Good morning. Colin Hunt here. I'm joined by Donal Galvin, just to give you an update on trading in the first quarter of 2024. As you know, 2023 was an exceptional year for the group, and the momentum that we saw at the end of last year has continued into the opening months of this year. We're very, very happy with how the group is performing across the various business lines. And, we believe that the strategic changes we made in the past number of years are now paying dividends, and the plan is working. And, we're very, very happy this morning to reiterate the guidance that we just gave to the markets a number of weeks ago. So, very confident in the outlook for the rest of the year. We'll, I'll pause there and open for questions.
As a reminder, please press star one to ask a question. We'll take our first line from Alastair Ryan from BofA . The line is open. Please go ahead.
Good morning. I think you've floored everybody by the brevity of your comments. So obviously.
Hard to remind Alistair, as you know.
So look, great numbers. Thank you. Just to push then, I suppose, in terms of customer behaviors, what would I appreciate that the interest rate environment is out of your hands, but what customer behaviors would you need to see to only make the 3.65 billion this year? 'Cause it seems that you've been relatively favorably surprised by deposit migration in the period. First thing taken, then, for Donal, I guess, you know, the hedging policy's been a very good news story for you. Does the rate environment allow you to lock in a little bit more in future periods so that the rapid decline in net interest income that the market's forecasting that consensus has is something that you can act on because the opportunity's there? Thank you.
Well, just first of all, Alistair, in relation to customer behavior, you know, the deposit beta for last year was very much at the lower end of our expectations. And we haven't seen a material change in terms of customer behavior on the migration from demand into term product in the opening months of this year. In fact, the run rate is very close to the run rate we would have seen in the closing months of last year. So we're not witnessing any significant change in customer behavior, particularly when it comes to which deposit products our customers are choosing to use at the moment.
Yeah. Overall, balances remain pretty consistent on the liability side. So, getting better visibility, I would say, on that as the months progress, would have guided a beta for 2024 of less than 20%. Certainly seems like it's gonna be well within that. Obviously, the other main mover is just gonna be general rates and general rate levels. We set our guidance at an ECB deposit rate of 2.75 at the end of the year. Obviously, that now looks, market-wise, a different rate, but it is volatile. But if you use our sensitivity tables, I think you'll get a good understanding of what the impact of whatever 25, 50, 75 basis points is. So, we definitely think that there'll be room for upside there, but we'll nail that down, I'd say, for the half-year.
On the hedging policy overall, no change to our strategy. Very comfortable with how the hedge is working. Obviously, a lot of moving parts on the balance sheet that we take into consideration. But overall, with respect to volumes, maturities, quantums, exit rates, no change from year-end.
Thank you. We will take the next question from line Diarmaid Sheridan from Davy. Line is open now. Please go ahead.
Yeah. Good morning, gents. Thank you for the updates. Very good quarter. Two questions, if I may. Maybe first of all, on capital trends. The kind of the underlying run rate generation of organic capital is still obviously very, very strong, given the profitability that you're indicating in the first quarter. So I just wonder, as we look out through the rest of the year, you have a directed buyback completed in the next few days, obviously subject to the shareholder meeting today. Is there a possibility that you could look at distributions in the second half of the year, or is that still very much a year-end discussion, in terms of how we should think about that?
And then secondly, just around net lending growth, just curious as to, you know, obviously, you've done 1.5% in the first quarter. How you're looking out at the next couple of quarters in terms of why it should only just increase by 2%, or do you think there's potentially upside to net balances as we look through the year? Thank you.
Thank you very much. Just, in relation to the timing of any future distributions, we are ruling nothing in, and we're ruling nothing out, at this juncture. Once we have an announcement to make, we will make that announcement, but now is not the time. As I said, we are ruling nothing in and nothing out.
Yeah. Hi, Jeremy. I think, with respect to loan growth, as you say, quarter one was very strong. And we are seeing momentum in all of the key business lines. We have some additional take-on of Ulster trackers as well. So, yeah, still early in the year, but we certainly look to exceed that 2% loan growth number. But again, you know, we'll be able to provide a little bit more color on that at the half-year.
