26th Apr 2006 12:04
Allied Irish Banks PLC26 April 2006 EMBARGO 12.00 26 APRIL 2006 Allied Irish Banks, p.l.c. Annual General Meeting Chairman Mr. Dermot gleeson's Speech ("AIB") (NYSE: AIB) Chairman's speech to AIB Annual General Meeting inRochestown Park Hotel, Douglas, Cork on Wednesday, 26th April 2006. Click here to download accompanying slides http://www.rns-pdf.londonstockexchange.com/rns/0243c_-2006-4-26.pdf Check against delivery Good morning ladies and gentlemen. My name is Dermot Gleeson and I am theChairman of the Board of AIB and it is my pleasure to welcome you to the 39thAnnual General Meeting. It's a very great pleasure to be in Cork. Many of you will of course know that the largest of the three constituent banksthat went to make up AIB when it was founded 40 years ago this year, was theMunster and Leinster bank which was headquartered in Cork. Probably fewer of you know that the oldest of the three that went to make upAIB, the Provincial Bank, opened its first branch in Cork on the South Mall on 1September 1825. Outside of the Dublin area, Cork and its surrounding areas have by far thelargest concentration of AIB shareholders in the country. An estimated 20% ofall our shareholders world wide live in Munster, so when a shareholder at lastyear's AGM suggested it was time to return to Cork, as someone that was born inthe Western road, I needed very little persuasion and it is a great pleasure tobe here. I want to welcome shareholders who I have met at previous AGMs, shareholders whomay not have attended in recent years and particularly to acknowledge thepresence of AIB pensioners or the families of AIB staff, many people with longand valued connections with the bank. You are all very welcome. Let me start by introducing my colleagues on the platform. This is JohnO'Donnell who took over as Group Finance Director last September and became amember of the Board last January. This is John's first AGM in that capacity andhe is very welcome indeed. Eugene Sheehy took over as Group Chief Executive last July and I am very happyto introduce Eugene to his first AGM in that capacity. I am also joined by Liam Kinsella, the Secretary of the Company, and by BryanSheridan, the Group Law Agent. Article 63 of our Articles requires a quorum of 10 and I propose dispensing withthe reading of the Notice convening the meeting. Copies of the 2005 Annual Report and Accounts have been sent to you with theNotice of the meeting and copies of those documents are also available on theway into the meeting. We did a small survey a few years ago of people who attended the AGM and 20% ofour attendees, were first time attenders. We found that the typical person who attends the AGM holds between about 4,000and 5,000, shares although worldwide the typical shareholder holds about 10,000shares. We have 83,000 shareholders worldwide but only a tiny proportion, less than 1%of shareholders, get to the AGM. One of the purposes of AGM as set down in the Combined Code on CorporateGovernance, is that it be used as a means of conducting effective communicationwith shareholders. That involves people making their contributions as succinctly as possible andacknowledging the rights of fellow shareholders to be heard. Shareholders in the room will probably range from those who hold 1 or 2 sharesto those who hold perhaps 100,000 shares. In the last two years we have adopted the procedure of allowing shareholders tosubmit questions in advance and this has proved helpful in determining thepriorities which shareholders have in terms of what they want from the AGM. We have received something like 80 questions and will certainly answer the oneswhich are most commonly repeated, because they represent the major concerns ofthe shareholders present. We almost certainly will not be able to answer all the questions, but anyunanswered questions will be the subject of written answers to the shareholdersconcerned. One of the principal complaints, in fact the principal complaint, which oursurvey disclosed is that the AGM has on occasion gone on too long. We want to make sure that we strike the right balance between allowing questionsto be asked and answered and finish conducting the AGM in a prompt and efficientway in accordance with the wishes of the majority. My principal job is to ensure that the AGM is conducted in an orderly andefficient way. I now move to the first formal part of our proceedings which is the reading ofthe Auditors Report to the members and I call upon Mr Paul Doby of our auditorsKPMG to read the Auditors Report. Section 2 (After Paul Doby finishes) At the AGM, shareholders have made clear that they like to receive anexplanation and an account of how the business