BANK of Ireland was more profitable after tax than AIB in the last financial year, when exceptional charges are excluded.

But AIB reported higher pre-tax profits than its smaller domestic competitor.

Bank of Ireland recorded a higher return on average assets at 1.25 per cent for the year to end March 1996, compared with a return of 1.09 per cent at AIB for the year to end December 1995.

Return of assets shows the profitability in relation to the assets employed in a business.

Bank of Ireland benefited from having a smaller asset base than AIB and a lower tax charge because of the tax benefit of previous losses in the US.

The measure is based on profits after tax and minority interests profits attributable to shareholders.

A comparison of return on equity, or shareholders' funds, at the banks shows that Bank of Ireland fared better than AIB.

It reported a 24.9 per cent return on equity employed, compared with 19.4 per cent at AIB.

On the earnings per share measure profits after tax divided by the number of shares in issue Bank of Ireland recorded a higher return at 51.6p before the exceptional charge and 41.5p after the charge, compared with 34.2p at AIB.

On this measure, Bank of Ireland benefits from having significantly fewer shares in issue than AIB 480 million compared with 673 million at AIB.

AIB reported higher pre tax profits than Bank of Ireland last year. AIB reported pre tax profits of £373 million the rise of 9.2 per cent boosted by cost control, lower bad debts and dealing profits.

Bank of Ireland reported a 13.6 per cent rise in pre-tax profits to £364 million before the exceptional charge of £48 million for restructuring its US operations.

AIB is a bigger bank than Bank of Ireland, with just under £3 billion more in assets.

AIB's asset base grew faster than Bank of Ireland's last year. Its total assets increased by 13.4 per cent, compared with growth of 12.2 per cent at Bank of Ireland on a smaller base.

Lending to customers grew much faster at AIB last year, with a 12.9 per cent increase, or £1,519 million in new loans. This compared with new loans of £838 million a Bank off Ireland or an increase of 7.8 per cent.

But on the deposit side of the balance sheet, Bank of Ireland recorded a stronger rise in customer deposits with an increase of 13.9 per cent or £1,672 million in customer deposits. At AIB, customer deposits increased by £886 million or 5.6 per cent.

In intensely competitive core lending and savings markets, net interest margins or profits from lending and funding operations tightened at both banks.

AIB's margin narrowed to 3.82 per cent while Bank of Ireland tightened to 4 per cent.

Margins on core business were even tighter but the overall group figures were helped by strong treasury performances.

One of the key differences between the banks was in the geographic spread of their operations with Bank of Ireland heavily concentrated in the domestic market while AIB's operations were more widely spread (see Table).