AIB exploring ways to further boost earnings

AIB’S top management team may be new to the job, but the message from the bank was still the same yesterday.

After delivering bumper full-year results, chief executive Eugene Sheehy and finance director John O’Donnell said they expect the bank to deliver “low double-digit” earnings per share growth in 2006.

Profits in 2005 of €1.7 billion were in line with market forecasts, but many analysts were disappointed.

NCB Stockbrokers said: “Overall, the results were largely as expected at the headline level. However, more substantial upgrades to our forecasts appear unlikely (at this stage) which may disappoint.”

Davy Stockbrokers said it did not expect to “dramatically” alter its profits expectations.

The bank’s shares, which have gained 12% in the past month, gained less than 1% yesterday despite profits running at €4.6 million a day.

Briefly outlining plans for the year, Mr Sheehy and Mr O’Donnell said the bank was working on several fronts to boost earnings.

On the consumer side, a review of product offerings is underway and free personal banking may come in. Also, the bank is looking at new ways to ensure it sells more products to existing customers through its branches and over the phone and internet.

While there may be competition in the form of Bank of Scotland and Danske Bank (owners of National Irish Bank), AIB was not afraid to take them on. For every customer who has switched accounts from AIB, it had signed up 10 new ones.

For the business market, its plans new offices around the world, including Sydney, where it hopes to increase investment banking revenues.

Having agreed to sell its life insurance and pensions arm Arklife to Hibernian, AIB will receive around €205m cash and a 25% stake in the new business. Although the deal will dilute 2006 earnings, the absence of a banking levy and further profits from the sale and leaseback of its Bankcentre head office are in the pipeline. Mr Sheehy also quashed speculation about the future of its 22% stake in M&T Bank in the US. The stake is generated profits of around 10% a year and has proved to be an excellent investment and there is no pressure to take a strategic decision on its future, he said.