22nd Feb 2006 07:00
Allied Irish Banks PLC22 February 2006 Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) AIB Group Annual Results 2005 Part 2 Basis of preparation First time adoption of International Financial Reporting Standards ('IFRS') Up to and including the year ended 31 December 2004, AIB's primary financialstatements were prepared in accordance with Irish Generally Accepted AccountingPrinciples ('IR GAAP'). On 1 January 2005, AIB Group implemented therequirements of International Financial Reporting Standards and InternationalAccounting Standards and other interpretations as adopted by the European Union('EU') (collectively, 'IFRS') for the first time and these are used for thepurpose of preparing the financial statements for the year ended 31 December2005. These financial statements have been prepared based on the requirements ofIFRS issued by the International Accounting Standards Board ('IASB') as adoptedby the EU. In accordance with IFRS 1 'First-time Adoption of International FinancialReporting Standards' ('IFRS 1'), there have been no adjustments to the estimatesmade at the time of the approval of the IR GAAP financial statements for theyear ended 31 December 2004. IFRS 1 provides first time adopters of IFRS withcertain exemptions. IFRS 1 also allows or requires a number of other exceptionsto its general principle that the standards in force at the reporting dateshould be applied retrospectively. AIB has availed of certain exemptions as setout below:- First time application relating to financial instruments and insurance contracts AIB has availed of transitional provisions for IAS 32 'Financial Instruments:Disclosure and Presentation' ('IAS 32'), IAS 39 'Financial Instruments:Recognition and Measurement' ('IAS 39') and IFRS 4 'Insurance Contracts' ('IFRS4') and has not presented comparative information in accordance with thesestandards in its 2005 financial statements. Accordingly, comparative informationfor 2004 in respect of financial instruments and insurance contracts has beenprepared on the basis of the Group's accounting policies under IR GAAP. Share based payments AIB has implemented the requirements of IFRS 2 'Share Based Payment' ('IFRS 2')to all equity settled share based payments granted after 7 November 2002 thathad not vested by 1 January 2005. Property, plant & equipment AIB has retained its existing carrying value of occupied properties, plant andequipment at 1 January 2004 as deemed cost, rather than either reverting tohistorical cost or carrying out a valuation at the date of transition aspermitted by IFRS 1. Cumulative exchange differences AIB has elected to deem cumulative exchange differences on the net investmentsin foreign branches and subsidiaries to be zero at 1 January 2004, as permittedby IFRS 1. Employee benefits AlB has recognised the cumulative actuarial gains and losses of defined benefitpension schemes and other post retirement benefits upon transition at 1 January2004. Business combinations AIB has elected not to apply IFRS 3 'Business Combinations' to businesscombinations that arose prior to 1 January 2004. Derecognition of financial instruments Financial instruments derecognised prior to 1 January 2004 have not beensubsequently recognised by the Group under IFRS. Effects of the transition to IFRS A summary reconciliation from previously reported Irish GAAP information to IFRSfor profit before taxation and shareholders' equity for December 2004 and thereconciliation to shareholders' equity at 1 January 2005 after the applicationof IAS 32, IAS 39 and IFRS 4 is presented in Note 2 'Transition to IFRS'. Notes 1 Accounting policies and presentation of financial information The accounting policies that the Group applied in the preparation of thefinancial statements for the year ended 31 December 2005 are set out in the June2005 Interim Report on pages 22 to 33. There has been no amendments to theseprovisional IFRS accounting policies with the following exceptions: (a) Construction contracts Revenue from construction