AIB Group PLC on Friday upped its guidance and said it is in talks with the Irish government to reduce the state’s stake in the company even more.

For the half-year ended June 30, the Dublin-based lender reported total operating income of €2.48 billion, a rise of 13% from €2.20 billion a year prior. Net interest income alone surged 18% on-year to €2.08 billion.

Pretax profit jumped 31% year-on-year to €1.29 billion from €987 million.

Looking to the full-year, AIB now expects net interest income of around €4.0 billion, its outlook raised from the over €3.65 billion it previously predicted.

AIB said it received regulatory approval for a €505 million share buyback. It said it intends to transact a €500 million directed buyback with the Irish government.

At current prices, the €500 million would represent roughly a 4% chunk of AIB shares. AIB shares fell 1.0% to 425.38 pence each in London on Friday morning, giving it a market capitalisation of €12.89 billion.

‘AIB Group delivered a very strong financial performance with profit after tax of €1.1 billion in the first half of the year as we embed our strategic priorities of enhancing our customer focus, further greening our business and driving greater operational efficiency. Given our strong capital position, we are pleased to announce our first post-[great financial crisis] mid-year distribution, with discussions underway with the Department of Finance for a €500m directed share buyback, which would bring payments to the state to €3 billion so far this year,’ Chief Executive Colin Hunt said.

The state’s stake in AIB was trimmed to 25.5% in June. It had stood at just under 40.8% at the end of December.

The Irish government stepped in to buy a stake in AIB in 2009 amid the global financial crisis.

The state pumped a total of €29.4 billion into AIB, Bank of Ireland Group PLC, and Permanent TSB Group Holdings PLC over 2009 to 2011.

The state currently owns around 57% of Permanent TSB.

Permanent TSB said Thursday its first-half profit more than doubled. Total operating income climbed 4.0% to €336 million from €323 million. Pretax profit surged to €75 million from €26 million a year prior.

Net interest income alone climbed 4.3% to €311 million from €298 million.

‘The increase is mainly driven by the higher interest rate environment together with earnings from higher interest earning assets, partly offset by higher cost of funds due to increasing deposit volumes primarily in higher interest bearing retail deposits,’ it explained.

Permanent TSB was untraded in London on Friday morning, last quoted at €1.63. The stock rose 4.4% on Thursday. AIB shares were up 0.2% at 430.50 pence each in London on Friday morning.

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