AIB delivers 40% rise in profits to a record €1.4 billion

AIB posted a 40 per cent increase in pre-tax profit to a record €1.4 billion last year, beating market expectations. It said yesterday it expected another buoyant year this year.

AIB, the country's largest bank, announced earnings per share of 133 cent, a 13 per cent increase on 2003, and ahead of analysts' forecasts of 126 cent. It expects to report EPS of between 142 and 144 cent this year as loan and deposit growth remain strong.

The bank announced a final dividend of 38.5 cent per share, bringing the total dividend to 59.4 cent or a 10 per cent increase on 2003.

The results were given a once-off boost of three cent per share from a lower tax charge and technical adjustments in the bank's life assurance subsidiary, Ark Life. But the bank also fired strongly on all cylinders to deliver an 11 per cent rise in total operating income to €3.26 billion.

Both loans and deposits grew strongly last year, increasing by 28 per cent and 14 per cent respectively, so that by year-end AIB had €4 billion more in deposits than at the start of the year while loans were up by €7 billion.

Net interest income rose by 11 per cent to €2.04 billion but the bank's non-interest income also performed strongly, accounting for nearly 38 per cent of total income at €1.23 billion.

"We had a great blend of earnings, strong profit growth across all geographies and a wide range of market share gains," chief executive Michael Buckley said.

A breakdown shows that AIB's banking operations in the Republic again delivered a strong performance, with profit up by 11 per cent to €695 million.

If the €50 million cost incurred on the foreign exchange overcharging issue is stripped out, profits were up 19 per cent, as loans increased by 30 per cent and deposits rose by 16 per cent. Ark Life also performed strongly, reporting a profit of €72 million or an 18 per cent increase on 2003.

"Our business pipelines going forward in this country are as strong, if not stronger, than this time last year," Mr Buckley said.

The bank's operations in Britain and Northern Ireland also enjoyed a good year, posting a 16 per cent increase in profits to €289 million as AIB expanded its business banking offering into the mid-market sector in Britain and gained market share in both mortgages and business lending in Northern Ireland.

The bank's capital markets division was another strong performer, increasing profits by 30 per cent to €329 million on the back of "exceptional growth" in corporate banking and strong profit growth in its treasury and investment divisions.

"Goodbody had a terrific year while their private-client business had an absolutely stonking year," Mr Buckley said of the bank's stockbroking operation.

AIB's Polish operations posted a 135 per cent increase in profits to €80 million, while the contribution from its US associate, M&T, rose 15 per cent to €195 million.

The bank drove its cost/income ratio down by two percentage points to 56.3 per cent, while non-performing loans declined to 1.2 per cent of the total from 1.4 per cent a year earlier.

Net interest margins remained under pressure, falling by 28 basis points to 2.42 per cent as loan growth outpaced that of deposits. But the bank said there were signs this was starting to abate and signalled it expected margins to fall by 20 basis points this year. AIB shares closed 10 cent higher at €16.30 yesterday.