British arm boosts bank’s profits

PROFITS at AIB’s Irish and British banking arms drove earnings higher last year, according to the bank’s annual results.

While earning per share growth for 2003 was only 3%, profits at its core banking operations here and in Britain were significantly ahead on 2002.

Pre-tax profits in Ireland were ahead by 14% on the previous at €637 million with €577m of this coming from the retail banking arm and a contribution of €60m from its pensions and insurance unit Arklife, which saw a 40% rise in sales in the second half of 2003.

AIB chief executive Michael Buckley said the bank recorded strong lending growth across its operations with a 34% rise in mortgage advances compared to a 26% increase for the overall market. He said the surge in mortgage lending had continued so far in 2004, despite some slowdown in house price growth. Business and consumer loans were up by 25% on 2002 and the bank expected to ramp up its lending to consumers.

In Britain and Northern Ireland, profits were up by 15% on the 2002 figure at €252m. Lending increased by 25%, while the bank's cost/income ratio fell to 49%.

AIB said its business banking unit in Britain had another excellent year and it was looking to expand this operation by opening new business development centres across Britain.

However, AIB's Polish subsidiary Bank Zachodni WBK saw a €20m fall in profits as the economy there continued to struggle. AIB said it had implemented a cost-cutting programme at BZ WBK, which had seen dozens of branches closed and 1,700 jobs axed.

Non-performing loans as a percentage of the total loan book fell 4% to 11%, compared to a 20% industry average in the country.

Mr Buckley said there were no plans to sell off BZ WBK and there were signs of the Polish economy was picking up, which would be positive for the bank.

AIB Capital Market, which includes Goodbody Stockbrokers, its corporate banking, treasury division and its remaining US business booked a 12% rise in profits to €258m, excluding the loss on the disposal of fund manager Govett to Gartmore Investment Management.