AIB shares slide despite strong growth
AIB shares were down 1.5% at €18.36 by noon but rallied to fall 21 cents yesterday to close at €18.43, a 1.13% fall. This was after telling shareholders it had recorded a strong 2005 and expects full-year earnings per share to be at the upper end of the 140c-142c range it projected in August.
The stock has advanced 20% this year and yesterday fell from a record high hit on Monday. Full-year figures are due to be released on February 22.
Merrion Stockbrokers John Bowe hit the nail on the head when he said: “The market may view this as slightly disappointing as upgrades were expected.”
London-based brokerage Keefe, Bruyette & Woods noted the bank’s update was largely in line with previous guidance.
“We believe an element of disappointment in not exceeding the previous guidance may trigger some profit taking,” it said in a note to clients.
In a key reference to its partnership with US Bank M&T in which it has a 22.5% stake AIB said: “The relationship continues to flourish and we expect this to be again reflected in its profit contribution this year.”
This language indicates that AIB chief executive Eugene Sheehy, a former M&T executive, may not have plans to exit AIB’s massive US investment in the short term, as expected by some commentators.
In the trading update, Ireland’s biggest company by market value said it expected income to grow faster than costs in all its units in 2005, with costs to rise by around 7% to 8%.
“Earnings momentum is driven by our franchises being located in outperforming economies which underpin high volume, high-quality growth,” AIB said in the statement.
“Momentum is further assured by very robust asset quality.” AIB predicted a 25% increase in lending in Ireland as well as in Britain and at its capital markets division. Mortgage lending growth at home is “in line” with the market, the bank said.
The company appears to believe that it has come through the difficulties from the uncovering of several overcharging incidents in the Irish market.
“The effectiveness of our customer relationship management approach is underlined by the high teens deposit growth anticipated this year,” the company said.
