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Ireland's AIB hikes dividend as full-year profits slip

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DUBLIN (Reuters) - Allied Irish Banks will raise its dividend for the second successive year since resuming payments following the financial crisis, the bank said on Friday after reporting 1.4 billion euros (1.2 billion pounds) in pre-exceptional 2018 profits.

AIB was the first Irish lender to restart dividends after the sector required the euro zone's most costly bank bailout almost a decade ago. On Friday, it proposed payments at 17 euro cents per share, totalling 461 million euros.

That compared to a 326 million euro payout a year ago, most of which will again go to the Irish government, which has been unable to sell anymore AIB shares since offloading a 29 percent stake in Europe's largest initial public offering (IPO) of 2017.

Amid a European-wide slump, AIB shares are trading around 8 percent down on the IPO price of 4.40 euros, although they have recovered from a low of 3.50 euros last December.

AIB's ability to return excess capital to shareholders was a selling point of the IPO. Friday's results showed its fully loaded tier one capital ratio of 17.5 percent, a measure of financial strength, was well above its medium-term target of 13 percent.

Excluding exceptional items, AIB reported full-year pretax profit of 1.41 billion euros, down from 1.57 billion euros a year ago. Profit after tax was down 5 percent to 1.25 billion.

Buoyed by the euro zone's fastest growing economy, new lending grew by 15 percent and the bank cut its level of non-performing loans by 41 percent to 6.1 billion euros.

AIB's net interest margin fell to 2.47 percent from 2.58 percent in 2017, but was still higher than the 2.20 recorded by main rival Bank of Ireland, which this week warned it would face further margin pressure in 2019.

"Our 2018 net interest margin, net interest income and costs are on track with our medium-term targets and our underlying capital generation has helped us in reaching our objective of normalising our proposed level of annual dividend payment," outgoing Chief Executive Bernard Byrne said in a statement.

Byrne told Reuters the bank's core assumption was that Britain would leave the European Union in an orderly manner and that the main Brexit challenge for the bank would likely be helping its business customers prepare.

Byrne is due to be replaced by head of wholesale and institutional banking Colin Hunt once regulators sign off, which Byrne said should happen "in a very short time period."

Deputy Chief Financial Officer Donal Galvin was appointed CFO on Friday with immediate effect.

(Reporting by Conor Humphries; Additional reporting by Padraic Halpin; Editing by Edmund Blair)