26 million writeback on redemption and repayment activity, which continues to impact predominantly within Stage 2 with a € 19 million writeback driven by loans that fully repaid. Net stage transfers resulted in a € 17 million charge, however these were largely offset by a € 12 million net remeasurement writeback.
• Post model adjustments resulted in a € 10 million writeback. This writeback primarily relates to a reduction in the Capital

Markets post model adjustment to capture the potential impact of inflation (including higher energy costs) and higher interest rates on non-property business which has been retained at a reduced level reflecting resilient performance of the underlying portfolios. Further detail on post model adjustments are outlined on pages 40 to 41.

• The impact of the updated macroeconomic scenarios and weightings resulted in a € 8 million writeback reflecting the reduced downside risk.

The ECL allowance for the portfolio totalled € 0.8 billion in ECL providing ECL allowance cover of 4%. For the Stage 3 portfolio, the ECL allowance cover is 37% (31 December 2022: € 0.8 billion, 4% and 35% respectively).

Credit risk – Credit profile of the loan portfolio – Asset class analysis Loans and advances to customers – Non-property business Additional disclosures

The following table provides further analyses by industry sector of the non-property business portfolio, by gross carrying amount and ECL allowance. Given the international profile of the Syndicated International Finance (SIF) business, all exposures within this business unit are reported separately.

Gross ECL Analysed by ECL stage profile Analysed by ECL stage profile carrying allowance amount Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 € m € m € m € m € m € m € m € m
1,502 209 92 1,803 14 13 35 62
2,889 175 1 3,065 13 23 1 37
1,899 179 56 2,134 9 14 18 41
508 984 194 1,686 5 142 32 179
113 104 79 296 1 21 36 58
1,341 169 70 1,580 11 19 31 61
217 21 16 254 1 3 8 12
2,179 1,278 359 3,816 18 185 107 310
1,971 250 25 2,246 11 21 16 48
226 3 1 230 2 — — 2
3,194 699 133 4,026 19 63 63 145
13,860 2,793 667 17,320 86 319 240 645
2,322 450 22 2,794 24 93 13 130
16,182 3,243 689 20,114 110 412 253 775

	31 December 2022
	Analysed by ECL stage profile			Gross carrying	Analysed by ECL stage profile			ECL allowance
	Stage 1	Stage 2	Stage 3	amount	Stage 1	Stage 2	Stage 3
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Agriculture	1,355	228	67	1,650	10	18	24	52
Energy	2,626	144	29	2,799	14	19	23	56
Manufacturing	1,839	134	67	2,040	12	16	24	52
Distribution:
Hotels	263	1,137	221	1,621	14	158	40	212
Licensed premises	86	114	93	293	1	22	31	54
Retail/Wholesale	1,284	213	77	1,574	10	24	33	67
Other distribution	188	23	15	226	1	3	7	11
Total distribution	1,821	1,487	406	3,714	26	207	111	344
Transport	1,814	235	28	2,077	8	22	19	49
Financial	220	3	1	224	2	—	—	2
Other services	3,279	437	140	3,856	24	45	55	124
Total	12,954	2,668	738	16,360	96	327	256	679
SIF	2,418	549	36	3,003	19	127	13	159
Total	15,372	3,217	774	19,363	115	454	269	838

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 € 0.2 billion to € 2.8 billion at 30 June 2023 (31 December 2022: €3.0 billion).

At 30 June 2023, 94% of the SIF lending portfolio is in a strong/ satisfactory grade (31 December 2022: 94%). 89% of the SIF portfolio is rated by S&P, with 69% rated B+ or above, 16% rated B and 4% rated B- or below.

The majority of the loans (81%) are to large borrowers with EBITDA > € 250 million. Exposures are well diversified by name and sector with the top 20 borrowers accounting for 30% of total exposure. 60% of the borrowers in this portfolio are domiciled in the USA, 6% in the UK, and 34% in the Rest of the World (primarily Europe) (31 December 2022: 62% in the USA, 4% in the UK and 34% in the Rest of the World (primarily Europe) respectively).

At 30 June 2023, there was a net credit impairment writeback of € 23 million on the SIF portfolio (31 December 2022: € 32 million charge).

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio

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:

Gross exposures to customers

									30 June 2023
								At amortised cost	At FVTPL
			Gross carrying amount				Analysed by ECL stage profile
	Loans and advances to customers	Loan commitments and financial guarantees issued	Total	Stage 1	Stage 2	Stage 3	POCI	Total	Total
Concentration by industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	1,809	742	2,551	2,193	255	103	—	2,551	—
Energy	3,077	1,670	4,747	4,501	244	2	—	4,747	9
Manufacturing	2,843	1,965	4,808	4,316	422	70	—	4,808	—
Distribution	4,212	1,790	6,002	4,026	1,594	382	—	6,002	14
Transport	2,737	910	3,647	3,294	321	32	—	3,647	—
Financial	410	676	1,086	1,081	4	1	—	1,086	—
Other services	5,026	2,311	7,337	6,274	914	149	—	7,337	—
Property and construction	9,264	2,183	11,447	6,969	3,996	482	—	11,447	151
Residential mortgages	30,429	1,416	31,845	30,071	1,057	632	85	31,845	—
Other personal	2,841	2,963	5,804	5,061	571	172	—	5,804	—
Total	62,648	16,626	79,274	67,786	9,378	2,025	85	79,274	174
Concentration by location(1)
Republic of Ireland	49,522	12,619	62,141	53,606	6,958	1,492	85	62,141	174
United Kingdom	8,514	3,065	11,579	9,666	1,571	342	—	11,579	—
North America	2,041	387	2,428	2,197	217	14	—	2,428	—
Rest of the World	2,571	555	3,126	2,317	632	177	—	3,126	—
	62,648	16,626	79,274	67,786	9,378	2,025	85	79,274	174

ECL allowance

								30 June 2023
								At amortised cost
		Gross carrying amount					Analysed by ECL stage profile
	Loans and advances to customers	Loan commitments and financial guarantees issued	Total	Stage 1	Stage 2	Stage 3	POCI	Total
Concentration by industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	68	3	71	15	15	41	—	71
Energy	37	6	43	16	26	1	—	43
Manufacturing	71	4	75	16	40	19	—	75
Distribution	359	10	369	23	237	109	—	369
Transport	62	1	63	16	28	19	—	63
Financial	4	1	5	4	—	1	—	5
Other services	174	8	182	31	85	66	—	182
Property and construction	405	23	428	49	215	164	—	428
Residential mortgages	280	—	280	42	38	191	9	280
Other personal	178	8	186	30	46	110	—	186
Total	1,638	64	1,702	242	730	721	9	1,702
Concentration by location(1)
Republic of Ireland	1,203	48	1,251	160	493	589	9	1,251
United Kingdom	231	9	240	52	121	67	—	240
North America	52	2	54	16	29	9	—	54
Rest of the World	152	5	157	14	87	56	—	157
	1,638	64	1,702	242	730	721	9	1,702

(1) Based on country of risk.

62

31 December 2022

Credit risk – Credit profile of the loan portfolio

Gross exposures to customers

									31 December 2022
								At amortised cost	At FVTPL
			Gross carrying amount				Analysed by ECL stage profile
	Loans and advances to customers	Loan commitments and financial guarantees issued	Total	Stage 1	Stage 2	Stage 3	POCI	Total	Total
Concentration by industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	1,656	668	2,324	1,975	270	79	—	2,324	—
Energy	2,814	1,668	4,482	4,240	213	29	—	4,482	9
Manufacturing	2,864	1,939	4,803	4,318	397	88	—	4,803	—
Distribution	4,138	1,580	5,718	3,378	1,908	432	—	5,718	14
Transport	2,632	914	3,546	3,196	310	40	—	3,546	—
Financial	477	572	1,049	972	76	1	—	1,049	—
Other services	4,782	2,103	6,885	6,049	679	157	—	6,885	—
Property and construction	8,617	2,384	11,001	9,056	1,509	436	—	11,001	226
Residential mortgages	30,279	1,168	31,447	29,553	1,161	646	87	31,447	—
Other personal	2,723	2,866	5,589	4,810	591	188	—	5,589	—
Total	60,982	15,862	76,844	67,547	7,114	2,096	87	76,844	249
Concentration by location(1)
Republic of Ireland	48,061	11,971	60,032	53,343	5,125	1,477	87	60,032	249
United Kingdom	8,087	2,976	11,063	9,322	1,339	402	—	11,063	—
North America	2,116	375	2,491	2,158	312	21	—	2,491	—
Rest of the World	2,718	540	3,258	2,724	338	196	—	3,258	—
	60,982	15,862	76,844	67,547	7,114	2,096	87	76,844	249

ECL allowance

								At amortised cost
			Gross carrying amount			Analysed by ECL stage profile
	Loans and advances to customers	Loan commitments and financial guarantees issued	Total	Stage 1	Stage 2	Stage 3	POCI	Total
Concentration by industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	54	3	57	11	20	26	—	57
Energy	56	8	64	16	25	23	—	64
Manufacturing	89	11	100	23	49	28	—	100
Distribution	398	14	412	30	269	113	—	412
Transport	65	1	66	12	30	24	—	66
Financial	31	—	31	3	28	—	—	31
Other services	145	10	155	33	63	59	—	155
Property and construction	320	23	343	90	121	132	—	343
Residential mortgages	283	—	283	40	37	197	9	283
Other personal	177	8	185	26	43	116	—	185
Total	1,618	78	1,696	284	685	718	9	1,696
Concentration by location(1)
Republic of Ireland	1,159	64	1,223	204	442	568	9	1,223
United Kingdom	250	11	261	51	111	99	—	261
North America	64	3	67	13	47	7	—	67
Rest of the World	145	—	145	16	85	44	—	145
	1,618	78	1,696	284	685	718	9	1,696

(1) Based on country of risk.

RISK MANAGEMENT CONTINUED

Credit risk – Credit profile of the loan portfolio

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 amortised cost

							30 June 2023
	1-30 days	31-60 days	61-90 days	91-180 days	181-365 days	> 365 days	Total
Industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	9	3	2	4	7	12	37
Energy	—	—	—	—	—	2	2
Manufacturing	3	1	—	—	2	6	12
Distribution	20	18	1	6	41	54	140
Transport	2	—	—	1	1	6	10
Financial	—	—	—	—	—	1	1
Other services	38	8	3	11	11	26	97
Property and construction	183	5	11	42	24	46	311
Residential mortgages	64	27	16	38	59	209	413
Other personal	40	10	7	18	32	83	190
Total gross carrying amount	359	72	40	120	177	445	1,213
ECL staging
Stage 1	78	—	—	—	—	—	78
Stage 2	89	55	24	—	—	—	168
Stage 3	192	17	15	119	176	440	959
POCI	—	—	1	1	1	5	8
	359	72	40	120	177	445	1,213
Segment
Retail Banking	133	42	27	74	130	398	804
Capital Markets	210	2	6	31	17	12	278
AIB UK	16	28	7	15	30	35	131
Group	—	—	—	—	—	—	—
	359	72	40	120	177	445	1,213
As a percentage of total gross
loans at amortised cost	% 0.57	% 0.11	% 0.06	% 0.19	% 0.28	% 0.71	% 1.94

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 30 June 2023 and 31 December 2022.

Aged analysis of contractually past due loans and advances to customers continued

At amortised cost

							31 December 2022
	1-30 days	31-60 days	61-90 days	91-180 days	181-365 days	> 365 days	Total
Industry sector	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Non-property business:
Agriculture	9	3	1	2	4	15	34
Energy	18	—	—	—	1	—	19
Manufacturing	8	2	1	1	3	6	21
Distribution	61	6	2	13	40	60	182
Transport	1	—	—	—	3	6	10
Financial	—	—	—	—	—	1	1
Other services	14	4	3	7	12	28	68
Property and construction	64	14	18	19	45	53	213
Residential mortgages	67	19	20	33	60	209	408
Other personal	39	12	7	21	30	88	197
Total gross carrying amount	281	60	52	96	198	466	1,153
ECL staging
Stage 1	85	—	—	—	—	—	85
Stage 2	128	39	19	—	—	—	186
Stage 3	67	21	33	96	197	461	875
POCI	1	—	—	—	1	5	7
	281	60	52	96	198	466	1,153
Segment
Retail Banking	129	39	35	72	144	408	827
Capital Markets	13	2	—	18	9	21	63
AIB UK	139	19	17	6	45	37	263
Group	—	—	—	—	—	—	—
	281	60	52	96	198	466	1,153
As a percentage of total gross loans at amortised cost	%	%	%	%	%	%	%
	0.46	0.10	0.09	0.16	0.32	0.76	1.89

In the half-year to June 2023, total loans past due have remained unchanged at € 1.2 billion or 1.9% of total loans and advances to customers (31 December 2022: € 1.2 billion or 1.9%).

Residential Mortgage loans past due at 30 June 2023 represent the largest concentration amounting to € 0.4 billion or 34% of total loans past due (31 December 2022: € 0.4 billion or 35%). Non-property business loans which were past due represent 25% or € 0.3 billion (31 December 2022: 29% or € 0.4 billion), with property and construction at 25% or € 0.3 billion (31 December 2022: 19% or € 0.2 billion), and other personal at 16% or € 0.2 billion (31 December 2022: 17% or € 0.2 billion).

All loans past due by 90 days or more on any material obligation are considered non-performing/defaulted.

Gross loans(1) and ECL movements

The following tables set out the movements in the gross carrying amount and ECL allowance for loans and advances to customers by ECL staging between 1 January 2023 and 30 June 2023 and the corresponding movements for the year to 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 140 and 141 of the Annual Financial Report 2022) 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

	30 June 2023*
	Stage 1	Stage 2	Stage 3	POCI	Total
	€ m	€ m	€ m	€ m	€ m
At 1 January 2023	52,862	6,036	1,997	87	60,982
Transferred from Stage 1 to Stage 2	(3,137)	3,137	—	—	—
Transferred from Stage 2 to Stage 1	1,605	(1,605)	—	—	—
Transferred to Stage 3	(65)	(385)	450	—	—
Transferred from Stage 3	28	128	(156)	—	—
New loans originated/top-ups(2)	6,545	—	—	—	6,545
Redemptions/repayments	(5,152)	(879)	(257)	(5)	(6,293)
Interest credited	1,086	177	37	1	1,301
Write-offs	—	—	(77)	—	(77)
Derecognised due to disposals	(19)	—	(64)	—	(83)
Exchange translation adjustments	187	40	11	—	238
Impact of model, parameter and overlay changes	(1,603)	1,603	—	—	—
Other movements	35	9	(11)	2	35
At 30 June 2023	52,372	8,261	1,930	85	62,648

			31 December 2022*
	Stage 1	Stage 2	Stage 3	POCI	Total
	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	48,394	6,768	2,885	103	58,150
Transferred from Stage 1 to Stage 2	(3,599)	3,599	—	—	—
Transferred from Stage 2 to Stage 1	2,317	(2,317)	—	—	—
Transferred to Stage 3	(91)	(623)	714	—	—
Transferred from Stage 3	39	301	(340)	—	—
New loans originated/top-ups(3)	14,594	—	—	—	14,594
Redemptions/repayments	(10,071)	(1,768)	(657)	(12)	(12,508)
Interest credited	1,566	202	71	2	1,841
Write-offs	—	—	(94)	—	(94)
Derecognised due to disposals	(151)	(109)	(541)	(6)	(807)
Exchange translation adjustments	(212)	(69)	(25)	—	(306)
Impact of model, parameter and overlay changes	—	—	—	—	—
Other movements	76	52	(16)	—	112
At 31 December 2022	52,862	6,036	1,997	87	60,982

(1) Movements on the gross loans table have been prepared on a 'sum of the months' basis.

