Profits are running well ahead at AIB in the current year with the bank reporting strong business volumes in the first half. While profit margins will be tighter in the current year, the bank is expecting to achieve its target of low doubledigit growth in earnings per share this year, it said yesterday.

AIB reported a 10 per cent increase in pre-tax profits to €1.1 billion (£866 million) in 1999 with indications that the rate of increase would be slightly higher this year.

In a statement issued ahead of briefings with analysts, AIB said asset growth remained strong across the group's franchises with business volume expected to increase by more than 15 per cent over the 12 months to the yearend.

Growth in its Irish operations is expected to be about 25 per cent for the 12 months with its businesses in the UK likely to deliver mid-teen increases. The US division, which includes Allfirst and AIB branded businesses, will achieve single-digit loan growth this year.

AIB has indicated that the group's net interest margins will fall from 1999 levels of 2.97 per cent by 0.02 of a percentage point largely due to competitive pressures.

Growth in non-interest income has remained strong since the beginning of the year across the group and is expected to be around 10 per cent compared with the first half of 1999. The franchises achieving the strongest performances this year include, Ark Life, foreign exchange commissions, stockbroking and corporate banking fees, according to AIB.

The bank has signalled a further decline in the cost to income ratio of AIB Bank and Allfirst driven by greater efficiency and volume growth. This is likely to be offset, however, by a higher ratio in Poland, reflecting the inclusion of Bank Zachodni for the full period and continuing investments in technology and network development in that division. Underlying growth in group costs remains targeted at midsingle figures for the full year.

AIB insists asset quality is strong across all its franchises with the provision for bad and doubtful debts likely to remain at the same levels as in 1999. The bank will announce its half-year results on August 2nd.