CompanyGraph
AIB Group plc
AIBG · Ireland
Lends money to Irish homebuyers and small businesses using deposits backed by the Irish state.
AIB Group takes in deposits from Irish households, businesses, and government bodies — including local authorities and state agencies that place their accounts with AIB because the Irish state owns 56.8% of the bank, a legacy of the 2008–2012 bailout that carries an implicit sovereign guarantee no private competitor can match — and lends that money out as mortgages and SME loans across Ireland. The interest rate AIB earns on those loans is set by ECB policy designed for the whole eurozone, while how much it can actually lend is capped by Central Bank of Ireland rules limiting mortgage sizes to 3.5 times a borrower's income, which in Dublin means most first-time buyers cannot qualify regardless of how much deposit funding is available. If a borrower does default, what AIB recovers depends on what Dublin or Cork property is worth at that moment, so the real margin on the mortgage book is only known after a downturn, not when the loan is written. The entire structure rests on the state keeping its controlling stake — if the government sells down below that threshold, the implicit guarantee disappears, public-sector deposits go out to open tender, and the privileged funding base that supports the constrained lending book goes with it.
How does this company make money?
The main source of income is the gap between the interest rate charged on Euro mortgages and business loans and the lower rate paid to depositors — that difference is the net interest margin. On top of that, the bank collects a fee each time it arranges a new mortgage, charges Irish businesses a regular account maintenance fee, and earns a spread on foreign exchange conversions when Irish companies trading across the border with the UK need to move money between Euros and Sterling.
What makes this company hard to replace?
Irish mortgage holders who want to move to a different lender face early repayment penalties and must pay legal costs to complete the transfer, making it expensive to leave mid-term. Businesses whose payroll is processed through this bank are typically locked into 12-month notice periods before they can migrate to another provider. Irish farming and agricultural businesses are tied in further because the bank offers specialist agricultural lending products that other banks do not have, so switching would mean losing access to financing built around how their businesses actually work.
What limits this company?
The Central Bank of Ireland will not let lenders give more than 90% of a home's value to first-time buyers, or more than 80% to everyone else, and borrowers cannot take on a loan worth more than 3.5 times their annual income. In Dublin, where house prices are very high, most buyers already bump into that income limit before they hit the property-value limit. So even when the bank holds plenty of deposits and wants to lend, the rules stop it from putting that money to work in the city where demand is greatest.
What does this company depend on?
The Central Bank of Ireland issues the banking license that allows the bank to take Euro deposits at all. The European Central Bank provides access to Euro liquidity and sets the interest rates that determine what the bank earns and what it pays. The Irish Land Registry must verify property ownership before any mortgage can be secured against a home. The SEPA payment rails and the Eurosystem Target2 settlement system handle every Euro payment and interbank transfer the bank processes each day.
Who depends on this company?
Irish small and medium-sized businesses rely on this bank for the working capital they use to pay suppliers and staff — if that lending stopped, many would face an immediate cash shortfall. Residential developers in Dublin and Cork use its construction financing to fund building projects; without it, those projects would stall. The Irish government also counts on it as one of the primary dealers who buy and distribute Irish government bonds at auction, so a gap there would make it harder and more expensive for the state to borrow.
How does this company scale?
Taking on another depositor costs very little — one more person opening an account adds to the pool of money available to lend without requiring a new branch or extra staff in proportion. Lending to businesses does not work the same way. Each SME loan requires someone with local knowledge to assess the business, its sector, and the person guaranteeing the debt personally. That judgment cannot be automated or handed to an outside firm, so the business lending side grows slowly no matter how many deposits come in.
What external forces can significantly affect this company?
The European Central Bank sets Euro interest rates based on conditions across the whole eurozone, not Ireland's economy specifically, so the bank's earnings can be squeezed or stretched by decisions made for entirely different reasons. Brexit has disrupted trade between Ireland and the UK, which puts pressure on Irish export businesses that hold commercial loans with the bank. EU-wide rules including Basel III capital requirements add to the cost of running the bank, and GDPR compliance costs rise when data crosses borders.
Where is this company structurally vulnerable?
If the Irish government sold enough of its shares to fall below a controlling stake — whether to raise cash or as part of a planned exit — the unspoken guarantee behind the bank's deposits would disappear. Local authorities and state agencies would then put their accounts out to competitive tender. The bank would lose the privileged deposit base that funds its mortgage and business lending, and the core structural advantage built around state ownership would be gone permanently.