contracts is recognised when it is probable that theeconomic benefits of the transaction will flow to the Group and when therevenue, the costs, (both incurred and in the future), the outcome of thecontract and its stage of completion can all be measured reliably. Once theabove criteria are met, both contract revenue and contract costs are recognisedby reference to the stage of completion of the contract. When the outcome of a construction contract cannot be estimated reliably, noprofit is recognised, but revenue is recognised to the extent of costs incurredthat are probable of recovery. Costs are recognised as an expense in the incomestatement in the accounting period in which the work is performed. (b) Non-current assets held for sale and discontinued operations A non-current asset or a group of assets containing a non-current asset (adisposal group) is classified as held for sale if its carrying amount will berecovered principally through sale rather than through continuing use, it isavailable for immediate sale and sale is highly probable within one year. On initial classification as held for sale, non-current assets and disposalgroups are measured at the lower of previous carrying amount and fair value lesscosts to sell with any adjustments taken to profit or loss. The same applies togains and losses on subsequent remeasurement. No reclassifications are made inrespect of prior periods. A discontinued operation is a component of the Group's business that representsa separate major line of business or geographical area of operations, or is asubsidiary acquired exclusively with a view to resale, that has been disposedof, has been abandoned or that meets the criteria to be classified as held forsale. Discontinued operations are presented on the income statement (includingcomparatives) as a separate amount, comprising the total of the post tax profitor loss of the discontinued operations for the period together with any post-taxgain or loss recognised on the measurement to fair value less costs to sell, oron disposal of the assets/disposal groups constituting discontinued operations. The currency used in these accounts is the euro which is denoted by 'EUR' or thesymbol •. Notes 2 Transition to IFRS As set out in the basis of preparation, the financial statements have beenprepared based on the requirements of IFRS as adopted by the European Union. AIBhas availed of transitional provisions for IAS 32 'Financial Instruments:Disclosure and Presentation' ('IAS 32'), IAS 39 'Financial Instruments:Recognition and Measurement' ('IAS 39') and IFRS 4 'Insurance Contracts' ('IFRS4') and has not presented comparative information in accordance with thesestandards. Accordingly, comparative information for 2004 in respect of financialinstruments and insurance contracts is prepared on the basis of the Group'saccounting policies under IR GAAP. The following table sets out the reconciliation from previously reported IrishGAAP information for profit after taxation and shareholders' equity for December2004, and the reconciliation to shareholders' equity at 1 January 2005 after theapplication of IAS 32, IAS 39 and IFRS 4. Profit after taxation Shareholders' equity 31 December 31 December 2004 2004 • m • m As reported under Irish GAAP 1,082 5,581Reconciliation adjustments to IFRSexcluding IAS 32, IAS 39 and IFRS 4:Associated undertakings 1 12Finance leases 2 1Software 6 20Taxation (4) (47)Intangible assets & goodwill 79 79Dividends - 336Share based payments (9) 10Employee benefits & other 1 (65) IFRS excluding IAS 32, IAS 39 and IFRS 1,158 5,9274Reconciliation adjustments to IAS32,IAS 39 and IFRS 4:Loans origination (65)Loan impairment 139Financial instruments 273Derivatives 38Long-term assurance business (185)Financial liabilities 345 Shareholders' equity under IFRS 6,472including IAS 32, IAS 39 and IFRS 4 3 Disposal of Ark Life Assurance Company Limited ('Ark Life'). Acquisition of aninterest of 24.99% in Hibernian Life Holdings Limited. On 22 November 2005, AIB announced that