is doing. An extensive account is of course available in the Annual Report and a smallerand more accessible summary is available in what we call the Summary Reviewwhich provides a useful birdseye view of where the bank is at this point intime. Looking back then at AIB in 2005 I am glad to say that the story is a verypositive one and has continued a good track record in delivering excellent valueto you our shareholders. In terms of total shareholder return, AIB delivered 22% in 2005. Let me try and give you a snap shot of the way the business has been going. Let's start with the most conventional or traditional way of gauging how we aredoing that's to look at after tax profit, how much money is left when we havepaid all our taxes. (Slide 1 - After Tax Profit) This slide shows the story over the last 5 years. The 2001 figures are shown before and after the effect of the Allfirst fraud. In 2005 we made €1,387m after tax. And a second way of looking at progress is earnings per share EPS. (Slide 2 - Adjusted Earnings Per Share) How much profit did we make for each share that you own? In other words, takethe average shares during 2005 (865 million) and spread the profit over themall. The adjusted earnings per share for 2005 were 145.9c per share. A third way of checking how the business is doing is to look at the trend inincome versus costs. (Slide 3 - Income/Cost Growth Trend) A key relationship to look at, is it your cost or your income that's risingfaster? What this slide shows is that the gap between income and costs is widening; thatthe rate of increase of our income is greater than the rate of increase in ourcosts. In 2005 the rate of increase in our income was 5 percentage points higher thanthe rate of increase in our costs. So, what do we do with the profits we're generating? Bank profits are a frequent topic of public comment and are frequentlymisunderstood. Over 90% of our profit goes in one of three directions. (Slide 4 - How The Profit Was Used) 32.4% of our total profits goes to paying dividends to shareholders. But sometimes I think the public needs to be reminded that it is not justindividual shareholders like yourselves. It is also pension funds. There is hardly a Pension Fund in Ireland thatdoesn't hold AIB shares. The vast majority of Irish pensioners are indirect beneficiaries of theseprofits. There are almost half a million people in private sector pension schemes andthose schemes depend for their viability on investments in businesses such asthe Irish banks in particular such as AIB the largest of the Irish banks. That's the first third of our profits. 42% of our profits are retained and kept to grow the business. In 2005 we retained about half a billion Euro and that's going into what we callthe bank's capital. In simple terms (although this is subject to some complications) for every Euroof capital that we have, we can loan out about 12 Euro, so when we retain half abillion Euro it allows us to make further loans of €6bn. Finally, the third major destination for our profits is in taxes and in 2005that was 18.3% of our profits - €322m was paid in taxes. Well over €1m per working day. Another way of looking at our profit is profit by divisions - the differentareas of the banks activity. (Slide 5 - Profit Growth by Division) This slide shows profit growth by division and you will see that happily in 2005everyone of the divisions increased their profit over 2004 figures and you willrecollect that 2004 was itself a very good year. I think at times most of the divisions are self-explanatory (ROI and GB/NI,Poland) with the possible exception of Capital Markets. That's the name we give to a collection of very important businesses that havedone extraordinarily well over the last 5 years. And because sometimes I think people find that description slightly puzzling, Iwant to try to show the businesses that make up the Capital Markets division. About 55 per cent of Capital Markets profits are made from Corporate Bankingrelationships with leading Irish and international corporates. Global Treasury primarily supports banking relationships by meeting the Treasuryneeds of our clients. We have dealing rooms in Dublin, London, Manchester, NewYork and Poland. Investment Banking comprises a number of businesses including Corporate Finance,Investment Managers and Goodbody Stockbrokers. The home and the heart of the bank is of course in the retail bank in theRepublic of Ireland. 