AIB is now charging customers interest on €10bn worth of savings.
The bank is currently charging negative interest rates on savings where a consumer or company holds €3m or more in deposits.
The customers affected are largely businesses, however it also includes some high-net-worth individuals.
However, before the end of July this year it will start charging negative interest rates on savings over €1m for all customers except charities, as it struggles to absorb the glut of cash in the economy.
The State-backed bank currently has some €84.5bn of customers deposits, an increase of 3pc since December, as household savings continue to increase.
At the end of 2020, the bank held €4.7bn in deposits at negative interest rates.
The decision to lower a floor for savings on which the bank charges negative interest rates reflects low interest. It is also due to the impact of a decline in lending during the pandemic and a jump in savings.
It comes as two of the five main banks here – KBC Ireland and Ulster Bank – continue with plans to leave the market.
“The ECB implemented negative interest rates in 2014 and since then banks have been paying interest to the Central Bank for holding deposits,” a spokesperson for AIB said.
“AIB has successfully insulated the vast majority of our customers during a sustained period of European negative interest rates. We continue to do so, while keeping our pricing for large deposits under constant review,” it added.
In a trading update on Thursday, AIB said its net interest income, which is the difference between what it pays out as a savings bank and what it charges as a lender, was 13pc lower in the first quarter of this year versus the same period in 2020. However, the bank said momentum was gathering on NII recovery through its negative interest rate strategy.
AIB says it returned to profit in the first three months of this year, with current trading “in line with expectations.”
The bank, which is led by Colin Hunt, recorded a loss after tax of €741m last year.
AIB expects to incur exceptional costs this year of around €250m, including costs relating to the tracker mortgage scandal, business restructuring, and redundancies.
In the three months to 31 March this year total income at the bank decreased 4pc, however, AIB said it experienced “resilient revenues supported by diversified income streams.”
AIB said negotiations with NatWest, Ulster Bank’s parent, for the acquisition of a around €4bn performing corporate and commercial loan portfolio, have “progressed constructively and we will update the market in due course.”
In the first three months of this year the bank reported total new lending of €2.3bn, down 7pc on the corresponding period in 2020. There were mixed lending trends across segments, with “sluggish” demand in consumer lending and stronger activity in corporate sectors.
Total loans of €59.2bn were down €300m in the quarter, primarily driven by non-performing loan portfolio sales and the continuing trend of redemptions exceeding new lending, according to the bank.
Non-performing loans are now down to €3.8bn or 6.5pc of the bank’s loan portfolio.
Performing loans of €55.3bn were up €200m since year-end.
Mortgage drawdowns were up 7pc year-on-year. A “solid rise” in mortgage lending is expected with market estimates revised to approximately €10bn for 2021.