(2) Includes € 0.7 billion of loans acquired from Ulster Bank.

(3) Includes € 2.1 billion of loans acquired from Ulster Bank.

ECL Credit risk – Credit profile of the loan portfolio Gross loans and ECL movements continued

ECL allowance movements – total 30 June 2023* Stage 1 Stage 2 Stage 3 POCI Total € m € m € m € m € m At 1 January 2023 263 646 700 9 1,618 Transferred from Stage 1 to Stage 2 (50) 124 — — 74 Transferred from Stage 2 to Stage 1 42 (77) — — (35) Transferred to Stage 3 (1) (45) 70 — 24 Transferred from Stage 3 1 14 (22) — (7) Net remeasurement 7 13 2 (1) 21 New loans originated/top-ups 22 — — — 22 Redemptions/repayments (12) (26) — — (38) Impact of model and overlay changes (50) 54 58 — 62 Impact of credit or economic risk parameters (2) (7) (7) — (16) Income statement net credit impairment (writeback)/charge (43) 50 101 (1) 107 Write-offs — — (77) — (77) Derecognised due to disposals — (1) (20) — (21) Exchange translation adjustments 1 4 3 — 8 Other movements 4 (1) (1) 1 3 At 30 June 2023 225 698 706 9 1,638

					31 December 2022*
	Stage 1	Stage 2	Stage 3	POCI	Total
	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	236	700	918	31	1,885
Transferred from Stage 1 to Stage 2	(40)	146	—	—	106
Transferred from Stage 2 to Stage 1	30	(102)	—	—	(72)
Transferred to Stage 3	(3)	(71)	126	—	52
Transferred from Stage 3	3	39	(91)	—	(49)
Net remeasurement	31	(16)	(16)	(5)	(6)
New loans originated/top-ups	66	—	—	—	66
Redemptions/repayments	(26)	(67)	—	—	(93)
Impact of model and overlay changes	21	20	48	(12)	77
Impact of credit or economic risk parameters	(59)	22	6	—	(31)
Income statement net credit impairment (writeback)/charge(1)	23	(29)	73	(17)	50
Write-offs	—	—	(94)	—	(94)
Derecognised due to disposals	(1)	(7)	(202)	—	(210)
Exchange translation adjustments	(1)	(5)	(7)	—	(13)
Other movements	6	(13)	12	(5)	—
At 31 December 2022	263	646	700	9	1,618

(1) Net credit impairment charge of € 50 million includes the impact of the Ulster Bank portfolio acquired during the year which resulted in a net charge of € 39 million.

*Forms an integral part of the condensed consolidated interim financial statements

Credit risk – Credit profile of the loan portfolio Gross loans and ECL movements continued

Total exposures to which an ECL applies increased during the period by € 1.6 billion from € 61.0 billion at 1 January 2023 to € 62.6 billion at 30 June 2023.

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. An ECL charge of € 61 million due to stage transfers and net remeasurement within stage occurred in the half-year to June 2023 which reflects underlying credit management activity and a slight deterioration in credit parameters which inform the modelled outcomes.

Model and overlay changes resulted in an ECL charge of € 62 million and further detail on the post model adjustments are outlined within the management judgements section on pages 40 to 41. These ensure exposures subject to risk, which are not adequately reflected in the modelled outcomes retain an appropriate ECL.

The updated macroeconomic scenarios and weightings resulted in a release of € 16 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 € 8 million. This was driven by an improvement in macroeconomic activity which has generally been better than expected in the half-year to June 2023 and forecasts have been revised upward as a result.

The gross loan transfers from Stage 1 to Stage 2 of € 3.1 billion are due to underlying credit management activity where a significant increase in credit risk occurred at some point during the period through either the quantitative or qualitative criteria for stage movement. 50% 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 7% caused solely by the backstop of 30 days past due. Of the € 3.1 billion which transferred from Stage 1 to Stage 2 in the half-year to June 2023, approximately € 2.6 billion is reported as Stage 2 at 30 June 2023. In addition, a post model adjustment approved in the halfyear to June 2023 resulted in € 1.6 billion of commercial real estate exposures (predominately commercial investment – office) transferring to Stage 2 as a proactive and forward-looking credit management approach following changes in market dynamics due to increased interest rates and stressing asset values where a potential Interest cover breach under stress could occur or where loans are unlikely to meet business as usual refinance terms. This is presented separately under impact of model, parameter and overlay changes.

Where a movement to Stage 2 is triggered by multiple drivers simultaneously these are reported in the following order: quantitative; qualitative; backstop.

Similarly, transfers from Stage 2 to Stage 1 of € 1.6 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 € 0.4 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 € 0.1 billion had transferred from Stage 1 to Stage 2 earlier in the year.

Transfers from Stage 3 to Stage 2 of € 0.1 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 decreased by € 0.5 billion in the period to € 52.4 billion with an ECL of € 0.2 billion and resulting cover of 0.4% (31 December 2022: 0.5%).

Stage 2 loans increased by € 2.2 billion in the period to € 8.2 billion with an ECL of € 0.7 billion and resulting cover of 8.5% (31 December 2022: 10.7%). The increase in Stage 2 loans was driven by the property portfolio following € 1.1 billion transferring from Stage 1 to 2 primarily due to loans triggering a qualitative significant increase in credit risk event during the period and the commercial investment portfolio post model adjustment.

Stage 3 exposures decreased by € 0.1 billion in the period to € 1.9 billion with the ECL cover increasing from 35.1% to 36.6%.

68

Movements in off-balance sheet exposures

The following tables set out the movements in the nominal amount and ECL allowance for loan commitments and financial guarantees by ECL staging:

Nominal amount movements

								30 June 2023*
	Loan commitments				Financial guarantees
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2023	13,947	1,033	80	15,060	738	45	19	802
Transferred from Stage 1 to Stage 2	(411)	411	—	—	(11)	11	—	—
Transferred from Stage 2 to Stage 1	418	(418)	—	—	45	(45)	—	—
Transferred to Stage 3	(5)	(10)	15	—	—	—	—	—
Transferred from Stage 3	6	3	(9)	—	—	—	—	—
Net movement	756	53	(8)	801	(69)	34	(2)	(37)
At 30 June 2023	14,711	1,072	78	15,861	703	45	17	765

							31 December 2022*
		Loan commitments	Financial guarantees
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	12,824	768	135	13,727	743	50	26	819
Transferred from Stage 1 to Stage 2	(470)	470	—	—	(35)	35	—	—
Transferred from Stage 2 to Stage 1	297	(297)	—	—	31	(31)	—	—
Transferred to Stage 3	(10)	(10)	20	—	—	(1)	1	—
Transferred from Stage 3	14	4	(18)	—	1	—	(1)	—
Net movement	1,292	98	(57)	1,333	(2)	(8)	(7)	(17)
At 31 December 2022	13,947	1,033	80	15,060	738	45	19	802

The internal credit grade profile of loan commitments and financial guarantees is set out in the following table:

	30 June 2023*	31 December 2022*
	€ m	€ m
Strong	11,625	10,844
Satisfactory	4,644	4,528
Criticised watch	179	257
Criticised recovery	83	134
Default	95	99
Total	16,626	15,862

Non-performing off-balance sheet commitments

Total non-performing off-balance sheet commitments amounted to € 95 million (31 December 2022: € 99 million).

*Forms an integral part of the condensed consolidated interim financial statements

Credit risk – Credit profile of the loan portfolio Movements in off-balance sheet exposures continued ECL allowance movements

								30 June 2023*
	Loan commitments					Financial guarantee contracts
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2023	19	35	5	59	2	4	13	19
Transferred from Stage 1 to Stage 2	(1)	11	—	10	(2)	2	—	—
Transferred from Stage 2 to Stage 1	1	(6)	—	(5)	2	(3)	—	(1)
Transferred to Stage 3	—	(2)	—	(2)	—	—	—	—
Transferred from Stage 3	1	—	—	1	—	—	—	—
Net remeasurement	(6)	(9)	—	(15)	—	1	(3)	(2)
Net income statement credit	(5)	(6)	—	(11)	—	—	(3)	(3)
Other movements	1	(1)	—	—	—	—	—	—
At 30 June 2023	15	28	5	48	2	4	10	16

							31 December 2022*
				Loan commitments			Financial guarantee contracts
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	16	29	8	53	5	7	14	26
Transferred from Stage 1 to Stage 2	(2)	16	—	14	(4)	3	—	(1)
Transferred from Stage 2 to Stage 1	6	(15)	—	(9)	1	(3)	—	(2)
Transferred to Stage 3	—	(1)	2	1	(1)	—	1	—
Transferred from Stage 3	—	—	(1)	(1)	1	—	(1)	—
Net remeasurement	(1)	6	(3)	2	—	(3)	(1)	(4)
Net income statement charge/(credit)(1)	3	6	(2)	7	(3)	(3)	(1)	(7)
Other movements	—	—	(1)	(1)	—	—	—	—
At 31 December 2022	19	35	5	59	2	4	13	19

(1) Net income statement charge of € 7 million for loan commitments includes € 6 million of loan commitments acquired as part of the Ulster Bank portfolio acquisition.

*Forms an integral part of the condensed consolidated interim financial statements

Credit risk Credit ratings

External credit ratings of financial assets

The following table sets out the credit quality of financial assets based on external credit ratings. These include loans and advances to banks of € 1.8 billion (31 December 2022: € 1.5 billion), securities financing of € 7.6 billion (31 December 2022: € 6.2 billion), investment debt securities at amortised cost of € 4.3 billion (31 December 2022: € 4.1 billion), and at FVOCI of € 11.9 billion (31 December 2022: € 11.8 billion) and trading portfolio financial assets of € 0.1 billion (31 December 2022: Nil). Information on the credit ratings for loans and advances to customers where an external credit rating is available is disclosed on page 61.

												30 June 2023
				At amortised cost				At FVOCI	At FVTPL	Total
	Bank		Corporate Sovereign	Other	Total	Bank		Corporate Sovereign	Other	Total	Sovereign
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
AAA/AA	404	—	2,206	1,544	4,154	4,365	138	3,708	477	8,688	75	12,917
A/A-	7,830	1,301	15	192	9,338	1,476	265	240	—	1,981	—	11,319
BBB+/BBB/ BBB-	7	31	32	5	75	355	161	719	—	1,235	—	1,310
Sub investment	—	79	—	—	79	—	—	—	—	—	—	79
Unrated	3	105	—	23	131	—	—	—	—	—		131
Total	8,244	1,516	2,253		1,764 13,777	6,196	564	4,667		477 11,904	75	25,756
Of which:
Stage 1 8,244		1,508	2,253		1,764 13,769	6,196	537	4,667		477 11,877	75	25,721
Stage 2	—	8	—	—	8	—	27	—	—	27	—	35
Stage 3	—	—	—	—	—	—	—	—	—	—	—	—

												31 December 2022
					At amortised cost					At FVOCI	At FVTPL	Total
	Bank	Corporate	Sovereign	Other	Total	Bank	Corporate	Sovereign	Other	Total	Sovereign
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
AAA/AA	440	—	2,171	1,405	4,016	4,008	110	4,048	453	8,619	—	12,635
A/A-	6,442	962	15	195	7,614	1,408	216	213	—	1,837	—	9,451
BBB+/BBB/ BBB-	10	9	32	5	56	347	173	861	—	1,381	—	1,437
Sub
investment	—	92	—	—	92	—	—	—	—	—	—	92
Unrated	2	112	—	23	137	—	—	—	—	—	—	137
Total	6,894	1,175	2,218		1,628 11,915	5,763	499	5,122		453 11,837	—	23,752
Of which:
Stage 1	6,894	1,167	2,218		1,628 11,907	5,763	499	5,122		453 11,837	—	23,744
Stage 2	—	8	—	—	8	—	—	—	—	—	—	8
Stage 3	—	—	—	—	—	—	—	—	—	—	—	—

(1) Relates to asset backed securities.

(2) Includes supranational banks and government agencies.

Credit risk

Additional credit quality and forbearance disclosures on loans and advances to customers Forbearance

The Group's approach to forbearance initiatives are outlined on pages 186 and 187 in the 'Risk management' section of the Annual Financial Report 2022. The following tables set out the internal credit ratings and ECL staging of forborne loans and advances to customers:

					30 June 2023			31 December 2022
			At amortised cost				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	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Temporary forbearance	332	15	32	337	716 (1)	374	19	74	842	1,309 (1)
Permanent forbearance	339	41	307	857	1,544 (2)	378	47	479	1,044	1,948 (2)
	671	56	339	1,194	2,260	752	66	553	1,886	3,257
Analysed by internal credit ratings
Strong Satisfactory	— —	— —	— —	— —	— —	— —	— —	— —	— —	— —
Total strong/ satisfactory	—	—	—	—	—	—	—	—	—	—
Criticised watch	—	—	—	—	—	—	—	—	—	—
Criticised recovery	255	17	98	821	1,191	309	15	259	1,431	2,014
Total criticised	255	17	98	821	1,191	309	15	259	1,431	2,014
Non-performing	416	39	241	373	1,069	443	51	294	455	1,243
Gross carrying amount	671	56	339	1,194	2,260	752	66	553	1,886	3,257
Analysed by ECL staging
Stage 1	1	—	14	70	85	2	—	19	98	119
Stage 2	194	17	84	751	1,046	246	15	240	1,333	1,834
Stage 3	399	39	241	373	1,052	424	51	294	455	1,224
POCI	77	—	—	—	77	80	—	—	—	80
Total	671	56	339	1,194	2,260	752	66	553	1,886	3,257
ECL allowance	136	28	104	277	545	151	32	146	424	753

(1) Of which: interest only € 332 million, payment moratorium € 229 million, reduced payment € 112 million (31 December 2022: of which: interest only € 715 million, payment moratorium € 401 million, reduced payment € 107 million).

(2) Of which: arrears capitalisation and term extension € 604 million, amendment to or non-enforcement of financial covenant € 349 million, restructure € 415 million (31 December 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 the increasing rate of inflation and subsequent affordability issues as the cost of household goods and services rise, including mortgage repayments as a result of rising interest rates.

The total forbearance portfolio has decreased by € 1.0 billion to € 2.3 billion in the half-year to June 2023 (31 December 2022: € 3.3 billion). The decrease was driven by the performing forborne element of the portfolio in criticised recovery which decreased by € 0.8 billion, due to lower inflows and customers exiting forbearance due to repayments or completion of probation criteria. The overall reduction in the half-year to June 2023 was in the non-property business portfolio which decreased by € 0.6 billion, as cases predominately in the hotels and licensed premises sectors exited forbearance.

