AIB raises forecast after six-month profits top €1.2bn

Wed, Aug 2, 2006, 01:00

Allied Irish Banks has upped its forecast for the year after pretax profits for the first six months topped €1.2 billion. Claire Shoesmith reports.

The bank, which has operations in Ireland, the UK, Poland and the US, said yesterday it expected earnings per share to grow by 20 per cent this year, compared with the original forecast for growth in the mid-teens.

Adjusted earnings per share increased 29 per cent, to 93.7 cents in the six months to the end of June, from the year-earlier period. Pretax profits from continuing operations were €1.2 billion, up from €825 million in the same period last year. In both cases last year's figures were adjusted to strip out the results from Ark Life, which AIB sold to Hibernian earlier this year.

Operating costs were up 11 per cent to more than €1 billion, a gain the bank attributed to the fact that it was investing considerable amounts into the long-term development of the business. Costs for the full year will be 9- 11 per cent, with as much as 3 per cent stemming from regulatory issues.

Chief executive Eugene Sheehy said the results reflected "buoyant well-spread growth" in all of the bank's markets. "While exceptionally good asset quality complemented the first-half results, the strong operating performance and customer demand underpins confidence in the future growth and resilience of our business," he said.

AIB raised its interim dividend by 10 per cent. The shares closed up 29 cent at €19.22.

Analysts welcomed the results, which came in ahead of forecasts, with all the main brokerages planning to upgrade their numbers. In a note to investors, Eamonn Hughes, an analyst at Goodbody, said he would raise his forecast for earnings per share by about 5 per cent for both this year and next.

AIB's Irish division, which now accounts for 47 per cent of total profits compared with 58 per cent in June 2003, saw its profits rise 19 per cent to €453 million. Loans increased 33 per cent, while deposits were up 20 per cent. "We are still very much an Irish bank with an improving international business," said Mr Sheehy.

In the UK, profits increased 18 per cent to €184 million, with loans and deposits up 27 per cent and 21 per cent respectively. British profits were up 27 per cent, while profits in Northern Ireland were 9 per cent ahead.

In Poland, pretax profits climbed by 62 per cent to €114 million, helped by a pick-up in retail borrowing and increased demand for business lending. Speaking at the results presentation Mr Sheehy reiterated earlier comments that AIB had no plans to make an acquisition in Poland. He said the bank's own business in the region is perfectly capable of competing effectively and operating efficiently as it stands. As a result he said it was unlikely AIB would be interested in purchasing the chain of BPH banks in Poland, for which UniCredito is seeking a buyer.

The capital markets division also improved its performance by moving some bad loans off its books, as did US unit M&T.

In the area of mortgages in Ireland, the bank's growth is behind the rest of the sector, a fate Mr Sheehy attributed to the fact that it is not offering 100 per cent mortgages on a wide scale. However, he said the bank is confident it can hold and improve its market share. He also said interest rate rises will moderate house prices but declined to give any forecast for future prices.