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Ireland's AIB is seeing a slower growth in loans due to SMEs and US renewables woes

AIB Group anticipates a slower loan growth in 2019 due to a subdued lending environment to Irish small business and fewer renewable energy projects being funded by the United States. However, it reiterated its forecast for growth to return to 2026 or 2027 on Friday.

AIB, Ireland's dominant lender, kept its guidance for net interest income and stated that it expects a return on tangible assets (ROTE) of over 20%, compared to an earlier forecast which was significantly ahead of the 15% target.

After a series of rate cuts by the European Central Bank, first-half after-tax profit fell by 16% from 1.1 billion euro in 2024 to 927 millions euros ($1.1 billion).

AIB shares fell 2.6% in the early trading.

After the growth slowed in the first half, it was reduced to 3%. The bank still expects a compound annual growth rate of 5% in the next two-year period.

AIB has identified the U.S. market as one of its major growth areas and has targeted it as a strategic area for growth.

The U.S. President Donald Trump’s tax and spending bill, passed last week, speeds up the phase out of tax credits for solar and wind projects by several years.

Donal Galvin, AIB's finance chief, said that the bank had "read the mood" and already reduced its expectations of activity in the U.S. during the first half. He said that the bank will invest in solar but that wind projects are no longer feasible.

Galvin, who is the CEO of the bank, said that it will pivot its focus to projects in Ireland, Britain and mainland Europe. This market, Galvin added, was very active, but also highly competitive.

He said he expected to see a pickup in lending for small and medium-sized businesses in Ireland after Sunday's U.S. - European Union tariff deal.

Galvin said that the worst-case scenario had been avoided, so they now have some certainty in their plans.

(source: Reuters)