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.

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/external covered bonds. The composition of the liquidity pool is subject to limits recommended by the Risk function and approved by the Board.

At 30 June 2023, the Group held € 64,774 million (31 December 2022: € 61,077 million) in qualifying liquid assets 'QLA'(1)/ contingent funding of which € 7,074 million (31 December 2022: € 7,845 million) was not available due to repurchase, secured loans and other restrictions. At 30 June 2023, the Group's available QLA was € 57,700 million (31 December 2022: € 53,232 million). During the six months to 30 June 2023, the available QLA ranged from € 52,170 million to € 59,819 million and the average balance was € 54,459 million.

(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 the six months to 30 June 2023 by € 4,468 million which was predominantly due to an increase in customer deposits in Ireland, retained and senior debt issuance, offset by an increase in customer loans, covered bond maturities and the directed buyback of shares.

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.

For further details of liquidity risk and its management, see pages 188 to 194 of the Annual Financial Report 2022.

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.

	30 June	31 December
	2023	2022
Liquidity metrics	%	%
Liquidity Coverage Ratio	164	192
Net Stable Funding Ratio	158	164

The Group monitors and reports its liquidity positions against Capital Requirements Regulations (CRR2) and other related liquidity regulations (LCR Delegated Act). It has fully complied with the minimum LCR and NSFR requirements of 100% in the six months to 30 June 2023. The Group LCR decreased in the six months to 30 June 2023 by 28% which was predominantly due to a payment associated with the Ulster Bank loan portfolio acquisition falling into the LCR 30 day stress horizon. The Group NSFR decreased in the six months to 30 June 2023 by 6% predominantly due to an increase in customer loans and securities financing.

Funding structure

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.

	30 June 2023	31 December 2022
Customer accounts	€ m	€ m
Total	103,704	102,359
Of which:
Euro	91,706	89,816
Sterling	9,754	10,478
US dollar	2,061	1,925
Other currencies	183	140

Customer accounts increased by € 1,345 million in the six months to 30 June 2023. The increase in the value of Euro deposits of € 1,890 million is due to deposit inflows associated with the banks exiting the Irish market coupled with higher income and employment levels. This was partially offset by a € 724 million decrease in GBP deposits driven by the AIB UK strategy of withdrawing from the GB SME market. This was reflective of a € 1,039 million underlying decrease in GBP deposits offset by a € 315 million increase in the value of GBP deposits due to GBP currency movements.

RISK MANAGEMENT CONTINUED

Liquidity and funding risk

Composition of wholesale funding(1)

The Group maintains access to a variety of sources of wholesale funding including bank deposits, securities financing, debt securities and subordinated debt. At 30 June 2023, total wholesale funding outstanding was € 9,303 million (31 December 2022: € 10,019 million) of which € 1,769 million is due to mature in less than one year (31 December 2022: € 2,507 million).

									30 June 2023
	< 1	1–3	3–6	6–12	Total	1–3	3–5	> 5	Total
	month	months	months	months	< 1 year	years	years	years
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Deposits by central banks and banks	117	—	12	—	129	99	192	—	420
Securities financing	685	108	—	—	793	—	—	—	793
Senior debt	—	—	125	722	847	1,364	2,969	1,464	6,644
ACS	—	—	—	—	—	—	5	21	26
Subordinated liabilities and other capital
instruments	—	—	—	—	—	—	—	1,420	1,420
Total 30 June 2023	802	108	137	722	1,769	1,463	3,166	2,905	9,303
Of which:
Secured	685	108	12	—	805	99	197	21	1,122
Unsecured	117	—	125	722	964	1,364	2,969	2,884	8,181
Total 30 June 2023	802	108	137	722	1,769	1,463	3,166	2,905	9,303

									31 December 2022
	< 1	1–3	3–6	6–12	Total	1–3	3–5	> 5	Total
	month	months	months	months	< 1 year	years	years	years
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Deposits by central banks and banks	22	210	—	—	232	96	186	—	514
Securities financing	798	100	—	—	898	—	—	—	898
Senior debt	—	252	—	126	378	2,084	2,071	1,646	6,179
ACS	—	999	—	—	999	—	—	25	1,024
Subordinated liabilities and other capital
instruments	—	—	—	—	—	—	—	1,404	1,404
Total 31 December 2022	820	1,561	—	126	2,507	2,180	2,257	3,075	10,019
Of which:
Secured	798	1,099	—	—	1,897	96	186	25	2,204
Unsecured	22	462	—	126	610	2,084	2,071	3,050	7,815
Total 31 December 2022	820	1,561	—	126	2,507	2,180	2,257	3,075	10,019

(1) The maturity analysis has been prepared using the residual contractual maturity of the liabilities.

In the six months to 30 June 2023, senior debt increased € 465 million primarily due to a € 750 million Senior Unsecured Note issued in January offset by a contractual maturity and USD foreign currency translation totalling € 285 million. Securities financing decreased by € 105 million in the six months to 30 June 2023.

Outstanding asset covered securities ('ACS') at 30 June 2023 decreased € 998 million to € 26 million due to a contractual maturity. For further details on debt securities, see note 25 'Debt securities in issue' to the condensed consolidated interim financial statements.

Liquidity and funding risk

Currency composition of wholesale funding

At 30 June 2023, 74% (31 December 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.

					30 June 2023	31 December 2022
	EUR	GBP	USD	Other	Total	EUR	GBP	USD	Other	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Deposits by central banks and banks	95	314	—	11	420	220	290	4	—	514
Securities financing	472	—	321	—	793	401	—	497	—	898
Senior debt	4,944	—	1,700	—	6,644	4,449	—	1,730	—	6,179
ACS	26	—	—	—	26	1,024	—	—	—	1,024
Subordinated liabilities and other capital instruments	1,373	47	—	—	1,420	1,360	44	—	—	1,404
Total wholesale funding	6,910	361	2,021	11	9,303	7,454	334	2,231	—	10,019
% of wholesale funding	%	%	%	%	%	%	%	%	%	%
	74	4	22	—	100	75	3	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 6.5% at 30 June 2023 (31 December 2022: 8%) with € 8,815 million of the Group's assets encumbered (31 December 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.

75

FINANCIAL STATEMENTS

• Condensed consolidated income statement
• Condensed consolidated statement of comprehensive income
• Condensed consolidated statement of financial position
• Condensed consolidated statement of changes in equity
• Condensed consolidated statement of cash flows
• Notes to the condensed consolidated interim financial statements

CONDENSED CONSOLIDATED INCOME STATEMENT (unaudited)

for the half-year ended 30 June 2023

		Half-year 30 June 2023	Half-year 30 June 2022
	Notes	€ m	€ m
Interest income calculated using the effective interest rate method	3	2,033	1,022
Other interest income and similar income	3	47	40
Interest and similar income	3	2,080	1,062
Interest and similar expense	4	(308)	(167)
Net interest income		1,772	895
Dividend income		1	1
Fee and commission income	5	393	373
Fee and commission expense	5	(87)	(86)
Net trading income	6	110	57
Net gain on other financial assets measured at FVTPL	7	18	30
Net (loss)/gain on derecognition of financial assets measured at amortised cost		(11)	28
Other operating income	8	1	8
Other income		425	411
Total operating income		2,197	1,306
Operating expenses	9	(975)	(901)
Impairment and amortisation of intangible assets		(111)	(108)
Impairment and depreciation of property, plant and equipment		(36)	(74)
Total operating expenses		(1,122)	(1,083)
Operating profit before impairment losses		1,075	223
Net credit impairment (charge)/writeback	10	(91)	309
Operating profit		984	532
Income from equity accounted investments	19	3	5
Profit before taxation		987	537
Income tax charge	11	(133)	(60)
Profit for the period		854	477
Attributable to:
– Equity holders of the parent		856	478
– Non-controlling interests		(2)	(1)
Profit for the period		854	477
Earnings per share
Basic earnings per ordinary share	12(a)	31.0c	16.5c
Diluted earnings per ordinary share	12(b)	31.0c	16.5c

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

for the half-year ended 30 June 2023

	Half-year 30 June	Half-year 30 June
	2023	2022
Notes	€ m	€ m
Profit for the period	854	477
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit asset/(liability), net of tax 11	—	29
Total items that will not be reclassified subsequently to profit or loss	—	29
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 11	47	(27)
Net change in cash flow hedges, net of tax 11	37	(839)
Net change in fair value of investment debt securities at FVOCI, net of tax 11	2	(130)
Total items that will be reclassified subsequently to profit or loss
when specific conditions are met	86	(996)
Other comprehensive income for the period, net of tax	86	(967)
Total comprehensive income for the period	940	(490)
Attributable to:
– Equity holders of the parent	942	(489)
– Non-controlling interests	(2)	(1)
Total comprehensive income for the period	940	(490)

78

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)

as at 30 June 2023

Notes € m € m Assets Cash and balances at central banks 34 36,088 38,138 Trading portfolio financial assets 87 8 Derivative financial instruments 13 2,489 2,511 Loans and advances to banks 14 1,843 1,502 Loans and advances to customers 15 61,184 59,613 Securities financing 16 7,627 6,282 Investment securities 18 16,537 16,270 Investments accounted for using the equity method 19 229 173 Intangible assets and goodwill 903 940 Property, plant and equipment 510 536 Other assets 20 342 296 Current taxation 7 15 Deferred tax assets 21 2,955 3,032 Prepayments and accrued income 456 423 Retirement benefit assets 22 24 13 Total assets 131,281 129,752 Liabilities Deposits by central banks and banks 23 420 514 Customer accounts 24 103,704 102,359 Securities financing 16 793 898 Trading portfolio financial liabilities 53 4 Derivative financial instruments 13 3,029 2,982 Debt securities in issue 25 6,670 7,203 Lease liabilities 243 257 Current taxation 10 1 Deferred tax liabilities 21 28 30 Retirement benefit liabilities 22 15 16 Other liabilities 26 1,374 1,106 Accruals and deferred income 462 377 Provisions for liabilities and commitments 27 274 340 Subordinated liabilities and other capital instruments 28 1,420 1,404 Total liabilities 118,495 117,491 Equity Share capital 29 1,637 1,671 Reserves 10,039 9,478 Total shareholders' equity 11,676 11,149 Other equity interests 30 1,115 1,115 Non-controlling interests (5) Total equity 12,786 12,261		30 June 2023	31 December 2022
(3)
	Total liabilities and equity	131,281	129,752

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the half-year ended 30 June 2023

							Attributable to equity holders of parent
	Share capital	Other equity interests	Capital reserves	Merger reserve	Capital redemp tion reserves	Reval uation reserves	Investment securities reserves	Cash flow hedging reserves	Revenue reserves	Foreign currency translation reserves	Total	Non controlling interests	Total equity
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2023	1,671	1,115	1,133	(3,622)	39	13	(36)	(1,470)	14,004	(583)	12,264	(3)	12,261
Total comprehensive income for the period
Profit for the period	—	—	—	—	—	—	—	—	856	—	856	(2)	854
Other comprehensive income (note 11)	—	—	—	—	—	—	2	37	—	47	86	—	86
Total comprehensive income for the period	—	—	—	—	—	—	2	37	856	47	942	(2)	940
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners of the Group
Dividends paid on ordinary shares (note 38)	—	—	—	—	—	—	—	—	(166)	—	(166)	—	(166)
Distributions paid to other equity interests	—	—	—	—	—	—	—	—	(33)	—	(33)	—	(33)
Buyback of ordinary shares (note 29)	(34)	—	—	—	34	—	—	—	(215)	—	(215)	—	(215)
Other movements	—	—	—	—	—	(1)	—	—	—	—	(1)	—	(1)
Total contributions by and distributions to owners of the Group	(34)	—	—	—	34	(1)	—	—	(414)	—	(415)	—	(415)
At 30 June 2023	1,637	1,115	1,133	(3,622)	73	12	(34)	(1,433)	14,446	(536)	12,791	(5)	12,786

AIB Group plc Half-Yearly Financial Report 2023

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the half-year ended 30 June 2022

	Attributable to equity holders of parent
	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
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	1,696	1,115	1,133	(3,622)	14	13	152	149	13,523	(512)	13,661	(1)	13,660
Total comprehensive income for the period
Profit for the period	—	—	—	—	—	—	—	—	478	—	478	(1)	477
Other comprehensive income (note 11)	—	—	—	—	—	—	(130)	(839)	29	(27)	(967)	—	(967)
Total comprehensive income for the period	—	—	—	—	—	—	(130)	(839)	507	(27)	(489)	(1)	(490)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners of the Group
Dividends paid on ordinary shares (note 38)	—	—	—	—	—	—	—	—	(122)	—	(122)	—	(122)
Distributions paid to other equity interests	—	—	—	—	—	—	—	—	(33)	—	(33)	—	(33)
Buyback of ordinary shares (note 29)	(25)	—	—	—	25	—	—	—	(91)	—	(91)	—	(91)
Total contributions by and distributions to owners of the Group	(25)	—	—	—	25	—	—	—	(246)	—	(246)	—	(246)
At 30 June 2022	1,671	1,115	1,133	(3,622)	39	13	22	(690)	13,784	(539)	12,926	(2)	12,924

AIB Group plc Half-Yearly Financial Report 2023

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the financial year ended 31 December 2022

						Attributable to equity holders of parent
	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
	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
At 1 January 2022	1,696	1,115	1,133	(3,622)	14	13	152	149	13,523	(512)	13,661	(1)	13,660
Total comprehensive income for the year
Profit for the year	—	—	—	—	—	—	—	—	767	—	767	(2)	765
Other comprehensive income (note 11)	—	—	—	—	—	—	(188)	(1,619)	(8)	(71)	(1,886)	—	(1,886)
Total comprehensive income for the year	—	—	—	—	—	—	(188)	(1,619)	759	(71)	(1,119)	(2)	(1,121)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners of the Group:
Dividends paid on ordinary shares (note 38)	—	—	—	—	—	—	—	—	(122)	—	(122)	—	(122)
Distributions paid to other equity interests	—	—	—	—	—	—	—	—	(65)	—	(65)	—	(65)
Buyback of ordinary shares (note 29)	(25)	—	—	—	25	—	—	—	(91)	—	(91)	—	(91)
Total contributions by and distributions to owners of the Group	(25)	—	—	—	25	—	—	—	(278)	—	(278)	—	(278)
At 31 December 2022	1,671	1,115	1,133	(3,622)	39	13	(36)	(1,470)	14,004	(583)	12,264	(3)	12,261

