AIB said today that the cloudy economic outlook and volatile equity markets will adversely affect profit margins.
The bank's US business has seen a fall-off in business since the Allfirst trading scandal earlier this year.
In its final trading update before releasing its results, AIB said that its Irish business remains strong and overall loan growth of about 16 per cent is expected this year. But it warned that demand for equity linked savings has been materially reduced by adverse market conditions which will affect Ark Life's revenues.
Deposits in the Irish retail business will increase by between eight and nine per cent, and mortgage lending should grow by about 25 per cent, the bank said.
Overall some attrition due to the product mix and the effect of low interest rates on deposit margins is being broadly offset by good interest rate management. The group expects the net interest margin for the year to be around three per cent.
In the US, commercial and corporate loan volumes are down, following the Allfirst trading fiasco. The bank has restructured it investment portfolio to lower risk securities and reduced the overall portfolio by approximately $1 billion.
The proposed merger of Allfirst Financial with M&T Bank should be completed in the firs quarter of 2003, pending regulatory and shareholder approvals.
In its economic outlook, AIB said the global economy remains weak and estimates Irish GDP of three per cent this year. But the bank warned that the waning competitiveness of the Irish economy must be addressed to ensure future prosperity.