AIB expects profit growth despite M&T Bank fall

AIB expects its earnings to grow by a low double digit percentage this year despite a fall in profits at M&T Bank in the US where it has a 23.5% stake.

Chairman Dermot Gleeson told shareholders at AIB’s AGM in Galway yesterday that their share of M&T Bank’s after-tax profit in 2006 amounted to €141 million, down 4% when compared to 2005.

Buffalo-based M&T, whose other main shareholders include Warren Buffett’s Berkshire Hathaway said last month first-quarter profit fell 13% amid weak demand for mortgages.

Mr Gleeson said that while M&T’s earnings drop was part of a ripple-effect from problems in the subprime lending market in the US, M&T did not itself provide home loans for people with poor credit records.

“These difficulties have had a ripple-effect on the rest of the residential mortgage market place, including the Alt-A loan market in which M&T has participated,” he said. “Unfavourable market conditions for the sale and repurchase of such loans in the first quarter of this year impacted M&T’s portfolio.”

Just 10% of AIB’s profits were generated in the US last year compared to 19% in 2003.

Half of the bank’s profits are generated in Ireland, compared with 64% in 2003. The main gain was in Poland where 13% of AIB’s profit is generated, compared with 3% in 2003.

Mr Gleeson said: “Our Irish business continues to perform well in an economy that remains strong. Economic growth is moderating but to a pace that is likely to remain above the European average and to a level which continues to represent a good environment for the bank. Our UK, Poland and Capital Markets businesses are all performing well.”

This year’s AIB AGM took place in Galway, having taken place in Cork and Belfast over the last two years. It is expected to take place in Dublin next year.

A crowd of about 200 turned out yesterday for the meeting. Attendees were shown a short video on AIB’s presence in the Polish market and their links with Polish bank BZWBK.

In 2006 the bank generated profit of €2.2 billion after tax, up 57% on 2005.

The main reasons for this were the sale and leaseback of a number of their properties and the sales of their Ark Life business.

Mr Gleeson also said there was no chance of AIB selling off Goodbody Stockbrokers to the managers.

AIB shares closed down 31 cent at €22.26 in Dublin yesterday evening.