Thank you. We will take the next question from line Borja Ramirez from Citi. The line is open now. Please go ahead.
Hello. Good morning. Can you hear me?
Yes, we can. Good morning.
Perfect. Thank you. I have 2 questions. Firstly, you guided for a deposit beta of less than 20% for the average of this year. Given, as per your press release, it is mentioned that the deposit migration during the quarter was lower than anticipated. So I would like to firstly ask, if you could quantify any potential improvement in the deposit beta guidance for the year. And then, secondly, if I could kindly ask, on NII for 2024, it's based on a very conservative assumption. If I were to adjust for the current forward curve, which I understand that it could be thereabouts or consensus or maybe even slightly upwards of 3.8, if you could kindly provide a bit more color. Thank you.
Thank you very much. Just in relation to deposits, we're very conscious of the fact that it is just eight weeks since we gave our guidance for 2024. Given the volatility in markets that's out there at the moment, we're not at an appropriate juncture to alter that. But I would like to reiterate that the sort of deposit migration, the sort of customer behavior that we saw on foot of the introduction of more attractive fixed-rate pricing from September, the volume flow that we saw in the closing months of last year has been replicated in the flow we've seen in the opening months of this year.
Yeah. I think with respect to the NII outlook overall, you know, I think there's three moving parts there, I think. There's the level of interest rates. You know, there's the quantum of liabilities, and there's the beta. Obviously, Colin's given you a run-through of the beta there. I think with respect to deposit volumes, holding up very, very strong, which is a key number. And then obviously, overall level of interest rates. So as you correctly point out, you know, market rates are currently 50 basis points higher than where we would have guided. You know, looking through our sensitivity tables, you know, that's obviously that would lead to upside there if indeed that rate path was to come to pass.
Thank you. We will take the next question from Sheel Shah from JP Morgan. The line is open now. Please go ahead.
Hi. Two from me, please. Firstly, I appreciate that you don't guide on NIM, but the quarterly NIM declined by about 5 basis points in the first quarter, a similar amount in the fourth quarter last year. Is that the trajectory that we should expect through the year if we exclude the rates component and sort of keep a consistent flow into term deposits? And secondly, just on deposit pricing, are you seeing any pressure on pricing here?
Look, I think the movement Q4 to Q1, as you say, small, 5 basis points, really, really that is the effect of paying higher rates for those customers who migrate from short to long term. And importantly, the overall quantum of liabilities is not reducing, so that's staying consistent. So I think, you know, the trend that we're seeing, the move into term, you know, which Colin referenced there, that seems to be our lived experience over the last six, nine, 12 months. And that it would not be unreasonable to take that as the run rate going forward. In terms of deposit pricing overall, we think on the medium to long-term products, you know, we have market-leading rates in the Irish market for regular savers, market-leading rates of 3%.
That seems to be an appropriate level at the moment.
Mm-hmm.
which is, you know, firstly, protecting the overall quantum of customers of the liability book. You know, and secondly, obviously, offering core savers good, good rates for their savings products.
Thank you. We will take the next question from line Seamus Murphy from Carraighill. The line is open now. Please go ahead.
Hi. Hi, guys. Just, just a very quick question. Can I just ask about the capital generation in the quarter? I think there was only 10 basis points move, which to me looks a little bit low given the fact that RWAs haven't increased that much, and the RWA density is quite low. I assume I know you accrue for the dividend, which I assume is kinda 35%, I don't know, 40% payout, let's say. Can you just, just explain that a little bit more just in terms of the, the movement? It's only the 10 basis points capital generation in the quarter.
Thank you very much indeed, Seamus. Just in relation to the dividend, we accrue at 60% payout. We accrue, on for policy reasons at the top of our policy range.
Right. Okay. Okay.
