AIB shares fall ahead of agm on 'dull' statement

AIB shares slipped back 11 cents to close at €15.14 on small volume profit-taking after a trading statement which contained no surprises. The group said it would meet its target of "mid-single digit" growth in earnings for the six months to end-June and for the full year. In a trading statement issued in advance of today's annual general meeting in Belfast, AIB said the strong performance reported at the begining of the year was continuing.

Admitting "some reduced business momentum" immediately after the foreign exchange fraud at its US operation in which the group lost $691 million (€743.8 million), AIB said its business was "now steadily recovering from the damage inflicted by the fraud". AIB shares have recovered strongly from the €11.35 price after the fraud revelations and, at €15.14, are now trading well ahead of the pre-revelation price of €13.65 and not far off their 2002 high of €15.70.

Analysts described the trading statement as "dull" and containing nothing unexpected. Merrion analyst Mr Seamus Murphy said he would marginally upgrade his 2002 earnings forecast by one cent to €1.23 per share but would not change his "hold" recommendation. The statement was reassuring and did not raise any new issues, he added.

Describing the statement as upbeat, Davy analyst Mr Scott Rankin said he was not increasing his 118.5 cents earnings per share forecast and would like to see a second quarter of US loan performance making any forecast change.

As directors face shareholders at today's a.g.m., they will set out changes decided by the board following the Allfirst fraud and the report of its investigator Mr Eugene Ludwig and the measures required by banking regulators in the US and Ireland.

A comprehensive review of its risk and governance operations is under way at the bank. "We are determined to execute this programme speedily and to validate that our risk organisation and governance culture meet the highest expectations of our shareholders and reglulators," AIB said in its statement.

Stating operating efficiency was a priority, AIB said it expected cost growth to moderate to around 6 per cent this year, though the first-half growth figure would be higher. AIB will announce results for the six months to end-June on July 31st.

The group is targeting high single-digit growth in non-interest income this year - driven by corporate banking fees, electronic banking income in Poland and Community Counselling Services fees in the US on the banking side. But income from equity-linked products and asset management revenue "continue to be constrained by difficult investment markets", AIB said.

Breaking down its trading outlook by geographical market, AIB said forecast 2002 economic growth of 3.5 per cent created a positive operating environment in the Irish market. It expects to achieve "low teens" growth in Irish loans in 2002 while deposits were "increasing in line with expectations". Lending demand was strong across a range of corporate and commercial sectors in the Irish market while its home mortgage activity has doubled. With more than 277,000 accounts opened under the Government Special Savings Incentive Accounts scheme, AIB said it had exceeded its traditional share of the deposit market.

In the UK, AIB deposits were increasing "at satisfactory levels". The bank's business pipeline in Great Britain was at record levels driven by strong commercial and corporate demand while, in Northern Ireland, commercial and retail lending activity was ahead of expectations, AIB said.

In the US, Allfirst was "showing resilience and encouraging trends" following the foreign exchange debacle. Average core deposits were up on the previous comparative period and "have remained broadly stable since the announcement of the fraud", AIB said. Stating loan volumes were in line with expectations, the bank forecast "probable low single-digit percentage growth" for 2002.

AIB said it expected operating profit to improve significantly in Poland where prevailing economic conditions remained difficult. Lower underlying loan loss provisions and its cost-reduction programme are expected to help the bottom line.