it had agreed the terms of a jointventure with Aviva Group p.l.c for the manufacture and distribution of life andpensions products in the Republic of Ireland. The joint venture brings togetherHibernian Life & Pensions Limited and Ark Life. Under the terms of theagreement, AIB will own an interest of 24.99% in the joint venture companyHibernian Life Holdings Limited and will enter into an exclusive agreement todistribute the life and pensions products of the joint venture. As part of thetransaction, AIB will receive a cash payment of up to • 205.4m. The transactionwas completed on 30 January 2006. Notes 3 Disposal of Ark Life Assurance Company Limited ('Ark Life'). Acquisition of aninterest of 24.99% in Hibernian Life Holdings Limited (continued) Under IFRS 5, 'Non-current assets held for sale and discontinued operations',the income and expenses of Ark Life for December 2005 and December 2004 of theoperations deemed to be disposed of have been reported net of taxation as adiscontinued operation below profit after taxation. The impact of the December2004 restatement on the previously reported figures is outlined below on theIncome Statement captions impacted. The assets and liabilities of Ark Life (note19) as at 31 December 2005 have been classified as held for sale and areseparate from other assets and liabilities on the balance sheet. There has beenno restatement of prior year balance sheet figures as the assets and liabilitieswere not held for sale at that date. 31 December 2004 As previously Discontinued Continuing reported operations operations • m • m • m Net interest income 2,134 62 2,072Other income 1,474 330 1,144 Total operating income 3,608 392 3,216Insurance and investment contract 309 309 -liabilities and claimsTotal operating expenses 1,894 25 1,869Provisions 133 - 133 Operating profit 1,272 58 1,214Share of results of associated 132 - 132undertakingsProfit on disposal of property and 26 - 26businesses Profit before taxation 1,430 58 1,372Taxation 272 5 267 Profit after taxation 1,158 53 1,105 Year 31 December 2005 AIB Bank AIB Bank Capital Poland Group Total ROI GB&NI Markets4 Segmental information • m • m • m • m • m • m Operations by businesssegments(1)Net interest income 1,314 516 435 205 60 2,530Other income 376 148 407 222 (36) 1,117 Total operating income 1,690 664 842 427 24 3,647Total operating expenses 867 323 400 280 141 2,011Provisions 55 21 46 15 6 143 Operating profit/(loss) 768 320 396 132 (123) 1,493Share of results of associated - 2 - 148 149undertakings (1)Profit on disposal of 12 2 - - - 14propertyConstruction contract - - - - 45 45incomeProfit on disposal of - - 5 - - 5businesses Profit before taxation -continuing operations 779 322 403 132 70 1,706 Balance sheetTotal loans 45,523 18,346 23,794 4,487 211 92,361Total deposits 34,172 10,958 58,038 6,229 123 109,520Total assets 55,224 20,031 44,371 7,813 5,775 133,214Total risk weighted 39,073 18,335 38,974 4,640 634 101,656assetsNet assets(2) 2,564 1,203 2,558 305 42 6,672Capital expenditure 71 16 13 19 17 136 Notes Year 31 December 2004 AIB Bank AIB Bank Capital Poland Group Total ROI GB & NI Markets4 Segmental information • m • m • m • m • m • m(continued) Operations by businesssegments(1)Net interest income 1,144 416 360 174 (22) 2,072Other income 340 189 390 188 37 1,144 Total operating income 1,484 605 750 362 15 3,216Total operating 813 305 403 245 103 1,869expensesProvisions 44 13 29 29 18 133 Operating profit/(loss) 627 287 318 88 (106) 1,214Share of results of (1) - 4 1 128 132associated undertakingsProfit on disposal of 7 1 - 1 - 9propertyProfit on disposal of - - 4 13 - 17businesses Profit before taxation -continuing operations 633 288 326 103 22 1,372 Balance sheet (at 1January 2005)Total loans 35,794 13,740 14,668 3,748 280 68,230Total deposits 27,178 9,084 40,537 5,452 133 82,384Total assets 42,137 15,175 33,550 6,703 5,254 102,819Total risk weighted 31,183 13,510 30,098 4,232 568 79,591assetsNet assets(2) 2,341 1,014 2,259 318 43 5,975Capital expenditure 82 12 16 24 - 134 Year 31 December 2005 Republic of United United Poland Rest of Total Ireland States of Kingdom the world America • m • m • m • m • m • m Operations by geographicalsegments(3)Net interest income 1,564 45 689 225 7 2,530Other income 537 68 252 251 9 1,117 Total operating 2,101 113 941 476 16 3,647incomeTotal operating 1,239 62 413 290 7 2,011expensesProvisions 70 1 54 15 3 143 Operating profit 792 50 474 171 6 1,493Share of results of 1 148 - - - 149associated undertakingsProfit on disposal of 12 - 2 - - 14propertyConstruction contract 45 - - - - 45incomeProfit on disposal of - 4 1 - - 5businesses Profit before taxation -continuing operations 850 202 477 171 6 1,706 Balance sheetTotal loans 58,831 3,863 24,888 4,487 292 92,361Total deposits 77,971 4,021 21,291 6,229 8 109,520Total assets 91,622 5,071 28,411 7,815 295 133,214Net assets(2) 4,039 477 1,810 320 26 6,672Capital expenditure 100 1 16 19 - 136 Notes Year 31 December 2004 Republic of United United Poland Rest of Total Ireland States of Kingdom the world America4 Segmental • m • m • m • m • m • minformation(continued) Operations by geographicalsegments(3)Net interest income 1,314 23 543 190 2 2,072Other income 572 102 259 205 6 1,144 Total operating 1,886 125 802 395 8 3,216incomeTotal operating 1,126 81 392 266 4 1,869expensesProvisions 70 (4) 38 29 - 133 Operating profit 690 48 372 100 4 1,214Share of results of 5 126 - 1 - 132associated undertakingsProfit on disposal of 7 - 1 1 - 9propertyProfit on disposal of - - 4 13 - 17businesses Profit beforetaxation -continuing operations 702 174 377 115 4 1,372 Balance sheet (at 1January 2005)Total loans 43,854 1,464 19,044 3,748 120 68,230Total deposits 55,289 2,691 18,952 5,452 - 82,384Total assets 70,484 2,568 22,885 6,761 121 102,819Net assets(2) 2,342 942 2,299 322 70 5,975Capital expenditure 97 1 12 24 - 134 (1) The business segment information is based on management accountsinformation. Income on capital is allocated to the divisions on the basis of thecapital required to support the level of risk weighted assets. Interest incomeearned on capital not allocated to divisions is reported in Group. (2) The fungible nature of liabilities within the banking industry inevitablyleads to allocations of liabilities to segments, some of which are necessarilysubjective. Accordingly, the directors believe that the analysis of total assetsis more meaningful than the analysis of net assets. (3) The geographical distribution of profit before taxation is based primarilyon the location of the office recording the transaction. Notes 2005 20045 Interest and similar income • m • m Interest on loans and receivables to banks 167 98Interest on loans and receivables to customers 4,032 3,044Interest on trading portfolio financial assets 305 232Interest on financial investments available for sale 647 644 5,151 4,018 2005 20046 Interest expense and similar charges • m • m Interest on amounts due to banks and customers 1,944 1,582Interest on debt securities in issue 545 255Interest on subordinated liabilities and other capital instruments 132 109 2,621 1,946 2005 20047 Trading income • m • m Foreign exchange contracts 59 66Profits less losses from trading portfolio assets 84 55Interest rate contracts (32) (30)Equity index contracts 1 5 112 96 2005 20048 Other operating income • m • m Profit on disposal of available for sale debt securities 17 15Profit on disposal of available for sale equity shares 2 2Profit on disposal of off-balance sheet instruments - 36Profit on disposal of investments in associated undertakings - 1Miscellaneous operating income 53 55 72 109 2005 20049 Administrative expenses • m • m Personnel expenses 1,298 1,136General and administrative expenses 583 579Restructuring costs - 9 1,881 1,724 10 Construction contract income In 2004, Blogram Limited a property development company and subsidiary of AlliedIrish Banks p.l.c., contracted with the Serpentine Consortium to construct on afixed price contract basis, a new development at Bankcentre, Ballsbridge, Dublinon their behalf. At 31 December 2005, contract revenue of • 81m less contractexpenses of • 36m have been reported as construction contract income. At 31December 2005, • 26m was due from the consortium in respect of constructioncontracts in progress. Notes 11 Profit on disposal of businesses 2005 The profit on disposal of businesses in 2005 of • 5m relates to the sale ofCommunity Counselling Services of • 4m (tax charge • 1m), and the accrual of •1m (tax charge • 0.3m), arising from the sale of the Govett business in 2003. 