82

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

for the half-year ended 30 June 2023

		Half-year 30 June 2023	Half-year 30 June 2022
	Notes	€ m	€ m
Cash flows from operating activities
Profit before taxation for the period		987	537
Adjustments for:
– Non-cash and other items	35	437	(85)
– Change in operating assets	35	(2,955)	(1,061)
– Change in operating liabilities	35	(78)	3,471
– Taxation (paid)/refund		(22)	13
Net cash (outflow)/inflow from operating activities		(1,631)	2,875
Cash flows from investing activities
Purchase of investment securities		(1,897)	(2,467)
Proceeds from sales, redemptions and maturity of investment securities		1,815	1,525
Additions to property, plant and equipment		(7)	(6)
Disposal of property, plant and equipment		2	4
Additions to intangible assets		(74)	(67)
Partial repayment of investment in associated undertaking		—	9
Investments accounted for using the equity method	19	(53)	(13)
Net cash outflow from investing activities		(214)	(1,015)
Cash flows from financing activities
Proceeds on issue of debt securities – MREL	25	750	1,000
Maturity of debt securities	25	(253)	—
Repurchase of debt securities		—	(250)
Dividends paid on ordinary shares	38	(166)	(122)
Buyback of ordinary shares	29	(215)	(91)
Distributions paid to other equity interests		(33)	(33)
Repayment of lease liabilities		(15)	(22)
Interest paid on debt securities – MREL		(96)	(52)
Interest paid on subordinated liabilities and other capital instruments		(29)	(29)
Net cash (outflow)/inflow from financing activities		(57)	401
Change in cash and cash equivalents		(1,902)	2,261
Opening cash and cash equivalents		39,316	43,557
Effect of exchange translation adjustments		156	(109)
Closing cash and cash equivalents	34	37,570	45,709

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

		Page
1	Basis of preparation, accounting policies and estimates	85
2	Segmental information	86
3	Interest and similar income	90
4	Interest and similar expense	90
5	Net fee and commission income	91
6	Net trading income	91
7	Net gain on other financial assets measured at FVTPL	91
8	Other operating income	92
9	Operating expenses	92
10	Net credit impairment (charge)/writeback	93
11	Taxation	93
12	Earnings per share	95
13	Derivative financial instruments	96
14	Loans and advances to banks	96
15	Loans and advances to customers	97
16	Securities financing	97
17	ECL allowance on financial assets	98
18	Investment securities	99
19	Investments accounted for using the equity method	100
20	Other assets	100

		Page
21	Deferred taxation	101
22	Retirement benefits	102
23	Deposits by central banks and banks	104
24	Customer accounts	104
25	Debt securities in issue	105
26	Other liabilities	105
27	Provisions for liabilities and commitments	106
28	Subordinated liabilities and other capital instruments	108
29	Share capital	108
30	Other equity interests	109
31	Contingent liabilities and commitments	109
32	Off-balance sheet arrangements and transferred financial assets	110
33	Fair value of financial instruments	111
34	Cash and cash equivalents	117
35	Statement of cash flows	118
36	Related party transactions	119
37	Financial and other information	120
38	Dividends	121
39	Non-adjusting events after the reporting period	121
40	Approval of Half-Yearly Financial Report	121

1 Basis of preparation, accounting policies and estimates 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 condensed consolidated interim financial statements for the six months to 30 June 2023 ('Half-Yearly Financial Report') comprise the parent company and its subsidiary undertakings, collectively referred to as 'AIB Group', and the Group's interests in associated undertakings and joint ventures.

The consolidated financial statements of the Group for the year ended 31 December 2022 ('the Annual Financial Report 2022') are available upon request from the Group Company Secretary or at www.aib.ie.

Going concern

The financial statements for the six months to 30 June 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 condensed consolidated interim financial statements.

Basis of preparation

The condensed consolidated interim financial statements for the six months to 30 June 2023 have been prepared in accordance with IAS 34 Interim Financial Reporting. These statements should be read in conjunction with the Annual Financial Report 2022, which was prepared in accordance with International Accounting Standards and International Financial Reporting Standards (collectively 'IFRS') as adopted by the European Union ('EU'). The condensed consolidated interim financial statements comprise the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows together with the related notes. These notes include certain risk related disclosures which are contained in the 'Risk management' section of the Half-Yearly Financial Report. The relevant information in the 'Risk management' section is identified as forming an integral part of the condensed consolidated interim financial statements.

Accounting policies

The accounting policies described on pages 230 to 256 of the Annual Financial Report 2022 have been applied in this Half-Yearly Financial Report.

New and amended standards and interpretations

For details on amendments to IAS 12 Income Taxes relating to the Pillar Two Rules, refer to note 21. There have been no new standards, or amendments to standards, adopted by the Group for the six months to 30 June 2023 which have had a material impact on the Group.

Critical accounting judgements and estimates

The preparation of the condensed consolidated interim 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 may involve making estimates concerning the likelihood of future events, the actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and for any future period affected. The judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are in the areas of impairment of financial assets; deferred tax; retirement benefit obligations; and provisions for liabilities and commitments.

Critical accounting judgements and estimates adopted by the Group are set out on pages 257 to 261 of the Annual Financial Report 2022 and while they remain appropriate, additional details and disclosures, taking account of developments in the six months to 30 June 2023, are as follows:

Impairment of financial assets

• The significant judgements relating to management adjustments to reflect all available information that have not been included in the risk measurement process modelled outcomes are outlined on pages 40 to 41.
• The updated macroeconomic scenarios and weightings used in models to calculate ECL allowance are set out on pages 34 to 38.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

1 Basis of preparation, accounting policies and estimates continued

Prospective accounting changes

Information on prospective accounting changes is set out on pages 255 and 256 of the Annual Financial Report 2022. There are no standards that are not yet effective that would be expected to have a material impact on the Group in future reporting periods.

Statement of compliance

The condensed consolidated interim financial statements comply with IAS 34 Interim Financial Reporting, as issued by the IASB and as adopted by the EU.

PricewaterhouseCoopers, Chartered Accountants and Statutory auditors, were appointed as the Group's independent auditor following the Group's AGM in May 2023. The interim figures for the six months to 30 June 2023 are unaudited but have been reviewed by the Group's independent auditor, PricewaterhouseCoopers, whose report is set out on pages 123 and 124. The financial information presented herein does not amount to statutory financial statements within the meaning of the Companies Act 2014. The Half-Yearly Financial Report is a requirement of the Transparency (Directive 2004/109/EC) Regulations 2007.

The summary financial statements for the financial year ended 31 December 2022 as presented in the condensed consolidated interim financial statements, represent an abbreviated version of the Group's full accounts for that year, on which the Group's previous independent auditor, Deloitte Ireland LLP, issued an unqualified audit report and did not include a reference to any matters to which the statutory auditor drew attention by way of emphasis without qualifying the report. The 31 December 2022 financial statements are not annexed to these condensed consolidated interim financial statements. The financial statements for the financial year ended 31 December 2022 have been filed in the Companies Registration Office.

2 Segmental information

Segment overview

The Group's performance is managed and reported across the Retail Banking, AIB Capital Markets ('Capital Markets'), AIB UK and Group segments. Segment performance excludes exceptional items.

Segment allocations

In the second half of 2022 the Group made changes to the methodologies used to allocate cost and income across operating segments in order to enhance the management of standalone segment performance. Under the Group's revised cost allocation methodology, substantially all of the costs of the Group's control, support and Treasury functions are now allocated to Retail Banking, Capital Markets and AIB UK whereas the previous methodology resulted in overheads which were managed centrally being reported in the Group segment. In addition certain Bank levies and regulatory fees, such as the Irish bank levy, which were previously reported in Group segment are now allocated to the Retail Banking and Capital Market segments. Figures for the prior half year have been restated on a comparative basis.

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.

2 Segmental information continued

							Half-year 30 June 2023
	Retail Banking	Capital Markets	AIB UK	Group	Total	Excep tional items (1)	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Operations by business segment
Net interest income	1,082	402	202	86	1,772	—	1,772
Net fee and commission income*	211	73	20	2	306	—	306
Other	134	25	3	(31)	131	(12) (2)(5)	119
Other income	345	98	23	(29)	437	(12)	425
Total operating income	1,427	500	225	57	2,209	(12)	2,197
Other operating expenses	(621)	(183)	(86)	(7)	(897)	(118)	(1,015)
Of which: Personnel expenses	(273)	(112)	(46)	(3)	(434)	(2) (3)	(436)
General and administrative expenses	(236)	(49)	(28)	(3)	(316)	(116) (4-6)	(432)
Depreciation, impairment and amortisation	(112)	(22)	(12)	(1)	(147)	—	(147)
Bank levies and regulatory fees	(9)	(4)	—	(94)	(107)	—	(107)
Total operating expenses	(630)	(187)	(86)	(101)	(1,004)	(118)	(1,122)
Operating profit/(loss) before
impairment losses	797	313	139	(44)	1,205	(130)	1,075
Net credit impairment charge	(46)	(26)	(5)	(14)	(91)	—	(91)
Operating profit/(loss)	751	287	134	(58)	1,114	(130)	984
Income from equity accounted investments	1	—	2	—	3	—	3
Profit/(loss) before taxation	752	287	136	(58)	1,117	(130)	987

(1) Exceptional items are shown separately above. These are items that Management view as distorting comparability of performance from period to period. Exceptional items include:

(2) Loss on disposal of loan portfolios; (5) Restructuring costs; and

(3) Termination benefits; (6) Inorganic transaction costs.

(4) Restitution costs;

					Half-year 30 June 2023
	Retail Banking	Capital Markets	AIB UK	Group	Total
*Analysis of net fee and commission income	€ m	€ m	€ m	€ m	€ m
Customer accounts	100	13	6	—	119
Card income	81	4	6	—	91
Foreign exchange fees	22	14	3	1	40
Credit related fees	4	15	7	—	26
Specialised payment services fees	67	—	—	—	67
Stockbroking client fees and commissions	—	23	—	—	23
Asset management and advisory fees	—	2	—	—	2
Other fees and commissions	17	5	—	3	25
Fee and commission income	291	76	22	4	393
Specialised payment services expenses	(58)	—	—	—	(58)
Card expenses	(19)	(1)	(2)	—	(22)
Other fee and commission expenses	(3)	(2)	—	(2)	(7)
Fee and commission expense	(80)	(3)	(2)	(2)	(87)
	211	73	20	2	306

Further information on 'Net fee and commission income' is set out in note 5.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

2 Segmental information continued

							Half-year 30 June 2022
	Retail Banking	Capital Markets	AIB UK	Group	Total	Excep tional items (1)	Total
	€ m	€ m	€ m	€ m	€ m	€ m	€ m
Operations by business segment
Net interest income	471	258	127	39	895	—	895
Net fee and commission income*	185	77	24	—	286	1 (7)	287
Other	19	52	8	14	93	31 (2)(5)	124
Other income	204	129	32	14	379	32	411
Total operating income	675	387	159	53	1,274	32	1,306
Other operating expenses	(539)	(154)	(82)	(7)	(782)	(200)	(982)
Of which: Personnel expenses	(233)	(93)	(43)	(2)	(371)	(9) (3-5)	(380)
General and administrative expenses	(195)	(39)	(26)	(3)	(263)	(157) (4-7)	(420)
Depreciation, impairment and amortisation	(111)	(22)	(13)	(2)	(148)	(34) (5)	(182)
Bank levies and regulatory fees	(9)	(4)	—	(88)	(101)	—	(101)
Total operating expenses	(548)	(158)	(82)	(95)	(883)	(200)	(1,083)
Operating profit/(loss) before
impairment losses	127	229	77	(42)	391	(168)	223
Net credit impairment writeback/(charge)	224	86	(1)	—	309	—	309
Operating profit/(loss)	351	315	76	(42)	700	(168)	532
Income from equity accounted investments	2	1	2	—	5	—	5
Profit/(loss) before taxation	353	316	78	(42)	705	(168)	537

(1) Exceptional items are shown separately above. These are items that Management view as distorting comparability of performance from period to period. Exceptional items include:

(2) Gain on disposal of loan portfolios; (5) Restructuring costs;

(3) Termination benefits; (6) Inorganic transaction costs; and

(4) Restitution costs; (7) Other.

					Half-year 30 June 2022
	Retail Banking	Capital Markets	AIB UK	Group	Total
*Analysis of net fee and commission income	€ m	€ m	€ m	€ m	€ m
Customer accounts	86	9	7	9	111
Card income	60	5	6	—	71
Foreign exchange fees	22	13	5	—	40
Credit related fees	4	14	7	—	25
Specialised payment services fees	66	—	—	—	66
Stockbroking client fees and commissions	—	25	—	—	25
Asset management and advisory fees	—	8	—	—	8
Other fees and commissions	26	7	2	(8) (1)	27
Fee and commission income	264	81	27	1	373
Specialised payment services expenses	(58)	—	—	—	(58)
Card expenses	(19)	(1)	(2)	—	(22)
Other fee and commission expenses	(2)	(3)	—	(1)	(6)
Fee and commission expense	(79)	(4)	(2)	(1)	(86)
	185	77	25	—	287

(1) Reflects the allocation of the Group's segment fee and commission income to Retail Banking and Capital Markets segments.

Further information on 'Net fee and commission income' is set out in note 5.

2 Segmental information continued

Other amounts – statement of financial position

					30 June 2023
	Retail Banking € m	Capital Markets	AIB UK	Group	Total € m
		€ m	€ m	€ m
Loans and advances to customers:
– measured at amortised cost	34,726	18,997	7,266	21	61,010
– measured at FVTPL	—	174	—	—	174
Total loans and advances to customers	34,726	19,171	7,266	21	61,184
Customer accounts	79,383	14,730	8,573	1,018	103,704

					31 December 2022
	Retail Banking € m	Capital Markets	AIB UK	Group	Total € m
		€ m	€ m	€ m
Loans and advances to customers:
– measured at amortised cost	34,165	18,215	6,969	15	59,364
– measured at FVTPL	—	249	—	—	249
Total loans and advances to customers	34,165	18,464	6,969	15	59,613
Customer accounts	75,798	16,240	9,097	1,224	102,359

				Half-year
				30 June 2023
	Ireland	United Kingdom	Rest of the World	Total
Geographic information(1)(2)	€ m	€ m	€ m	€ m
Gross external revenue	1,982	197	18	2,197
Inter-geographical segment revenue	(36)	53	(17)	—
Total revenue	1,946	250	1	2,197

				Half-year
				30 June 2022
	Ireland	United	Rest of the	Total
		Kingdom	World
Geographic information(1)(2)	€ m	€ m	€ m	€ m
Gross external revenue	1,322	(3)	(13)	1,306
Inter-geographical segment revenue	(173)	156	17	—
Total revenue	1,149	153	4	1,306

Revenue from external customers comprises interest and similar income (note 3) and interest and similar expense (note 4), and all other items included in 'Other income'.

				30 June 2023
	Ireland	United	Rest of the	Total
		Kingdom	World
Geographic Information	€ m	€ m	€ m	€ m
Non-current assets(3)	1,367	44	2	1,413

				31 December 2022
	Ireland	United	Rest of the	Total
		Kingdom	World
Geographic Information	€ m	€ m	€ m	€ m
Non-current assets(3)	1,426	48	2	1,476

(1) The geographical distribution of total revenue is based primarily on the location of the office recording the transaction.

(2) For details of significant geographic concentrations, see the 'Risk management' section.

