First Maryland Bancorp, AIB's US subsidiary, has recorded a 56 per cent rise in pre-tax profit to $84.7 million (£57.9 million) from $54.3 million in the three months to September 30th 1997.
Most of this growth was due to a profit from the sale of credit card loans and a contribution from Dauphin Deposit Corporation, which was acquired in July. Excluding these items indicates an underlying third-quarter growth of 10 per cent in net profits from both First Maryland (FMB) and Dauphin.
The integration of First Maryland and Dauphin was progressing according to plan, said Mr Denis O'Leary, group chief accountant. It was on track to take some $48 million out of costs over a two- year period. "Some of the savings will be reflected in the fourth quarter," he said. The integration was "going very well". In effect, it involved "building a new bank . . . taking the best of FMB and Dauphin". AIB was "very positive about Dauphin; there is a lot of potential".
Mr Tom Mulcahy, AIB group chief executive, said that following the completion of the Dauphin acquisition, "we are now positioned to take advantage of our leading market share in the Harrisbury/Baltimore corridor while continuing the process of integrating the Dauphin franchise".
While Dauphin recorded an underlying growth of 10 per cent in net profit to around $28 million, there was virtually no contribution after the funding costs were taken into account. The funding of the capital would have amounted to about $15 million and the goodwill came to around $13 million.
The parent, AIB, will take the goodwill to its reserves so that will not impact on the profit and loss account. The funding costs will involve only the cash element of the consideration; these would be annualised at around $12 million. The latest results include a capital gain of $28.2 million from the $360 million credit card loans' sale. However, First Maryland had to contend with a rise in provisions for credit card loans from $2 million to $l7.4 million, reflecting problems in the US credit card business. Noting that First Maryland did not sell the credit card loans because of the problems, Mr O'Leary said it had "tightened up the criteria" for credit cards and would be "serving our own customer base". FMB's net interest margin was unchanged at 4.36 per cent. However, Dauphin's was lower.
The latest results are not directly comparable because of the first-time contribution from Dauphin. Total income rose from $178.5 million to $283.3 million, mainly reflecting the Dauphin deal. By far the largest contributor was interest and fees, which increased from $130.6 million to $200.5 million. FMB said the results showed a strong underlying performance, with 14.5 per cent growth in retail lending, an 8.5 per cent increase in commercial lending since December 1996, and "good growth in deposit service charges (up 12 per cent) and trust and advisory fees (up 22 per cent) over the comparative period in 1996".
The asset quality remained strong, the bank said. The percentage of non-performing assets to total assets amounted to 0.52 per cent. And non-performing loans of $72 million were covered 244 per cent by total provisions of $175.5 million. First Maryland, with headquarters in Baltimore, owns First National Bank of Maryland, Dauphin Deposit Bank, the York Bank and First Omni Bank.