2004 The profit on disposal of businesses in 2004 of • 17m relates to the sale ofBZWBK's subsidiary, CardPoint S.A. of • 13m (tax charge • 2m), and the accrualof • 4m (tax charge • 1m), arising from the sale of the Govett business in 2003. 2005 200412 Taxation • m • m Allied Irish Banks, p.l.c. and subsidiariesCorporation tax in Republic of IrelandCurrent tax on income for the period(1) 160 133Adjustments in respect of prior periods 1 (5) 161 128Double taxation relief (10) (13) 151 115Foreign taxCurrent tax on income for the period 163 181Adjustments in respect of prior periods (11) (11) 152 170Deferred taxation 303 285Origination and reversal of timing differences 16 (10)Other - (8) 16 (18)Total income tax expense - continuing operations 319 267Effective income tax rate - continuing operations 18.7% 19.5% (1)The December 2005 figure includes a charge of • 29.5m (2004: • 29.5m) inrelation to the Irish Government bank levy. 2005 200413 Earnings per share • m • m (a) BasicProfit attributable to equity holders of the parent 1,343 1,129Distributions to other equity holders (38) (4)Profit attributable to the ordinary shareholders 1,305 1,125Weighted average number of shares in issue during the 864.5m 852.0mperiodEarnings per share EUR 151.0c EUR 132.0c Notes 2005 200413 Earnings per share (continued) • m • m(b) DilutedProfit attributable to ordinary shareholders 1,305 1,125Dilutive impact of potential ordinary shares in (1) -associated company Adjusted profit attributable 1,304 1,125 Number of shares (millions)Weighted average number of shares in issue during 864.5 852.0the periodDilutive effect of options outstanding 5.7 3.1 Potential weighted average number of shares 870.2 855.1Earnings per share - diluted EUR 149.8c EUR 131.5c Basic Diluted 2005 2004 2005 200414 Adjusted earnings per share cent cent cent cent (a) Earnings per shareAs reported 151.0 132.0 149.8 131.5Adjustments:Construction contract income (4.4) - (4.4) -Hedge volatility (0.7) - (0.7) -Effective interest rate - (2.5) - (2.5)Insurance business - (2.4) - (2.4) 145.9 127.1 144.7 126.6 Basic Diluted 2005 2004 2005 2004 cent cent cent cent(b) Earnings per share - continuing operationsAs reported 145.7 125.8 144.6 125.3Adjustments:Construction contract income (4.4) - (4.4) -Hedge volatility (0.7) - (0.7) -Effective interest rate - (2.5) - (2.5) 140.6 123.3 139.5 122.8 Adjusted earnings per share is presented to help understand the underlyingperformance of the Group. The adjustments in 2005 are items that do not reflectthe underlying business performance. As IAS 39 and IFRS 4 have been implementedwith effect from 1 January 2005, the adjustments in 2004 reflect the impact thatthese standards would have had on the effective interest rate and insurancebusiness had they been applied from 1 January 2004. 31 December 1 January 2005 200515 Trading portfolio financial assets • m • mLoans and receivables to banks 3 2Loans and receivables to customers 72 45Debt securities:Governments securities 922 1,048Other public sector securities 19 73Other debt securities 9,008 6,705 9,949 7,826Equity shares 89 84 10,113 7,957 Notes 2005 200416 Loans and receivables to customers • m • m Loans and receivables to customers 81,171 62,243Amounts receivable under finance leases 1,620 1,527Amounts receivable under hire purchase contracts 1,154 968Unquoted securities 1,287 - 85,232 64,738 2005 2004 • m • mImpaired loans by divisionAIB Bank ROI 308 295AIB Bank GB & NI 166 154Capital Markets 132 100Poland 262 297 868 