(3) Non-current assets comprise intangible assets, goodwill and property, plant and equipment.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

	Half-year 30 June	Half-year 30 June
3 Interest and similar income	2023 € m	2022 € m
Interest on loans and advances to customers at amortised cost	1,069	880
Interest on loans and advances to banks at amortised cost	546	22
Interest on securities financing at amortised cost	114	4
Interest on investment securities	304	46
Interest income on financial assets	2,033	952
Deposits by central banks and banks at amortised cost	—	26
Customer accounts at amortised cost	—	43
Securities financing	—	1
Negative interest on financial liabilities	—	70
Interest income calculated using the effective interest rate method	2,033	1,022
Interest income on finance leases and hire purchase contracts	38	36
Interest income on financial assets at FVTPL	9	4
Other interest income and similar income	47	40
Interest and similar income	2,080	1,062

The Group presents interest resulting from negative effective interest rates on financial liabilities as interest income rather than as offset against interest expense.

Included in negative interest on financial liabilities for the six months to 30 June 2022 is interest of € 26 million relating to the TLTRO III programme. The Group repaid its TLTRO borrowings in December 2022 (See note 4 of the Annual Financial Report 2022 for further details).

Interest income includes a charge of € 223 million (Half-Year 30 June 2022: a credit of € 65 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'.

	Half-year 30 June	Half-year 30 June
	2023	2022
4 Interest and similar expense	€ m	€ m
Interest on deposits by central banks and banks	8	1
Interest on customer accounts	55	22
Interest on securities financing	8	1
Interest on debt securities in issue	186	33
Interest on lease liabilities	5	6
Interest on subordinated liabilities and other capital instruments	45	21
Interest expense on financial liabilities	307	84
Cash and balances at central banks	—	76
Loans and advances to banks	—	2
Securities financing	—	4
Investment securities	1	1
Negative interest on financial assets	1	83
Interest expense calculated using the effective interest rate method	308	167

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 reported above, calculated using the effective interest rate method, relates to financial liabilities not carried at fair value through profit or loss.

Interest expense includes a credit of € 18 million (Half-Year 30 June 2022 a charge of € 5 million) transferred from other comprehensive income in respect of cash flow hedges which is included in 'Interest on customer accounts'.

5 Net fee and commission income	Half-year 30 June 2023 € m	Half-year 30 June 2022 € m
Customer accounts	119	111
Card income	91	71
Foreign exchange fees	40	40
Credit related fees	26	25
Specialised payment services fees(1)	67	66
Stockbroking client fees and commissions	23	25
Asset management and advisory fees	2	8
Other fees and commissions(2)	25	27
Fee and commission income	393	373
Specialised payment services expenses(1)	(58)	(58)
Card expenses(3)	(22)	(22)
Other fee and commissions expenses	(7)	(6)
Fee and commission expense	(87)	(86)
Net fee and commission income	306	287

(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. (2) Other fees and commissions includes wealth commissions € 11 million, insurance commissions € 6 million and other commissions € 8 million (Half-Year

30 June 2022: € 13 million, € 6 million and € 8 million respectively). (3) Card expenses includes credit card commissions of € 21 million and ATM expenses of € 1 million (Half-Year 30 June 2022: € 21 million and € 1 million respectively).

Fees and commissions which are an integral part of the effective interest rate are recognised as part of interest and similar income (note 3) or interest and similar expense (note 4).

	Half-year 30 June	Half-year 30 June
	2023	2022
6 Net trading income	€ m	€ m
Foreign exchange contracts	(18)	(21)
Interest rate contracts and debt securities(1)	(1)	31
Credit derivative contracts	(1)	5
Equity investments, index contracts and warrants	(8)	16
Forward contracts to acquire loans(2)	138	26
Net trading income	110	57

(1) Includes a gain of € 2 million (Half-Year 30 June 2022: gain of € 14 million) in relation to XVA adjustments. XVA comprises counterparty valuation adjustments ('CVA') and funding valuation adjustments ('FVA').

(2) Includes a gain of € 12 million (Half-Year 30 June 2022: gain of € 26 million) relating to the forward contract to acquire Ulster Bank corporate and commercial loans and a gain of € 126 million relating to the forward contract to acquire Ulster Bank tracker (and linked) mortgages. See notes 33 and 39 for further information.

The total hedging ineffectiveness on cash flow hedges reflected in the condensed consolidated income statement amounted to Nil (Half-Year 30 June 2022: Nil).

Half-year	Half-year
30 June	30 June
2023	2022
7 Net gain on other financial assets measured at FVTPL € m	€ m
Loans and advances to customers(1) 6	16
Investment securities – equity 12	14
Net gain on other financial assets measured at FVTPL 18	30

(1) Excludes interest income (note 3).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

	Half-year 30 June 2023	Half-year 30 June 2022
8 Other operating income	€ m	€ m
Loss on disposal of investment securities at FVOCI – debt	(5)	(2)
(Loss)/gain on termination of hedging swaps(1)	(4)	9
Miscellaneous operating income	10	1
Other operating income	1	8

(1) The majority of the loss/gain on termination of hedging swaps relates to the disposal of debt securities at FVOCI. In the Half-Year to 30 June 2023, it includes a charge of € 8 million transferred from other comprehensive income in respect of cash flow hedges (Half-Year 30 June 2022: charge of € 1 million).

	Half-year 30 June 2023	Half-year 30 June 2022
9 Operating expenses	€ m	€ m
Personnel expenses:
Wages and salaries	346	301
Termination benefits(1)	2	3
Retirement benefits(2)	51	47
Social security costs	37	33
Other personnel expenses(3)(4)	11	6
	447	390
Less: staff costs capitalised(5)	(11)	(10)
Personnel expenses	436	380
General and administrative expenses(6)	369	319
Restitution and associated costs(7)	63	101
	432	420
Bank levies and regulatory fees	107	101
Operating expenses	975	901

(1) Includes charges for voluntary severance programmes of € 2 million (Half-Year 30 June 2022: € 3 million).

(2) Comprises a defined contribution charge of € 43 million (Half-Year 30 June 2022: a charge of € 39 million), a charge of € 2 million in relation to defined benefit expense (Half-Year 30 June 2022: a charge of € 3 million), and a long term disability payments/death in service benefit charge of € 6 million (Half-Year 30 June 2022: a charge of € 5 million). For details of retirement benefits, see note 22.

(3) Share-based payment charge of Nil (Half -Year 30 June 2022: Nil).

(4) Other personnel expenses include staff training, recruitment and various other staff costs.

(5) Staff costs capitalised relate to intangible assets.

(6) Includes Nil (Half-Year 30 June 2022: € 27 million) relating to the CBI Tracker Mortgage Examination fine.

(7) Relates to Belfry provision and the associated costs. The half-year to 30 June 2022 also included costs related to the Tracker Mortgage Examination.

92

10 Net credit impairment (charge)/writeback

The following table analyses the income statement net credit impairment (charge)/writeback on financial instruments.

			Half-year 30 June 2023			Half-year 30 June 2022
Credit impairment (charge)/writeback on financial instruments	Measured at amortised cost € m	Measured at FVOCI € m	Total € m	Measured at amortised cost € m	Measured at FVOCI € m	Total € m
Net re-measurement of ECL allowance
Loans and advances to banks	(2)	—	(2)	—	—	—
Loans and advances to customers	(107)	—	(107)	276	—	276
Securities financing	(3)	—	(3)	1	—	1
Loan commitments	11	—	11	—	—	—
Financial guarantee contracts	3	—	3	2	—	2
Investment securities – debt	—	(9)	(9)	(2)	—	(2)
Credit impairment (charge)/writeback	(98)	(9)	(107)	277	—	277
Recoveries of amounts previously written-off	16	—	16	32	—	32
Net credit impairment (charge)/writeback	(82)	(9)	(91)	309	—	309

	Half-year 30 June	Half-year 30 June
11 Taxation	2023 € m	2022 € m
Current tax
Corporation tax in Ireland
Current tax on income for the period	(3)	(2)
Adjustments in respect of prior periods	—	—
	(3)	(2)
Foreign tax
Current tax on income for the period	(35)	(13)
Adjustments in respect of prior periods	—	—
	(35)	(13)
Current tax charge for the period	(38)	(15)
Deferred taxation
Origination and reversal of temporary differences	1	1
Adjustments in respect of prior periods	1	—
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	(97)	(46)
Deferred tax charge for the period	(95)	(45)
Total tax charge for the period	(133)	(60)
Effective tax rate	13.5 %	11.2 %

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

11 Taxation continued

Analysis of selected other comprehensive income

	Half-year 30 June 2023				Half-year 30 June 2022
	Gross	Tax	Net	Gross	Tax	Net
	€ m	€ m	€ m	€ m	€ m	€ m
Retirement benefit schemes
Remeasurement of defined benefit asset/(liability)	—	—	—	30	(1)	29
Total	—	—	—	30	(1)	29
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	(46)	6	(40)	32	(4)	28
– Exchange differences on translation of foreign operations	87	—	87	(55)	—	(55)
Total	41	6	47	(23)	(4)	(27)
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	213	(27)	186	(59)	7	(52)
Hedging losses recognised in other comprehensive income	(185)	36	(149)	(934)	147	(787)
Total	28	9	37	(993)	154	(839)
Investment debt securities at FVOCI reserves
Fair value losses transferred to income statement	5	(1)	4	2	—	2
Fair value losses recognised in other comprehensive income	(2)	—	(2)	(148)	16	(132)
Total	3	(1)	2	(146)	16	(130)

12 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 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.

	Half-year	Half-year
	30 June	30 June
	2023	2022
(a) Basic	€ m	€ m
Profit attributable to equity holders of the parent	856	478
Distributions on other equity interests	(33)	(33)
Profit attributable to ordinary shareholders of the parent	823	445

		Number of shares (millions)
Weighted average number of ordinary shares in issue during the period	2,653.5	2,703.5
Earnings per share – basic	EUR 31.0 c	EUR 16.5 c

	Half-year 30 June	Half-year 30 June
	2023	2022
(b) Diluted	€ m	€ m
Profit attributable to ordinary shareholders of the parent (note 12 (a))	823	445

		Number of shares (millions)
Weighted average number of ordinary shares in issue during the period	2,653.5	2,703.5
Potential weighted average number of shares	2,653.5	2,703.5
Earnings per share – diluted	EUR 31.0 c	EUR 16.5 c

The ordinary shares are included in the weighted average number of shares on a time apportioned basis.

Warrants

The Minister for Finance was issued warrants in 2017 to subscribe for 271,166,685 ordinary shares of AIB Group plc.

The warrants are exercisable during the period commencing 27 June 2018 and ending 27 June 2027. These warrants were not included in calculating the diluted earnings per share as they were antidilutive (see note 29 for further details).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

13 Derivative financial instruments

The following table presents the notional principal amount and the fair value of derivative financial instruments analysed by purpose.

			30 June 2023			31 December 2022
	Notional Fair values	principal	Notional principal		Fair values
	amount	Assets	Liabilities	amount	Assets	Liabilities
	€ m	€ m	€ m	€ m	€ m	€ m
Derivatives held for trading
Interest rate derivatives	14,352	557	(549)	12,289	521	(517)
Foreign exchange derivatives	5,207	29	(46)	5,990	121	(72)
Equity derivatives	91	—	(6)	83	4	—
Credit derivatives	83	—	(1)	43	—	(1)
Forward contracts to acquire loans(1)	5,478	141	—	1,232	—	(9)
Total derivatives held for trading	25,211	727	(602)	19,637	646	(599)
Derivatives held for hedging
Derivatives designated as cash flow hedges	45,910	174	(1,974)	30,813	145	(1,950)
Derivatives designated as fair value hedges	22,701	1,588	(414)	22,111	1,677	(433)
Derivatives designated as net investment hedges	1,515	—	(39)	1,459	43	—
Total derivatives held for hedging	70,126	1,762	(2,427)	54,383	1,865	(2,383)
Total derivative financial instruments	95,337	2,489	(3,029)	74,020	2,511	(2,982)

(1) Relates to the forward contract to acquire corporate and commercial loans from Ulster Bank and the forward contract to acquire tracker (and linked) mortgages from Ulster Bank. See notes 33 and 39 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 policies and control framework as described in the 'Risk management' section of the Annual Financial Report 2022.

The Group has significantly increased hedging of net interest income sensitivity to market rate changes in the first half of 2023 through receive fixed and pay floating interest rate swaps designated as cash flow hedges.

For further details on the Group's derivative activity see note 17 of the Annual Financial Report 2022.

	30 June 2023	31 December 2022
14 Loans and advances to banks	€ m	€ m
At amortised cost
Funds placed with central banks	267	262
Funds placed with other banks	1,578	1,240
	1,845	1,502
ECL allowance	(2)	—
Total loans and advances to banks	1,843	1,502

Loans and advances to banks include cash collateral of € 1,189 million (31 December 2022: € 963 million) placed with derivative counterparties and placed with repurchase agreement counterparties.

	30 June	31 December
	2023	2022
15 Loans and advances to customers	€ m	€ m
At amortised cost
Loans and advances to customers	61,023	59,397
Amounts receivable under finance leases and hire purchase contracts	1,625	1,585
	62,648	60,982
ECL allowance	(1,638)	(1,618)
	61,010	59,364
Mandatorily at fair value through profit or loss
Loans and advances to customers	174	249
Total loans and advances to customers	61,184	59,613
Additional information:
Amounts which are repayable on demand or at short notice	2,194	1,954
Amounts due from associated undertakings	26	18

Loans and advances to customers include cash collateral amounting to € 21 million (31 December 2022: € 15 million) placed with derivative counterparties.

16 Securities financing

Securities financing transactions are generally entered into on a collateralised basis, with debt securities and equities, usually advanced or received as collateral. 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. 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.

	30 June 2023				31 December 2022
	Banks	Customers	Total	Banks	Customers	Total
	€ m	€ m	€ m	€ m	€ m	€ m
Assets
Reverse repurchase agreements	4,081	171	4,252	2,888	29	2,917
Securities borrowing transactions	2,246	1,129	3,375	2,431	934	3,365
Total(1)	6,327	1,300	7,627	5,319	963	6,282
Liabilities
Securities sold under agreements to repurchase	789	4	793	898	—	898
Total	789	4	793	898	—	898

(1) Classified as ECL Stage 1 and have an ECL of € 4 million at 30 June 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 30 June 2023, the total fair value of the collateral received was € 7,627 million (31 December 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 30 June 2023, in relation to securities sold under agreements to repurchase, the Group had pledged collateral with a fair value of € 793 million (31 December 2022: € 898 million). These transactions were conducted under terms that are usual and customary to standard securities sold under repurchase agreements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

17 ECL allowance on financial assets

The following table shows the movements on the ECL allowance on financial assets. Further information is disclosed in the 'Risk management' section of this report.