2005 was a year in which we have faced increased competition especially in ourhome markets and you will have seen plenty of publicity about new players in ourhome market. (Slide 6 - Branch/Outlets Network - 325 Locations) This slide shows how we are presently deployed in Ireland. We are the most extensive bank with more than 325 branches and outlets deployedright across the island. To give you an impression of the extent of our size and reach, we estimate thatevery day about 64,000 people walk into an AIB branch on this island. It is also very important to remember that a huge number of our customers chooseto bank in a different way because of the increased efficiency and popularity ofinternet and telephone banking and now I want to tell you something about that. (Slide 7 - Internet Banking Figures) This slide shows our internet banking business, a business that was really inits infancy when this AGM was last held in Cork in 1999. In 2005 this service handled 25 million log ons, half a million a week, and thisis an area where we continue to grow and innovate and where we expect to seefurther very significant growth in the years ahead. We estimate that 67,000 customers go online to visit AIB Internet services everyday in the Republic alone. That means that every day we have roughly the same number of online customers ascustomers who actually come into our branch locations. So AIB remains a leading presence in Ireland both online and in person. As I have said however half our profits are made outside the Republic. We operate in Poland the UK and the US but we also have offices in Paris,Frankfurt and a new office is planned for Sydney. You will have seen the very positive results published on Monday for our firstquarter in Poland. Our international dimension is not just confined however to the business that wedo we are also owned internationally. (Slide 8 - Where the Shares are Owned) 38% of our shares are held in the Republic, 26% are in the United States, 22% inthe United Kingdom, 12% in the rest of Europe and 2% in the rest of the world,so we are two thirds owned outside of the Republic of Ireland. Finally let me look at something that's important to you. The trend in dividendgrowth which we the shareholders have enjoyed over the last 5 years. (Slide 9 - Dividend Growth over Five Years) This represents compound growth over 5 years to 2005 of 11% per annum. In 2005 the total dividend was 10% higher than the previous year. A successful rapidly growing economy like Ireland needs profitable banks. Remember almost half our profits were taken in and retained with a view tomaking further loans to businesses and individuals, in Ireland and across theGroup. It has been said before that the banks are the nervous system of the economy. When the economy is thriving and healthy and prospering it needs banks tosupport that momentum by supporting businesses and consumers and of course thebanks will prosper as well and grow as well as a result. AIB has 12,700 employees in the Republic of Ireland, 2,300 pensioners, and56,000 shareholders. I referred earlier to the half million private sector pensioners who areindirect recipients of profits, that this bank earns. Those pensioners depend upon successful Irish companies like AIB turning in goodprofits year after year. Last year we bought €350 million worth of goods and services from over 4,500businesses in the Republic of Ireland. Now finally let me say something about 2006, the year to date. It is of course early days yet but our business continues to enjoy acontinuation of the strong momentum we experienced in 2005 and we continue tosee sustained demand in all our markets for all our key products. I am happy toreiterate our 2006 EPS guidance of low double digit EPS growth off our base of145.9c. We anticipate some rise in interest rates over the next year. We continue to enjoy excellent loan growth in Ireland, the United Kingdom and inour International Corporate Banking activities. We also expect another year of strong deposit growth. Asset quality, that's to say the quality of our loans, is at a historically highlevel. Put another way, the number of defaulting loans is at an historicallylow level. It's 40 years since the Royal, Provincial, and Munster and Leinster joinedtogether to form AIB. We have had good years and bad but have come a long way and learned a lot. We remain one of Ireland's most successful companies and the prospects forfuture growth and profitability remain bright. Now I am going to ask that a short video be shown after which we will move intothe main part of the meeting. -ENDS- For further information please contact:Alan Kelly Catherine BurkeGeneral Manager, Group Finance Head of Corporate RelationsAIB Group AIB GroupBankcentre BankcentreBallsbridge BallsbridgeDublin 4 Dublin 4Tel: +353-1-6600311 ext. 12162 Tel: +353-1-6600311 ext. 13894 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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