AIB sees profits surge to €851m

AIB made pre-tax profits of €851 million for the first six months of 2005 against €706m in the same period last year.

Double digit growth was achieved across all its key trading divisions with the Republic of Ireland a “stalwart” in the overall outturn, the group said.

The bank expects that trend to continue and has revised up its basic earnings per share from 138 -140 cent to 140-142 cent for the year.

Basic earnings per share were up 16% to 72.3 cent in the first half.

Chief executive Eugene Sheehy described the first six months of 2005 as a “buoyant” time for loan and deposit growth.

AIB has declared a 10% higher interim dividend of 23 cent for the period.

Total income grew by 12% to €1.8 billion, while total costs rose by 8%, due to regulatory costs and higher performance-related pay.

Profits at AIB’s banking business in the Republic of Ireland were up 17% to €406m.

That figure was 34% ahead when the once-off effect of last year’s investigation into foreign exchange charges was stripped out.

Loans grew by 12% from the figure at the end of 2004, while deposits were up 8%. Profits at Ark Life, the bank’s life and pensions business, improved from €22m to €32m, helped by growth in single premium sales and tight cost controls.

The bank expects loan growth of around 20% in the Republic for the full year. Mr Sheehy said it had no plans to join other institutions in offering 100% mortgages.

In Britain and Northern Ireland, profits grew by 13% to €156m, helped by loan growth of 14% in Britain. Profits at AIB Capital Markets, which include corporate and treasury operations, jumped by 33% to €206m. This was helped by a 60% increase in corporate banking profits.

Profits at Bank Zachodni WBK in Poland were 17% higher at €68m, although loan growth was flat. AIB’s share of profits from US bank M&T rose to €69m from €59m.

AIB shares fell 14 cent to €17.83 on the day, but what concerned Mr Sheehy was the 200-day average share price performance, not the intra-day figure.

Overall, the outlook across all of AIB’s markets was very positive.

Bad debt provisions were down from €55m to €42m. That figure was low historically and would inevitably move upwards.

Mr Sheehy stressed asset quality in the bank was very good.

The bank’s focus on relationship banking, where over 1,500 relationship bankers are in place, allows it to focus on doing increasing business with its existing customer base.

In the housing market, AIB has more than 17% of the mortgage market and has retained market share despite stiff competition.

It has no concerns about its loan book, but the bank acknowledged the Central Bank has a duty to express concern over our rising debt.

Mr Sheehy also said Ireland had a strong savings culture, twice as good as Britain’s and about five times that of the US.

From a housing bubble perspective he pointed out that the Loan to Value Ratio of AIB’s client base is 70/71% and falling.

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