	30 June	31 December
	2023 € m	2022 € m
At 1 January	1,623	1,888
Exchange translation adjustments	8	(13)
Net re-measurement of ECL allowance – investment securities – debt	—	2
Net re-measurement of ECL allowance – banks	2	—
Net re-measurement of ECL allowance – customers	107	50
Net re-measurement of ECL allowance – securities financing	3	—
Changes in ECL allowance due to write-offs	(77)	(94)
Changes in ECL allowance due to disposals	(21)	(210)
Other	3	—
At end of period	1,648	1,623
Amounts included in financial assets measured at amortised cost:
Investment securities – debt	3	3
Loans and advances to banks	2	—
Loans and advances to customers	1,638	1,618
Securities financing	4	1
Other assets – stockbroking client debtors	1	1
At end of period	1,648	1,623

18 Investment securities

The following table analyses the carrying value of investment securities by major classification at 30 June 2023 and 31 December 2022.

	30 June 2023	31 December 2022
	€ m	€ m
Debt securities at FVOCI
Government securities	2,923	3,824
Supranational banks and government agencies securities	1,744	1,298
Asset backed securities	477	453
Bank securities	6,196	5,763
Corporate securities	564	499
Total debt securities at FVOCI	11,904	11,837
Debt securities at amortised cost
Government securities	2,084	2,052
Supranational banks and government agencies securities	169	166
Asset backed securities	1,764	1,628
Bank securities	74	73
Corporate securities	216	212
Total debt securities at amortised cost	4,307	4,131
Total debt securities	16,211	15,968
Equity securities
Equity investments at FVTPL	326	302
Total equity securities	326	302
Total investment securities	16,537	16,270

The following table analyses total debt securities by ECL stage:

Gross amount
Stage 1	16,177	15,961
Stage 2	37	10
Total debt securities	16,214	15,971
ECL(1)	(3)	(3)
Carrying value	16,211	15,968

(1) Relates to debt securities at amortised cost.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

19 Investments accounted for using the equity method

30 June	31 December
2023	2022
€ m	€ m
173	127
3	21
50	24
—	(11)
3	12
229	173

Of which:
Associates	174	159
Joint venture	55	14

Investments in associated undertakings comprises the Group's investment in First Merchant Processing (Ireland) DAC trading as 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.

Included in the income statement is the contribution net of tax from investments accounted for using the equity method as follows:

	Half-year 30 June 2023	Half-year 30 June 2022
Income statement	€ m	€ m
Share of equity accounted investments (after tax)
Associates(1)	12	12
Joint ventures	(9)	(7)
Income from equity accounted investments	3	5

(1) Includes AIB Merchant Services € 14 million (Half-Year 30 June 2022: € 12 million).

	30 June 2023	31 December 2022
20 Other assets	€ m	€ m
Proceeds due from disposal of loan portfolio(1)	9	41
Stockbroking client debtors	83	17
Items in transit	83	84
Items in course of collection	62	51
Sale of debt securities awaiting settlement	3	—
Other(2)	102	103
	342	296

(1) ECL – Nil.

(2) Includes sundry debtors € 25 million (31 December 2022: € 41 million).

21 Deferred taxation

	30 June	31 December
	2023	2022
Analysis of movements in deferred taxation	€ m	€ m
At 1 January	3,002	2,781
Exchange translation and other adjustments	6	(8)
Deferred tax through other comprehensive income (note 11)	14	311
Income statement (note 11)	(95)	(82)
At end of period	2,927	3,002
Analysed as to:

Deferred tax assets	3,019	3,096
Deferred tax liabilities	(92)	(94)
	2,927	3,002
Represented on the statement of financial position:
Deferred tax assets	2,955	3,032
Deferred tax liabilities	(28)	(30)
	2,927	3,002

Information on the basis of recognition of deferred tax assets on unused tax losses is included in note 2 'Critical accounting judgements and estimates' on pages 257 and 258 of the Annual Financial Report 2022.

With regards to the Group's deferred tax asset for unutilised losses, during 2023 the Group recognised a charge to the income statement of € 97 million, a credit to other comprehensive income of € 6 million and an exchange translation and other adjustments of € 6 million. As a result, the amount of recognised deferred tax assets arising from unutilised tax losses amounted to € 2,657 million (31 December 2022: € 2,742 million) of which € 2,452 million (31 December 2022: € 2,546 million) relates to Irish tax losses and € 205 million (31 December 2022: € 196 million) relates to UK tax losses (of which € 196 million (31 December 2022: € 187 million) relates to the Group's principal UK subsidiary). Net deferred tax assets at 30 June 2023 of € 2,704 million (31 December 2022: € 2,873 million) are expected to be recovered after more than 12 months.

The Group has not recognised deferred tax assets in respect of: Irish tax on unused tax losses at 30 June 2023 of € 161 million, (31 December 2022: € 161 million); overseas tax (UK and USA) on unused tax losses of € 3,052 million (31 December 2022: € 2,996 million); and foreign tax credits for Irish tax purposes of € 12 million (31 December 2022: € 13 million). Of these tax losses totalling € 3,213 million for which no deferred tax is recognised: € 7 million expires in 2032; € 41 million expires in 2033; € 26 million in 2034; and € 5 million in 2035.

In December 2022, the EU adopted a directive setting out how the Pillar Two Rules relating to the new global minimum effective tax rate of 15% should be applied within the EU from 31 December 2023. The Department of Finance has held a public consultation and has confirmed it intends to legislate for the Pillar Two Rules in the 2023 Finance Bill.

In May 2023, the International Accounting Standards Board issued amendments to IAS 12 Income Taxes which provide for a mandatory temporary exception to the normal requirement to account for deferred tax insofar as the tax concerned arises under the Pillar Two Rules. The amendments to IAS 12 also require an entity to make disclosures about its exposure to Pillar Two income taxes, for periods in which Pillar Two legislation is (substantively) enacted but not yet effective, which is likely to be applicable for the Group's 2023 Annual Financial Report.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

22 Retirement benefits

The Group's accounting policy for retirement benefit obligations is set out on pages 237 and 238 of the Annual Financial Report 2022. All defined benefit schemes operated by the Group were closed to future accrual no later than 31 December 2013 and employees who were members of a defined benefit scheme (including hybrid arrangements) transferred to a defined contribution ('DC') scheme.

Defined contribution schemes

The total cost in respect of defined contribution schemes for the half-year ended 30 June 2023 was € 43 million (Half-year 30 June 2022: € 39 million).

Defined benefit schemes

The Group's net pension surplus at 30 June 2023 was € 9 million (31 December 2022: net pension deficit € 3 million), comprising retirement benefit assets of € 24 million (31 December 2022: € 13 million) and retirement benefit liabilities of € 15 million (31 December 2022: € 16 million).

(i) Financial assumptions

The following table summarises the financial assumptions adopted in the preparation of these financial statements in respect of the main schemes for the half-year ended 30 June 2023 and the year ended 31 December 2022. The assumptions have been set based upon the advice of the Group's actuary.

	30 June 2023	31 December 2022
Financial assumptions	%	%
Irish scheme
Rate of increase of pensions in payment(1)	2.50	2.60
Discount rate	4.02	4.20
Inflation assumptions(2)	2.60	2.85
UK scheme
Rate of increase of pensions in payment	3.20	3.10
Discount rate	5.30	5.00
Inflation assumptions (RPI)	3.20	3.10

(1) For further details on this assumption please refer to the discussion below.

(2) The inflation assumption applies to the revaluation of deferred members' benefits up to their retirement date.

The demographic assumptions for retirement benefit obligations are set out in note 28 of the Annual Financial Report 2022.

(ii) Contributions

Contributions of £ 9.25 million were made to the UK scheme as part of the revised funding arrangement which was implemented in December 2019. For further details on the agreed funding arrangement see note 28 of the Annual Financial Report 2022.

(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.

(iv) Rate of increase of pensions in payment – Irish scheme

As described in note 28 of the Annual Financial Report 2022, the Board has determined that the funding of discretionary increases to pensions in payment is a decision to be made by the Board each year. Under this process, the Group decided in February 2022 and February 2023 that the funding of discretionary increases was not appropriate in either year in relation to the 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 2.5% (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 € 821 million at 30 June 2023 (31 December 2022: € 886 million).

22 Retirement benefits continued

(v) Movement in defined benefit obligation and scheme assets

The following table sets out the movement in the defined benefit obligation and scheme assets:

				30 June 2023					31 December 2022
	Defined benefit obligation	Fair value of scheme assets	Asset ceiling/ minimum funding(1)	Net defined benefit (liabilities) assets		Defined benefit obligation	Fair value of scheme assets	Asset ceiling/ minimum funding(1)	Net defined benefit (liabilities) assets
	€ m	€ m	€ m	€ m		€ m	€ m	€ m	€ m
At 1 January	(4,850)	5,454	(607)	(3)		(6,241)	6,976	(735)	—
Included in profit or loss
Past service cost	(2)	—	—	(2)		(1)	—	—	(1)
Interest (cost)/income	(102)	116	(13)	1		(90)	101	(10)	1
Administration costs	—	(1)	—	(1)		—	(4)	—	(4)
	(104)	115	(13)	(2)		(91)	97	(10)	(4)
Included in other comprehensive income
Remeasurements gain/(loss):
– Actuarial gain/(loss) arising from:
– Experience adjustments	(96)	—	—	(96)		(217)	—	—	(217)
– Changes in demographic assumptions	—	—	—	—		18	—	—	18
– Changes in financial assumptions	65	—	—	65		1,390	—	—	1,390
– Return on scheme assets excluding
interest income	—	122	—	122		—	(1,349)	—	(1,349)
– Asset ceiling/minimum funding adjustments	—	—	(91)	(91)		—	—	138	138
Total remeasurement gain/(loss)				—	(2)				(20) (2)
Translation adjustment on non-euro schemes	(23)	25	—	2		42	(45)	—	(3)
	(54)	147	(91)	2		1,233	(1,394)	138	(23)
Other
Contributions by employer	—	12	—	12		—	24	—	24
Benefits paid	104	(104)	—	—		249	(249)	—	—
	104	(92)	—	12		249	(225)	—	24
At end of period	(4,904)	5,624	(711)	9		(4,850)	5,454	(607)	(3)
				30 June 2023 € m					31 December 2022 € m
Recognised on the statement of financial position as:
Retirement benefit assets
UK scheme				12					3
Other schemes				12					10
Total retirement benefit assets				24					13
Retirement benefit liabilities
Irish scheme				—					—
EBS scheme				—					—
Other schemes				(15)					(16)
Total retirement benefit liabilities				(15)					(16)
Net pension surplus/(deficit)				9					(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 nil (31 December 2022: € 8 million), see page 78.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

	30 June 2023	31 December 2022
23 Deposits by central banks and banks	€ m	€ m
Central Bank Borrowings – secured	303	282
Central Bank Borrowings – unsecured	—	—
	303	282
Other Bank Borrowings – unsecured	117	232
	420	514

Deposits by central banks and banks include cash collateral at 30 June 2023 of € 74 million (31 December 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:

			30 June 2023			31 December 2022
	Central banks	Banks	Total	Central banks	Banks	Total
	€ m	€ m	€ m	€ m	€ m	€ m
Total carrying value of financial assets pledged	518	17	535	8,749	15	8,764
Of which:
Government securities	9	17	26	540	15	555
Other securities(1)	509	—	509	8,209	—	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 June	31 December
	2023	2022
24 Customer accounts	€ m	€ m
Current accounts	63,844	64,402
Demand deposits	33,741	32,595
Time deposits	6,092	5,335
Other – non-controlling interests(1)	27	27
	103,704	102,359
Of which:
Non-interest bearing current accounts	59,158	59,266
Interest bearing deposits, current accounts and short term borrowings	44,546	43,093
	103,704	102,359
Amounts include:
Due to associated undertakings	213	271

(1) Relates to long term loans from minority shareholders in Augmentum Limited, see note 41 of the Annual Financial Report 2022 for further details.

Customer accounts include cash collateral of € 82 million (31 December 2022: € 71 million) received from derivative counterparties in relation to net derivative positions (see note 39 of the Annual Financial Report 2022 for further details on cash collateral).

At 30 June 2023, the Group's five largest customer deposits amounted to 1% (31 December 2022: 1%) of total customer accounts.

	30 June	31 December
25 Debt securities in issue	2023 € m	2022 € m
Issued by AIB Group plc
Euro Medium Term Note Programme	4,945	4,451
Global Medium Term Note Programme	1,699	1,728
	6,644	6,179
Issued by subsidiaries
Bonds and other medium term notes	26	1,024
	6,670	7,203

Analysis of movements in debt securities in issue

	30 June	31 December
	2023	2022
	€ m	€ m
At 1 January	7,203	5,881
Issued during the period	750	3,231
Repurchased	—	(847)
Matured	(1,253)	(750)
Other(1)	(30)	(312)
At end of period	6,670	7,203

(1) Includes a positive fair value hedge adjustment of € 3 million (31 December 2022: negative € 404 million) and negative exchange translation adjustments of € 33 million (31 December 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.

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.

	30 June	31 December
	2023	2022
26 Other liabilities	€ m	€ m
Notes in circulation	37	40
Items in transit	121	105
Creditors	38	37
Stockbroking client creditors	64	13
Bank drafts	304	298
Items in course of collection	350	261
Other(1)	460	352
	1,374	1,106

(1) Includes invoice discounting credit balances on customer accounts € 35 million (31 December 2022: € 55 million) and the purchase of debt securities awaiting settlement € 97 million (31 December 2022: Nil).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

27 Provisions for liabilities and commitments

						30 June 2023
	Legal claims	Belfry related	FSPO	Restructuring	Other	Total
	€ m	provisions € m	decision € m	costs € m	provisions € m	€ m
Provisions (excluding loan commitments and financial guarantee contracts)
At 1 January 2023	29	79	60	8	86	262
Charged to income statement	4	63	—	—	—	67 (1)
Released to income statement	(1)	—	—	—	(2)	(3) (1)
Provisions utilised	(3)	(77)	—	(3)	(33)	(116)
Exchange translation adjustments	—	—	—	—	—	—
At 30 June 2023	29	65	60	5	51	210 (2)
Loan commitments and financial guarantee contracts
At 1 January 2023						78
Net writeback to the income statement						(14) (3)
Disposals						—
Exchange translation adjustments						—

At 30 June 2023 64

Total provisions for liabilities and loan commitments 274

						31 December 2022
	Legal claims	Belfry related provisions	FSPO decision	Restructuring costs	Other provisions	Total
	€ m	€ m	€ m	€ m	€ m	€ m
Provisions (excluding loan commitments and financial guarantee contracts)
At 1 January 2022	31	75	79	27	210	422
Charged to income statement	6	94	—	4	36	140 (1)
Released to income statement	(3)	—	(16)	(4)	(30)	(53) (1)
Provisions utilised	(5)	(90)	(3)	(18)	(130)	(246)
Exchange translation adjustments	—	—	—	(1)	—	(1)
At 31 December 2022	29	79	60	8	86	262 (2)

Loan commitments and financial guarantee contracts
At 1 January 2022	79
Net charge to the income statement	— (3)
Disposals	(1)
Exchange translation adjustments	—
At 31 December 2022	78
Total provisions for liabilities and loan commitments	340

(1) Included in note 9.

(2) Amounts expected to be settled within one year amount to € 160 million (31 December 2022: € 190 million).