Yeah. And then overall, a lot of the asset growth or the net asset growth was in wholesale areas, such as Climate Capital, which had a really strong quarter, which are, you know, 100% or higher RWA type of, of areas. But you know, I think as the year progresses, that will probably normalize to a more even split between, you know, retail, wholesale type of activities. Nothing unusual in the RWA capital world, I suppose, is what I'm saying.
Thank you. We will take the next question from line Chris Cant from Autonomous. The line's open now. Please go ahead.
Good morning. Can you hear me okay?
Yes. Loud and clear, Chris.
Thanks for taking the questions. I just wanted to come back on NII, please. Obviously, we have this restatement, with full-year numbers, between other income and NII, which makes things a little bit tricky, or trickier than it usually is for us to think about the Q-on-Q dynamics. I think if I clean up for that restatement, your NII is annualizing about EUR 4.2 billion in the first quarter, down a little over 1% quarter-over-quarter. I think those are the right numbers, but just wanted to confirm, please. And I guess the key question for us all is then absent base-rate cuts. And I appreciate they are they are gonna come through at some stage.
But if we park that to one side for a moment, is there any reason for us to suppose that the sort of pacing of Q on Q decline from here as we look through the rest of the year should change beyond the effect of base-rate cuts? Just should we be assuming that sort of very gentle, sequential decline from here, or is there something else which is likely to cause incremental pressure above and beyond base-rate cuts? Thank you.
No. Look, I think the main mover is going to be, is gonna be base-rate moves, when they move. And it's gonna be around where Euribor is settled around that, which I think is all becoming a little bit clearer for us all. You know, obviously, as rates fall, you know, we're seeing benefits on the other side from the structural hedge. So certainly no cliff edge. And I think the underlying message from the trading statement today, Q4 v Q1, you know, you're seeing a very gentle decline, which is very much driven by, you know, that beta effect of the move of short to long-term deposits, which seems to be fairly consistent at this moment in time.
Thank you. We will take the next question.
Okay.
From line Grace Dargan from Barclays. The line is open now. Please go ahead.
Morning. Thank you for taking my questions.
Good morning.
If I could just come back on term deposits. I don't know if I could push you just to ask what the EUR billion move into term deposits was in the quarter, if you're able to share that. And I guess just looking at a system level, it looked like that term migration, actually, in Ireland was slowing in Q1, but you're kind of pointing to kind of similar trends. I don't know if there's any reason for the difference there. And then secondly, just to ask your views, I guess one of your competitors from elsewhere in Europe is obviously looking to double down in Ireland. What do you think prevents other banks from following suit and increasing the demand in the market? Thank you.
Thank you very much. I'll take the second question. In the, we face competition every day of the week from not only the full-service retail banks here within the Republic of Ireland but also from overseas banks, fintechs, neobanks, and so on. And, I can't comment on why other institutions make strategic choices to enter, exit, or avoid the market. But our focus is very much on our 3.3 million customers, biggest franchise of any bank in the state. And, we just need to ensure that we deliver a comprehensive, complete, full set of products and services to those 3.3 million customers, in the way that they choose: branches, phone, mobile, digital, and ensure that those products and services are competitively and attractively priced. And that's what we do every single day.
Yeah. Just with respect to the migrations overall, haven't seen any material change in the pace. So what we've seen in Q1, very similar to what we saw in Q3 and Q4, probably around EUR 600 million a month. You know, whether that's higher or lower than anyone else is, I suppose one could do that analysis themselves. But, you know, overall, we're always looking at, you know, price for different cohorts but also ensuring that we maintain our overall portfolio as well. So, we're very happy with our pricing strategy, for all of our different customer cohorts.
Thank you. It appears no further question at this time. I'll hand it back over to your host for closing remarks.
Thank you very much indeed, as ever, for your time this morning and for your questions. We are having our AGM starting at 10:00 A.M. We'll then move into EGM starting at 11:00 A.M. We have a very important proposal to bring to our shareholders this morning, which, if approved, will see the State's shareholding fall below 33%. And that's obviously a very, very welcome development from our perspective. But at this point, we'll wish you a very good day. Thank you.