AIB is aiming to maintain low double-digit growth in earnings per share, chief executive Mr Tom Mulcahy said as he reported better than expected first-half results with a 12 per cent rise in profits to €609 million (£483 million).
All of the group's divisions produced good profit growth for the six months to end June. Retail banking in the Republic and the Polish operation were the strongest performers, with increases of 24 per cent and 82 per cent respectively. Some 42 per cent of group profits came from the domestic market, down from 45 per cent.
Boosted by good growth in loans; in fee and commission income and rising business volumes which offset some tightening in net interest margins, the results were ahead of the €585 million and €596 million forecast range and the share price responded, gaining 33 cents to close at €9.18.
Mr Mulcahy said the results demonstrated the group's ability to compete successfully against new low-cost entrants to the domestic market, while "our e-business developments show our capability to meet the changing market conditions we face".
With profits after tax up 14.8 per cent to €442 million and earnings per share 13 per cent ahead at 48.5 cents, shareholders are to get a 14 per cent increase in their interim dividend with a payment of 13.5 cents per share.
Core operating profit before provisions was 18 per cent ahead at €676 million, indicating good revenue growth and cost control. The group doubled its bad debt provisions to €70 million or 0.3 per cent of average loans from 0.2 per cent.
A breakdown by division shows that the developing Polish operation produced the strongest profit growth with an 82 per cent rise to €43 million. When the Bank Zachodni acquisition is stripped out, underlying profits rise by 31 per cent.
Profits at the AIB Bank division - retail and commercial banking operations in the Republic, Northern Ireland, Britain, Channel Islands and the Isle of Man as well as branded finance and leasing and life and pensions operations - were 20 per cent ahead at €323 million. Within that division, profits from retail banking in the Republic were up 24 per cent, boosted by strong growth in lending, leasing and credit card business and profits from the Ark Life operation.
In Northern Ireland, profits at First Trust were up 15 per cent while strong growth in lending to and fees from small and medium-sized business customers boosted profits in Britain by 20 per cent. Profits at the Capital Markets division were 12 per cent ahead at €90 million helped by strong growth at Goodbody Stockbrokers and in treasury and corporate banking. At the US division headline profits were up 15 per cent to €164 million but the underlying rise was just 5 per cent when the impact of currency conversion is stripped out.
At group level net interest income was up 16.8 per cent to €985 million though the underlying rise was 5 per cent when the impact of currency translation and the Bank Zachodni acquisition in Poland are stripped.
Competition in the retail markets in the Republic and the US meant a 0.17 of a percentage point fall in group net interest margin to 3.10 per cent. In the domestic market the margin slipped to 2.73 per cent from 3.00 per cent at end June 1999 and 2.94 per cent at end December.
Non-interest income was up 25.2 per cent to €611 million, with a rise of about 14 per cent on a constant currency basis.
The ratio of interest income to other income improved to 38.3 per cent from 36.7 per cent. The underlying rise in total income was 9 per cent.
Group costs were up 21.7 per cent to €924 million, but the increase was 6 per cent when the impact of currency factors and the BZ acquisition were excluded.
Increased business activity, network expansion in Poland and technology and e-business investment pushed up costs but good income growth meant that the group cost income ratio remained at 57 per cent.
In AIB Bank the ratio improved to 52 per cent from 54 per cent. Stripping out a profit of €2 million on the sale of property and income of €4 million from associates, the core underlying operating profit was 11.7 per cent ahead at €603 million. At 27.5 per cent AIB's effective tax charge was down from 28.9 per cent.
At the end of June group loans were 20 per cent ahead at €42.8 billion of the June 1999 figure and 9 per cent up on the end December 1999 level. Customer accounts were 20 per cent up at €46.5 billion on the June 1999 figure and 7 per cent up on the end December level.