846 2005 200417 Provisions for impairment of loans and receivables • m • mAt beginning of period 760 766IFRS transition adjustment (146) -Exchange translation adjustments 16 25Transfer to provisions for liabilities and commitments - (15)Charge against income statement 115 114Amounts written off (72) (151)Recoveries of amounts written off in previous years 3 21At end of period 676 760At end of period:Specific 514 478IBNR/General 162 282 676 760Amounts include:Loans and receivables to banks 2 2Loans and receivables to customers 674 758 676 760 31 December 1 January 2005 200518 Financial investments available for sale • m • mDebt securities:Government securities 8,522 7,227Other public sector securities 507 854Bank and building society certificates of deposit 643 585Other debt securities 7,021 6,880 16,693 15,546Equity shares 171 174 16,864 15,720 Notes 19 Long-term assurance business On 22 November 2005, AIB announced that it had agreed the terms of a jointventure with Aviva Group p.l.c for the manufacture and distribution of life andpensions products in the Republic of Ireland. The joint venture brings togetherHibernian Life & Pensions Limited and Ark Life Assurance Company Limited ('ArkLife'). As set out in note 3, the income from Ark Life that is determined to relate todiscontinued operations is shown, on an after tax basis, as a one line item onthe face of the income statement. Prior year numbers have been restated. Ark Life assets and liabilities have been included in the balance sheet at 31December 2005 as a disposal group classified as held for sale. Comparatives havenot been restated. Income and expense from long-term assurance business included in the incomestatement is set out below: 2005 2004Income and expense from Ark Life's long-term assurance business • m • mNet interest income 113 62Other income 740 342Total operating income 853 404Increase in insurance and investment contract liabilities, and claims 762 309Total operating expenses 27 26Income before taxation 64 69Taxation 4 6Income after taxation 60 63Analysed as to:Continuing operations 14 10Discontinued operations 46 53 Some elements of the Ark Life business are being retained within the Group andthis gives rise to the difference between the amounts recognised above and thosedisclosed as discontinued activities. The assets and liabilities of Ark Life included in the consolidated balancesheet of the Group are as follows: 31 December 1 January 31 December 2005 2005 2004 • m • m • mAssetsLoans and receivables to banks 191 220 220Financial assets held at fair value through 2,638 1,871 -profit or lossDebt securities - - 425Equity shares - - 1,446Property, plant and equipment 52 51 51Reinsurance assets 748 601 -Placings with group companies 1,428 1,246 1,246Other assets 371 255 440Total assets 5,428 4,244 3,828 LiabilitiesInvestment contract liabilities 2,953 2,422 2,422Insurance contract liabilities 1,923 1,465 864Other liabilities 215 75 75Total liabilities 5,091 3,962 3,361Shareholders' equity 337 282 467Total liabilities and shareholders' equity 5,428 4,244 3,828 Notes 19 Long-term assurance business (continued) Presentation in the Group balance sheet Holdings of shares in Allied Irish Banks, p.l.c., (by the parent or subsidiarycompanies), for any reason, are deducted in arriving at shareholders' equity. At31 December 2005, shares in AIB with a value of • 77m (2004: • 74m) were heldwithin the long-term business funds to meet the liabilities to policyholders. Long-term assurance assets attributable to policyholders are presented in theGroup balance sheet net of the carrying value of the shares in AIB held withinthe fund. Group shareholders' funds have been reduced by a similar amount. 