AIB dividends set to rise by 12%

AIB SHAREHOLDERS should see dividends increase by 12% when the company announces its results for the year ending December 31 2002, stockbrokers Dolmen Securities predict.

However, the biggest event of 2002 for AIB was in February, when it uncovered the activities of rogue trader John Rusnak, who cost AIB 789m in fraudulent deals.

Dolmen expects profit before tax to hit 1,420 million, up 4%, earnings per share 1.20 and dividends to hit 49c up 12%.

“Such a solid result is likely to be have been driven by continued volume growth and robust asset quality at its Irish and UK operations, as well as earnings growth from the corporate banking and treasury activities of its capital markets division.

The results’ announcement may also be accompanied by the commencement of a signalled $450m share buyback programme.

“The majority sale of Allfirst to M&T Bank Corporation, due to complete by the end of March, will boost AIB’s Tier 1 ratio to over 8%, even allowing for this $450m buyback programme,” Dolmen said.

AIB’s earnings will start to benefit in 2003 from two different sets of merger synergies, Dolmen predict. In the second half of 2003, cost savings from the merger of its two Polish operations, BZ and WBK, will start to feed into earnings, with a full-year earnings boost in 2004.

AIB’s earnings will also start to benefit in 2003 from synergies generated from the merger of Allfirst and M&T Bank, as a result of AIB’s 22.5% shareholding in the merged entity, with once again the full-year earnings boost being felt from 2004.

“Therefore, following the 16% fall in AIB’s share price since November, we now upgrade our recommendation again from hold to buy,” Dolmen advise, putting a 12-month price target for AIB of 14.30, a 19% upside. NCB, in a note issued to clients in advance of tomorrow’s profit announcement, points out the company’s trading statement on December 4 was in line with market expectations and NCB expect loan growth in the Republic to be 16%, about 25% for mortgages, and about 13% for non-mortgages. Deposit growth of 8%-9% is expected, partly offset by a weak second-half performance from Ark Life.

NCB predict loan growth of 17%-18%, while deposits are expected to grow 13%-15%.

In the United States, the loan portfolio is likely to have fallen 4%-5% in 2002, following a long-term trend of under-performance.

NCB says a restructuring of the securities portfolio has produced a gain of around $70m in Q4 2002.

Capital markets performance has been solid, in line with the first half.

Corporate banking and treasury activities continue to be the main contributors and drivers of the business.