DAVY VIEW

Surplus funding will remain a continuing feature for AIB until a step-change in credit growth. However, ECB tiering helps protect net interest income (NII) and we expect the rate of margin attrition experienced during 2018 to dissipate. Instead, we lower our 2020/2021 forecasts to reflect the weaker 2019 out-turn and reduced corporate lending. Higher cost forecasts relate to rising investment amortisation, and we are hopeful that the Q1 strategy update will highlight corrective actions to sustainably reduce the cost base over time. The recovery in non-performing loan (NPL) momentum supports capital return ambition in 2020. Our price target falls to 355c (370c prior) to reflect our forecast changes.