2005 200420 Customer accounts • m • m Current accounts 20,909 17,099Demand deposits 8,013 7,321Time deposits 28,118 22,736 57,040 47,156 Securities sold under agreements to repurchase 6 77Other short-term borrowings 5,534 2,918 5,540 2,995 62,580 50,151 Contract amount 2005 200421 Memorandum items: contingent liabilities and commitments • m • m Contingent liabilities:Endorsements(1) - 2Guarantees and assets pledged as collateral security 7,157 5,394Other contingent liabilities 1,396 830 8,553 6,226 Commitments:Other commitments 19,558 16,127 28,111 22,353 (1) On transition to IFRS, at 1 January 2005, IAS 39 requires the recognition ofa liability for acceptances from the date of acceptance. A corresponding assetdue from the originator is also recognised. Under Irish GAAP, acceptances wereaccounted for on a net basis and shown as a contingent liability. The Group's maximum exposure to credit loss under contingent liabilities andcommitments to extend credit, in the event of non-performance by the other partywhere all counterclaims, collateral or security prove valueless, is representedby the contractual amounts of those instruments. The following table presents the notional principal amount and gross replacementcost of interest rate, exchange rate and equity contracts for 2005 and 2004. 2005 2004 Notional Gross Notional Gross principal replacement principal replacement amount cost amount cost • m • m • m • mInterest rate contracts(1) 178,326 1,146 141,067 1,059Exchange rate contracts(1) 19,799 238 15,870 599Equity contracts(1) 4,386 253 3,575 112 (1) Interest rate, exchange rate and equity contracts are entered into for bothhedging and trading purposes. Notes 21 Memorandum items: contingent liabilities and commitments (continued) The Group uses the same credit control and risk management policies inundertaking all off-balance sheet commitments as it does for on balance sheetlending including counterparty credit approval, limit setting and monitoringprocedures. In addition, in relation to derivative instruments, the Group'sexposure to market risk is controlled within the risk limits in the Group'sInterest Rate Risk and Foreign Exchange Risk Policies and is further constrainedby the risk parameters incorporated in the Group's Derivatives Policy asapproved by the Board. 22 Average balance sheets and interest rates The following tables show the average balances and interest rates of interestearning assets and interest bearing liabilities for the years ended 31 December2005 and 2004.The calculation of average balances include daily and monthlyaverages for reporting units. The average balances used are considered to berepresentative of the operations of the Group. Year ended 31 December 2005 Year ended 31 December 2004 Average Interest Average Average Interest Average balance rate balance rateAssets • m • m % • m • m % Loans andreceivables tobanksDomestic offices 4,596 117 2.5 2,857 70 2.4Foreign offices 1,131 50 4.4 824 28 3.4Loans andreceivables tocustomersDomestic offices 47,806 2,084 4.4 38,540 1,625 4.2Foreign offices 27,664 1,768 6.4 21,397 1,260 5.9Trading portfoliofinancial assetsDomestic offices 7,786 257 3.3 5,890 193 3.3Foreign offices 1,308 48 3.7 1,139 39 3.4FinancialinvestmentsDomestic offices 12,869 470 3.7 11,011 431 3.9Foreign offices 3,220 177 5.5 2,883 213 7.4 Total interestearning assetsDomestic offices 73,057 2,928 4.0 58,298 2,319 4.0Foreign offices 33,323 2,043 6.1 26,243 1,540 5.9Net interest on 125 48swaps Total average 106,380 5,096 4.8 84,541 3,907 4.6interest earningassetsNon-interest 13,209 10,421earning assets Total average 119,589 5,096 4.3 94,962 3,907 4.1assets Percentage ofassets applicableto foreign activities 31.1 31.3 Notes 22 Average balance sheets and interest rates (continued) Year ended 31 December 2005 Year ended 31 December 2004 Average Interest Average Average Interest Average balance rate balance rateLiabilities and • m • m % • m • m %shareholders'equity Due to banksDomestic offices 25,288 693 2.7 20,288 555 2.7Foreign offices 1,963 81 4.1 2,732 91 3.3Due to customersDomestic offices 27,820 473 1.7 23,795 363 1.5Foreign offices 18,545 642 3.5 14,780 462 3.1Other debt issuedDomestic offices 7,001 171 2.4 3,395 77 2.3Foreign offices 8,486 374 4.4 3,942 178 4.5SubordinatedliabilitiesDomestic offices 2,925 132 4.5 2,513 109 4.3 Total