(3) Included in note 10.

27 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 € 25 million charge including amounts for legal and settlement costs (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. Based on an initial assessment, a provision was also recorded for € 75 million.

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 by € 82 million for the cost of redress. Furthermore, associated costs required to conclude the redress programme, were estimated at € 12 million and were separately provided for. Following utilisations during the year, the closing provision was € 79 million at 31 December 2022.

In 2023, the provision for the customer redress was further reassessed, principally as a result of additional information that was obtained during the period and increased by € 59 million. Payments to impacted customers are ongoing with the Group making payments of € 70 million in 2023. The provision for associated costs was also reassessed and increased by € 4 million and € 7 million of the provision was utilised during the period.

While the Group's best estimate of the provision at 30 June 2023 is € 65 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 decision

Note 34 of the Annual Financial Report 2022 sets out the background in relation to the FSPO Decision. The Group continued to engage with stakeholders during 2023 and a number of related issues also continue to exist that have yet to be resolved, including tax liabilities arising that the Group will be required to discharge on behalf of impacted customers. Notwithstanding the near completion of payments to customers based on the FSPO decision, the level of provision required for these other costs has been assessed at € 60 million (31 December 2022: € 60 million). These issues are subject to uncertainty with a range of possible outcomes with the final outcome being higher or lower depending on finalisation of such issues.

(c) Restructuring costs

Restructuring cost provisions mainly relate to the UK restructuring with other amounts relating to the property transformation strategy.

(d) Other provisions

Other provisions, none of which are individually material, include provisions for customer redress and related matters, right-of-use commitments, onerous contracts and other miscellaneous provisions.

Regulatory provision

The Group previously conducted a review of certain technical matters relating to previous submissions to the Single Resolution Board which was the basis of the annual fee to the Single Resolution Fund. At 31 December 2022, the Group had provided € 31 million in relation to matters arising from this review. A final settlement of € 29 million was paid and the remaining provision of € 2 million was released to the income statement.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

28 Subordinated liabilities and other capital instruments

	30 June 2023	31 December 2022
	€ m	€ m
Dated loan capital – European Medium Term Note Programme:
Issued by AIB Group plc
€ 500 million Subordinated Tier 2 Notes due 2029, Callable 2024	471	466
€ 1 billion Subordinated Tier 2 Notes due 2031, Callable 2026	889	881
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)	13	12
£ 368m 12.5% Subordinated Notes due June 2019
– nominal value £ 79 million (maturity extended to 2035 as a result of the Subordinated Liabilities Order)	46	44
£ 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)	1	1
	60	57
	1,420	1,404
	30 June 2023	31 December 2022
Maturity of dated loan capital	€ m	€ m
Dated loan capital outstanding is repayable as follows:
5 years or more	1,420	1,404

For further details of subordinated liabilities and other capital instruments, see note 35 of the Annual Financial Report 2022.

29 Share capital

		30 June 2023		31 December 2022
	Number of shares m	€ m	Number of shares m	€ m
Authorised
Ordinary share capital
Ordinary shares of € 0.625 each	4,000.0	2,500	4,000.0	2,500
Issued and fully paid
Ordinary share capital
Ordinary shares of € 0.625 each	2,618.8	1,637	2,673.4	1,671

Movements in share capital

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 the nominal amount of the acquired shares transferred from share capital to capital redemption reserves. The number of ordinary shares in issue was 2,618,753,655 at 30 June 2023.

For further details on the structure of the Company's share capital, see note 36 of the Annual Financial Report 2022.

Warrants

In 2017, AIB Group plc 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 and capable of exercise by the holder of the warrants until 27 June 2027. In accordance with the terms of the Warrant Instrument, the exercise price of the warrants, originally set at € 8.80, has been adjusted following the 2022 and 2023 share buybacks and is currently set at € 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.

31 December
2022
€ m
496
619
1,115
30 June 2023 € m 496 619 1,115

Other equity interests are included in the Group's capital base.

For further details on these securities, see note 37 of the Annual Financial Report 2022.

31 Contingent liabilities and commitments

The following table gives the nominal or contract amounts of contingent liabilities and commitments:

	Contract amount
	30 June	31 December
	2023	2022
	€ m	€ m
Contingent liabilities(1) – credit related
Guarantees and assets pledged as collateral security:
Guarantees and irrevocable letters of credit	735	764
Other contingent liabilities	30	38
	765	802
Commitments(2)
Documentary credits and short term trade-related transactions	177	121
Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year	9,881	9,173
1 year and over	5,803	5,766
	15,861	15,060
	16,626	15,862

(1) Contingent liabilities are off-balance sheet products and include guarantees, irrevocable letters of credit and other contingent liability products such as performance bonds.

(2) A commitment is an off-balance sheet product, where there is an agreement to provide an undrawn credit facility. The contract may or may not be cancelled unconditionally at any time without notice depending on the terms of the contract.

For details of the credit ratings and geographic concentration of contingent liabilities and commitments, see pages 62 and 69 in the 'Risk management' section of this report.

Provisions for ECLs on loan commitments and financial guarantee contracts are set out in note 27.

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 27).

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.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

32 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 a special purpose entity ('SPE') forms the basis for their treatment in the Group's financial statements. An SPE is consolidated in the financial statements when the substance of the relationship between the Group and the SPE indicates that the SPE is controlled by the entity and meets the criteria set out in IFRS 10 Consolidated Financial Statements. The primary form of SPE utilised by the Group are securitisations and employee compensation trusts. Further details of SPEs are set out in note 42 of the Annual Financial Report 2022.

In addition, the Group enters into repurchase agreements and securities lending transactions in the normal course of business that do not result in the derecognition of the financial assets concerned. Details of these transactions are set out in note 42 of the Annual Financial Report 2022.

Securitisation activity in the six months to 30 June 2023

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.

The following table shows the financial assets (loans and advances) transferred but not derecognised, their current carrying value, and the liability due to external investors:

			30 June 2023
			Carrying amount of
	Carrying amount of assets	Carrying amount of assets	associated liabilities currently
	originally transferred	currently recognised	recognised
	€ m	€ m	€ m
Loans and advances to customers	5,079	5,028	—

The Group did not undertake any securitisation activity during the six months to 30 June 2022.

33 Fair value of financial instruments

					30 June 2023
	Carrying amount		Fair value
			Fair value hierarchy
		Level 1	Level 2	Level 3	Total
	€ m	€ m	€ m	€ m	€ m
Financial assets measured at fair value
Trading portfolio financial assets:
Equity securities	12	12	—	—	12
Debt securities	75	75	—	—	75
Derivative financial instruments:
Interest rate derivatives	2,319	—	2,254	65 (1)	2,319
Exchange rate derivatives	29	—	29	—	29
Equity derivatives	—	—	—	—	—
Credit derivatives	—	—	—	—	—
Forward contracts to acquire loans	141 (2)	—	—	141	141
Loans and advances to customers at FVTPL	174	—	—	174	174
Investment debt securities at FVOCI:
Government securities	2,923	2,923	—	—	2,923
Supranational banks and government agencies	1,744	1,744	—	—	1,744
Asset backed securities	477	413	64	—	477
Bank securities	6,196	6,196	—	—	6,196
Corporate securities	564	564	—	—	564
Equity investments at FVTPL	326	16	—	310	326
	14,980	11,943	2,347	690	14,980
Financial assets not measured at fair value
Cash and balances at central banks	36,088	637 (3)	35,451	—	36,088
Loans and advances to banks	1,843	—	267	1,576	1,843
Loans and advances to customers:
Mortgages(4)	30,181	—	—	30,461	30,461
Non-mortgages	30,829	—	—	30,773	30,773
Total loans and advances to customers	61,010	—	—	61,234	61,234
Securities financing:
Reverse repurchase agreements	4,252	—	—	4,252	4,252
Securities borrowing	3,375	—	—	3,375	3,375
Investment debt securities measured at amortised cost	4,307	2,464	—	1,868	4,332
Other financial assets	669	—	—	669	669
	111,544	3,101	35,718	72,974	111,793
Financial liabilities measured at fair value
Trading portfolio financial liabilities:
Equity securities	11	11	—	—	11
Debt securities	42	42	—	—	42
Derivative financial instruments:
Interest rate derivatives	2,937	—	2,451	486 (1)	2,937
Exchange rate derivatives	85	—	85	—	85
Equity derivatives	6	—	6	—	6
Credit derivatives	1	—	1	—	1
	3,082	53	2,543	486	3,082
Financial liabilities not measured at fair value
Deposits by central banks and banks:
Other borrowings	117	—	—	117	117
Secured borrowings	303	—	303	—	303
Customer accounts:
Current accounts	63,844	—	—	63,844	63,844
Demand deposits	33,741	—	—	33,741	33,741
Time deposits	6,119	—	—	6,092	6,092
Securities financing:
Securities sold under agreements to repurchase	793	—	—	793	793
Debt securities in issue	6,670	6,765	—	27	6,792
Subordinated liabilities and other capital instruments	1,420	1,428	—	13	1,441
Other financial liabilities	1,735	—	—	1,735	1,735
	114,742	8,193	303	106,362	114,858

(1) Includes € 14 million derivative assets and € 433 million derivative liabilities categorised as level 3 on the basis that a component of the XVA valuation is derived from unobservable inputs.

(2) Includes € 15 million relating to the forward contract to acquire Ulster Bank corporate and commercial loans and € 126 million relating to the forward contract to acquire Ulster Bank tracker (and linked) mortgages. See note 39 for further information.

(3) Comprises cash on hand.

(4) Includes residential and commercial mortgages.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

33 Fair value of financial instruments continued

					31 December 2022
	Carrying amount		Fair value
			Fair value hierarchy
		Level 1	Level 2	Level 3	Total
	€ m	€ m	€ m	€ m	€ m
Financial assets measured at fair value
Trading portfolio financial assets:
Equity securities	8	8	—	—	8
Derivative financial instruments:
Interest rate derivatives	2,343	—	2,255	88 (1)	2,343
Exchange rate derivatives	164	—	164	—	164
Equity derivatives	4	—	4	—	4
Credit derivatives	—	—	—	—	—
Loans and advances to customers at FVTPL	249	—	—	249	249
Investment debt securities at FVOCI:
Government securities	3,824	3,824	—	—	3,824
Supranational banks and government agencies	1,298	1,298	—	—	1,298
Asset backed securities	453	438	15	—	453
Bank securities	5,763	5,763	—	—	5,763
Corporate securities	499	499	—	—	499
Equity investments at FVTPL	302	18	—	284	302
	14,907	11,848	2,438	621	14,907
Financial assets not measured at fair value
Cash and balances at central banks	38,138	573 (2)	37,565	—	38,138
Loans and advances to banks	1,502	—	262	1,240	1,502
Loans and advances to customers:
Mortgages(3)	30,031	—	—	28,625	28,625
Non-mortgages	29,333	—	—	29,253	29,253
Total loans and advances to customers	59,364	—	—	57,878	57,878
Securities financing:
Reverse repurchase agreements	2,917	—	—	2,917	2,917
Securities borrowing	3,365	—	—	3,365	3,365
Investment debt securities measured at amortised cost	4,131	2,413	—	1,739	4,152
Other financial assets	592	—	—	592	592
	110,009	2,986	37,827	67,731	108,544
Financial liabilities measured at fair value
Trading portfolio financial liabilities:
Equity securities	4	4	—	—	4
Derivative financial instruments:
Interest rate derivatives	2,900	—	2,477	423 (1)	2,900
Exchange rate derivatives	72	—	72	—	72
Equity derivatives	—	—	—	—	—
Credit derivatives	1	—	1	—	1
Forward contracts to acquire loans	9 (4)	—	—	9	9
	2,986	4	2,550	432	2,986
Financial liabilities not measured at fair value
Deposits by central banks and banks:
Other borrowings	232	—	—	232	232
Secured borrowings	282	—	282	—	282
Customer accounts:
Current accounts	64,402	—	—	64,402	64,402
Demand deposits	32,595	—	—	32,595	32,595
Time deposits	5,362	—	—	5,348	5,348
Securities financing:
Securities sold under agreements to repurchase	898	—	—	898	898
Debt securities in issue	7,203	7,214	11	16	7,241
Subordinated liabilities and other capital instruments	1,404	1,401	—	13	1,414
Other financial liabilities	1,375	—	—	1,375	1,375
	113,753	8,615	293	104,879	113,787

(1) Includes € 40 million derivative assets and € 372 million derivative liabilities categorised as level 3 on the basis that a component of the XVA valuation is derived from unobservable inputs.

(2) Comprises cash on hand.

(3) Includes residential and commercial mortgages.

(4) Includes € 9 million relating to the forward contract to acquire Ulster Bank corporate and commercial loans. See note 39 for further information.

Details of the methodologies used for calculating fair value and the definition of terms are set out in note 44 of the Annual Financial Report 2022.

33 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.

Reconciliation of balances in Level 3 of the fair value hierarchy

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:

							30 June 2023
							Financial liabilities
			Loans and advances	Equities at FVTPL	Total	Derivatives	Total
	Debt	Equities at FVOCI	at FVTPL
€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
88	—	—	249	284	621	432	432
—	—	—	—	—	—	—	—
118	—	—	—	—	118	54	54
—	—	—	6	15	21	—	—
118	—	—	6	15	139	54	54
							—
							—
							—
							—
—	—	—	—	(5)	(5)	—	—
—	—	—	(82)	—	(82)	—	—
206	—	—	174	310	690	486	486
	Derivatives — Net change in fair value of cash flow hedges — — —	— — — —	Investment securities — — — —	Financial assets — — — 1	— — — 16	— — — 17	— — — —

							31 December 2022
							Financial liabilities
			Loans and advances	Equities at FVTPL	Total	Derivatives	Total
	Debt	Equities at FVOCI	at FVTPL
€ m	€ m	€ m	€ m	€ m	€ m	€ m	€ m
301	—	—	243	248	792	96	96
—	—	—	—	—	—	—	—
(213)	—	—	—	—	(213)	336	336
—	—	—	14	89	103	—	—
(213)	—	—	14	89	(110)	336	336
—	—	—	—	—	—	—	—
—	—	—	—	—	—	—	—
—	—	—	—	—	—	—	—
—	—	—	25	72	97	—	—
—	—	—	(1)	(125)	(126)	—	—
—	—	—	(32)	—	(32)	—	—
88	—	—	249	284	621	432	432
	Derivatives Net change in fair value of cash flow hedges		Investment securities	Financial assets

(1) Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change occurred.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

33 Fair value of financial instruments continued

The table below sets out the total gains or losses included in profit or loss that is attributable to the change in unrealised gains or losses relating to assets and liabilities categorised as Level 3 in the fair value hierarchy held at 30 June 2023 and 31 December 2022:

	30 June 2023	31 December 2022
	€ m	€ m
Net trading income –income/(losses)	86	(281)
Gains on equity investments at FVTPL	14	13
Losses on loans and advances at FVTPL	(2)	(16)
	98	(284)

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:

			Fair value				Range of inputs
Financial instrument		30 June 2023 € m	31 December € m	2022 Valuation technique	Significant unobservable input	30 June 2023	31 December 2022
Uncollateralised	Asset	65		88 CVA	LGD	31% - 48%	26% - 43%
customer	Liability	486	423			(Base 39%)	(Base 34%)
derivatives					PD	0.6% - 2.7%	0.8% - 4.6%
						(Base 1.5% 1 Year PD)	(Base 2.1% 1 year PD)
				FVA	Funding spreads	(0.1%) - 0.1%	(0.1%) to 0.2%
Ulster Bank forward contract – corporate and commercial loans	Asset Liability	15 —	9	— Discounted Expected Future Cash flows	PD	(0.5%) - 0.5%	(0.5%) - 0.5%
					Discount Yield	(0.5%) - 0.5%	(0.5%) - 0.5%
Ulster Bank forward contract – tracker (and linked) mortgages	Asset	126		— Discounted Expected Future Cash flows	PD	(0.25%) - 0.25%	N/A
					Discount Yield	(0.1%) - 0.1%	N/A
Visa Inc. Series B Preferred Stock	Asset	33		22 Quoted market price (to which a discount has been applied)	Final conversion rate	0% - 90%	0% - 90%
Loans and advances to	Asset	174		249 Discounted cash flows(1)	Discount on market value	(5%) - 3%	(4%) - 3%
customers measured at FVTPL				Collateral values	Collateral changes	N/A	N/A

(1) 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 a net negative XVA valuation adjustment amounting to € 7 million (31 December 2022: negative € 18 million). The sensitivity to unobservable inputs for this XVA valuation adjustment at 30 June 2023 ranges from (i) negative € 7 million to positive € 5 million for CVA (31 December 2022: negative € 12 million to positive € 6 million) and (ii) negative € 1 million to Nil for FVA (31 December 2022: negative € 2 million to positive € 1 million).

