AIB's Polish subsidiary's profits fall

Restructuring costs and lower deposit margins made a sizable dent in profits at AIB's Polish subsidiary, WBK, over the third quarter.

Results released yesterday show that WBK's pre-tax profits fell back by 14 per cent to 229.1 million zlotys (€50 million) when compared with the same period of 2002. After-tax profits nearly halved to 37 million zlotys, far below consensus expectations of 52 million zlotys.

In the same period last year, the bank's net profit stood at 71 million zlotys, partly boosted by a substantial dividend from its minority-owned life insurer. This year, the dividend was booked in the second quarter.

"A bigger tax burden looks to have hurt their bottom line. The bank might have been cleaning up its books, which led to higher tax payments," said Mr Artur Szeski, an analyst at Pekao brokerage.

"Otherwise the results are generally okay," he added.

The effective tax rate reached nearly 41 per cent in the third quarter against 17 per cent last year. Interest rates have meanwhile fallen dramatically, thus squeezing WBK's large deposit business.

Mr Dave O'Callaghan, AIB's group investor relations manager, said the quarterly performance needed to be placed in the context of a gradually improving Polish economy and a costly restructuring at WBK.

The bank launched plans to shed almost 1,000 jobs in July in an effort to reduce overheads.

Mr O'Callaghan pointed to encouraging signs within both mortgage lending and corporate lending at WBK, adding that AIB was "very confident" about the potential of its holding. - (Additional reporting, Reuters)