33 Fair value of financial instruments continued

Ulster Bank forward contract – corporate and commercial loans

The Group entered into an agreement in 2021 to acquire performing Ulster Bank corporate and commercial loans which was subject to regulatory approval. This transaction is an asset acquisition as the Group concluded that it did not meet the definition of a business combination. Following the receipt of regulatory authority approval, 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 agreement date to the earlier of the reporting date or the acquisition date for a loan. The notional value of the forward contract at 30 June 2023 represents the principal amount to be acquired by the Group in the second half of 2023.

The following are key considerations in determining the fair value of the forward contract at 30 June 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 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 € 1 million to positive € 1 million for PDs at 30 June 2023, and negative € 4 million to a positive of € 4 million for discount yield.

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 30 June 2023 represents the principal amount of loans to be acquired by the Group in the second half of 2023.

The following are key considerations in determining the fair value of the forward contract at 30 June 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 € 31 million to positive € 34 million for PDs at 30 June 2023, and negative € 20 million to a positive of € 21 million for discount yield.

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.

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 will be convertible into Class A Common Stock of Visa Inc. over time, with the first partial conversion 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. 62% haircut (31 December 2022: 71%). This was converted at the period 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.

Loans and advances to customers measured at FVTPL

The fair value measurement sensitivity to unobservable collateral values and interest rates ranges from negative € 8 million to positive € 5 million at 30 June 2023 (31 December 2022: negative € 9 million to positive € 8 million).

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.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

33 Fair value of financial instruments continued

Sensitivity of Level 3 measurements

The implementation of valuation techniques involves a considerable degree of judgement. While the Group believes its estimates of fair value are appropriate, the use of different measurements or assumptions could lead to different fair values. The following table sets out the impact of using reasonably possible alternative assumptions in the valuation methodology at 30 June 2023 and 31 December 2022:

				30 June 2023
				Level 3
		Effect on income statement	Effect on other comprehensive income
	Favourable	Unfavourable	Favourable	Unfavourable
	€ m	€ m	€ m	€ m
Classes of financial assets
Derivative financial instruments	60	(56)	—	—
Investment securities – equity	24 (1)	(24) (1)	—	—
Loans and advances to customers measured at FVTPL	5	(8)	—	—
Total	89	(88)	—	—

Classes of financial liabilities

Derivative financial liabilities	5	(8)	—	—
Total	5	(8)	—	—

	31 December 2022
				Level 3
		Effect on income statement	Effect on other comprehensive income
	Favourable	Unfavourable	Favourable	Unfavourable
	€ m	€ m	€ m	€ m
Classes of financial assets
Derivative financial instruments	6	(11)	—	—
Investment securities – equity	24 (1)	(15) (1)	—	—
Loans and advances to customers measured at FVTPL	8	(9)	—	—
Total	38	(35)	—	—
Classes of financial liabilities
Derivative financial liabilities	1	(2)	—	—
Total	1	(2)	—	—

(1) Relates to a significant equity investment, the carrying value of which was € 33 million at 30 June 2023 (31 December 2022: € 22 million). Sensitivity information has not been provided for other equities as the portfolio comprises several investments, none of which is individually material.

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.

34 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:

	30 June	30 June
	2023	2022
	€ m	€ m
Cash and balances at central banks	36,088	44,561
Loans and advances to banks	1,482	1,148
Total	37,570	45,709

Cash and balances at central banks (net of ECL allowance of Nil) comprise:

	30 June 2023	31 December 2022
	€ m	€ m
Central Bank of Ireland	31,241	32,573
Bank of England	3,979	4,584
Federal Reserve Bank of New York	231	408
Other (cash on hand)	637	573
Total	36,088	38,138

The Group is required to hold minimum reserve balances with the Central Bank of Ireland.

The Group is also required by law to maintain reserve balances with the Bank of England. At 30 June 2023, these amounted to € 267 million (30 June 2022: € 336 million).

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.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

35 Statement of cash flows

Non-cash and other items included in profit before taxation

	Half-year 30 June	Half-year 30 June
	2023	2022
Non-cash items	€ m	€ m
Profit on disposal of property	—	(3)
Net loss/(gain) on derecognition of financial assets measured at amortised cost	11	(28)
Dividends received from equity investments	(1)	(1)
Investments accounted for using the equity method	(3)	(5)
Net credit impairment charge/(writeback)	107	(277)
Change in provisions	64	108
Retirement benefits – defined benefit expense	2	3
Depreciation, amortisation and impairment	147	182
Interest on subordinated liabilities and other capital instruments	21	20
Interest on debt securities – MREL	123	56
Loss on disposal of investment securities	5	2
Loss/(gain) on termination of hedging swaps	4	(9)
Amortisation of premiums and discounts	19	22
Net gain on equity investments at FVTPL	(12)	(14)
Net loss on loans and advances to customers at FVTPL	2	2
Change in prepayments and accrued income	(31)	3
Change in accruals and deferred income	68	74
Effect of exchange translation and other adjustments(1)	(78)	(208)
Total non-cash items	448	(73)
Contributions to defined benefit pension schemes	(12)	(13)
Dividends received on equity investments	1	1
Total other items	(11)	(12)
Non-cash and other items for the period	437	(85)

	Half-year 30 June	Half-year 30 June
	2023	2022
Change in operating assets(1)	€ m	€ m
Change in trading portfolio financial assets	(79)	(2)
Change in derivative financial instruments	—	(22)
Change in loans and advances to banks	(22)	7
Change in loans and advances to customers	(1,420)	(228)
Change in securities financing	(1,361)	(608)
Change in other assets	(73)	(208)
	(2,955)	(1,061)
	Half-year	Half-year
	30 June	30 June
	2023	2022
Change in operating liabilities(1)	€ m	€ m
Change in deposits by central banks and banks	(104)	172
Change in customer accounts	1,035	3,113
Change in securities financing	(96)	730
Change in trading portfolio financial liabilities	49	4
Change in debt securities in issue	(1,000)	(750)
Change in notes in circulation	(3)	(29)
Change in other liabilities	41	231
	(78)	3,471

(1) 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.

36 Related party transactions

Other than as outlined below, there have been no related party transactions or changes therein since 31 December 2022 (as set out in note 47 of the Annual Financial Report 2022) that have materially affected the Group's financial position or performance in the six months to 30 June 2023.

Transactions with Key Management Personnel

Key Management Personnel ('KMP') as defined in IAS 24 Related Party Disclosures ('IAS 24'), comprise Executive and Non-Executive Directors and Senior Executive Officers.

At 30 June 2023, 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, amounted to € 1.49 million (31 December 2022: € 1.56 million).

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.

At 31 December 2022, the Irish Government held 56.89% of the total ordinary shares in AIB Group plc (1,520,799,849 ordinary shares). At 30 June 2023, the Irish Government's shareholding has reduced to 46.90% (1,228,114,680 ordinary shares) following a directed share buyback, the sell down of shares and disposals as part of a pre-arranged trading plan. The relationship also encompasses a number of other dimensions, including guarantee schemes and the Relationship Framework.

(i) Irish Government and related entities

The following table outlines the amounts outstanding (excluding accrued interest) at 30 June 2023 and 31 December 2022 with the Irish Government and related entities which are considered individually significant. 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.

	30 June 2023	31 December 2022
	Balance € m	Balance € m
Assets
Cash and balances at central banks(1)	31,241	32,573
Trading portfolio financial assets	57	—
Investment securities(2)	4,584	4,860
Total assets	35,882	37,433
	30 June 2023	31 December 2022
	Balance € m	Balance € m
Liabilities
Deposits by central banks and banks	—	—
Customer accounts	620	340
Trading portfolio financial liabilities	42	—
Total liabilities	662	340

(1) Cash and balances at central banks represent the placements which the Group holds with the Central Bank.

(2) Investment securities at 30 June 2023 comprise € 4,584 million (31 December 2022: € 4,860 million) in Irish Government securities held in the normal course of business.

All other balances, both assets and liabilities are carried out in the ordinary course of banking business on normal terms and conditions.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED

36 Related party transactions continued

(ii) Local government(1)and Commercial semi-state bodies(2)

During 2023 and 2022, AIB 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 the purposes of this disclosure.

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 30 June 2023 and 31 December 2022:

	30 June	31 December
	2023	2022
	€ m	€ m
Assets
Loans and advances to banks	—	1
Investment securities	—	35

37 Financial and other information		Half-year 30 June 2023 %	Half-year 30 June 2022 %
Operating ratios
Operating expenses/operating income		51.1	82.9
Other income/operating income		19.3	31.5
Rates of exchange	Half-year 30 June 2023	Half-year 30 June 2022	Year 31 December 2022
€/\$*
Closing	1.0866	1.0387	1.0666
Average	1.0804	1.0932	1.0531
€/£*
Closing	0.8583	0.8582	0.8869
Average	0.8763	0.8425	0.8527

*Throughout this report, US dollar is denoted by \$ and Pound sterling is denoted by £.

38 Dividends

Final dividends are not accounted for until they have been approved at the Annual General Meeting of shareholders or in the case of an interim dividend, when it becomes irrevocable having already been approved for payment by the Board of Directors. Interim dividends may be cancelled at any time prior to the actual payment.

A final dividend for the year ended 31 December 2022 of 6.2 cent per ordinary share, amounting to € 166 million (for the year ended 31 December 2021: € 122 million), was approved at the Annual General Meeting on 4 May 2023 and subsequently paid on 12 May 2023.

39 Non-adjusting events after the reporting period

Ulster Bank corporate and commercial loans

Subsequent to 30 June 2023, the Group acquired eligible performing loans of € 130 million and eligible non-performing loans of € 48 million. It was agreed that (subject to the finalisation of pricing) all non-performing loans to be acquired under the agreement would be included in the final tranche of loan transfers to the Group. The non-performing loans will be recognised as purchased or originated credit impaired (POCI) loans. The transfer of the Ulster Bank corporate and commercial loans is now complete.

Ulster Bank tracker (and linked) mortgage portfolio

In 2022, the Group confirmed that Allied Irish Banks, p.l.c. had entered into an agreement for the acquisition of an Ulster Bank tracker (and linked) mortgage portfolio of c. € 5.7 billion for a consideration of c. € 5.4 billion. The agreement received CCPC approval in January 2023. The final consideration payable depends on movements in the portfolio up to completion. Subsequent to 30 June 2023, the Group acquired eligible performing loans of € 4 billion with the remaining eligible loans expected to be acquired by the end of 2023.

40 Approval of Half-Yearly Financial Report

The Half-Yearly Financial Report was approved by the Board of Directors on 27 July 2023.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

for the half-year ended 30 June 2023

The Directors are responsible for preparing the Group Half-Yearly Financial Report in accordance with IAS 34 Interim Financial Reporting as issued by the IASB and adopted by the EU; the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

The Directors are also responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors listed below confirm to the best of their knowledge and belief that the condensed set of financial statements have been prepared in accordance with IAS 34 and that they give a true and fair view of the assets, liabilities, financial position and profit of the Group and that as required by the Transparency (Directive 2004/109/EC) Regulations 2007, the Half-Yearly Financial Report includes:

• a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the condensed financial statements;
• a description of the principal risks and uncertainties for the remaining six months of the financial year;
• a fair review of related parties' transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during the period; and
• any changes in the related parties' transactions described in the last annual report, that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

For and on behalf of the Board

Jim Pettigrew Chair

27 July 2023

Non-Executive Directors Executive Directors

Anik Chaumartin Basil Geoghegan Tanya Horgan Sandy Kinney Pritchard Elaine MacLean Andy Maguire Brendan McDonagh (Deputy Chair) Helen Normoyle (Senior Independent Director) Ann O'Brien Fergal O'Dwyer Jim Pettigrew (Chair) Jan Sijbrand Ranjit (Raj) Singh

Colin Hunt Chief Executive Officer

Donal Galvin Chief Financial Officer

Colin Hunt (Chief Executive Officer) Donal Galvin (Chief Financial Officer)

INDEPENDENT REVIEW REPORT TO AIB GROUP PLC

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed AIB Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the Half-Yearly Financial Report of AIB Group plc for the six month period ended 30 June 2023 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

The interim financial statements comprise:

• the Condensed Consolidated Statement of Financial Position as at 30 June 2023;
• the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income for the period then ended;
• the Condensed Consolidated Statement of Cash Flows for the period then ended;
• the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
• the explanatory notes to the interim financial statements.

The interim financial statements included in the Half-Yearly Financial Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Transparency (Directive 2004/109/ EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' ("ISRE (Ireland) 2410") issued for use in Ireland. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half-Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (Ireland) 2410. However future events or conditions may cause the group to cease to continue as a going concern.

INDEPENDENT REVIEW REPORT TO AIB GROUP PLC continued

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half-Yearly Financial Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019.

In preparing the Half-Yearly Financial Report including the interim financial statements, the directors are responsible for assessing the group'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 to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the Half-Yearly Financial Report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Central Bank (Investment Market Conduct) Rules 2019 and for no other purpose. We do not, in giving this conclusion, 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.

PricewaterhouseCoopers Chartered Accountants Dublin

27 July 2023

FORWARD LOOKING STATEMENTS

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 Principal risks on pages 23 to 25 of the Annual Financial Report 2022 and updated on page 33 of this Half-Yearly 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 23 to 25 of the Annual Financial Report 2022 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.