interestearningliabilitiesDomestic offices 63,034 1,469 2.3 49,991 1,104 2.2Foreign offices 28,994 1,097 3.8 21,454 731 3.4 Total average 92,028 2,566 2.8 71,445 1,835 2.6interest earningliabilitiesNon interest 21,237 18,070earningliabilities Total average 113,265 2,566 2.3 89,515 1,835 2.0liabilitiesShareholders' 6,324 5,447equity Total averageliabilities andshareholders' 119,589 2,566 2.2 94,962 1,835 1.9equity Percentage ofliabilitiesapplicable toforeign activities 30.7 29.1 23 Post-balance sheet events (a) Financial Statements There have been no material post-balance sheet events which would requiredisclosure or adjustment to the 31 December 2005 Financial Statements. (b) Dividends Final dividends are not accounted for until they have been approved at theAnnual General Meeting of Shareholders to be held on 26 April 2006. It isrecommended that a final dividend of Eur 42.30c per ordinary share, amounting toa total of • 368m,be paid on 27 April 2006. The Financial Statements for theyear ended 31 December 2005 do not reflect this resolution, which will beaccounted for in shareholder's equity as an appropriation of retained profits inthe year ending 31 December 2006. 24 Form 20-F An annual report on Form 20-F will be filed with the Securities and ExchangeCommission, Washington D.C. and, when filed, will be published on the Company'swebsite and will be available to shareholders on application to the CompanySecretary. 25 Approval of accounts The accounts were approved by the Board of Directors on 21 February 2006. Financial and other information 2005 2004 Operating ratiosOperating expenses (1) /operating income 55.2% 57.8%Other income/operating income 30.6% 35.6%Net interest margin:Group 2.38% 2.45%Domestic 2.17% 2.17%Foreign 2.83% 3.08% Rates of exchange• /US $Closing 1.1797 1.3621Average 1.2484 1.2474• /Stg £Closing 0.6853 0.7051Average 0.6851 0.6813• /PLNClosing 3.8600 4.0845Average 4.0276 4.5314 (1) Excludes restructuring costs of €8.7m in 2004. 31 December 1 January 2005 2005Capital adequacy information • m • m Risk weighted assetsBanking book:On balance sheet 79,520 62,770Off-balance sheet 14,682 10,960 94,202 73,730Trading book:Market risks 6,891 5,149Counterparty and settlement risks 563 712 7,454 5,861 Total risk weighted assets 101,656 79,591 CapitalTier 1 7,275 6,510Tier 2 4,089 2,312 11,364 8,822Supervisory deductions 487 302 Total 10,877 8,520 Five year financial summary Year ended 31 December 2005 2004 2003 2002 2001 2005 IFRS IFRS IR GAAP IR GAAP IR GAAP US $m Summary of consolidated • m • m • m • m • m statement of income(1) 2,985 Net interest income 2,530 2,072 1,934 2,351 2,258 - Other finance income - - 12 62 67 1,318 Other income before 1,117 1,144 1,230 1,514 1,426 exceptional item - Exceptional foreign - - - - (789) exchange dealing losses 4,303 Total operating income 3,647 3,216 3,176 3,927 2,962 after exceptional item 2,373 Total operating expenses 2,011 1,869 1,960 2,318 2,284 1,930 Operating profit before 1,636 1,347 1,216 1,609 678 provisions 168 Provisions 143 133 177 251 204 1,762 Operating profit 1,493 1,214 1,039 1,358 474 176 Share of results of 149 132 143 9 4 associated undertakings Share of restructuring & integration costs in - associated undertaking - - (20) - - Amortisation of goodwill on acquisition of - associated undertaking - - (42) - - 16 Profit on disposal of 14 9 32 5 6 property 53 Construction contract 45 - - - - income 5 Profit/(loss) on disposal 5 17 (141) - 93 of businesses 2,012 Profit before taxation - 1,706 1,372 1,011 1,372 577 continuing operations 376 Taxation on ordinary 319 267 318 306 55 activities 1,636 Profit after taxation - 1,387 1,105 693 1,066 522 continuing operations 54 Discontinued operation, net 46 53 - - - of taxation 1,690 Profit for the period 1,433 1,158 693 1,066 522 178.1c Basic earnings per share 151.0c 132.0c 78.8c 119.1c 56.2c 176.8c Diluted earnings per share 149.8c 131.5c 78.4c 117.9c 55.9c As at 31 December 2005 2004 2003 2002 2001 2005 IFRS IFRS IR GAAP IR GAAP IR GAAP US $m Summary of consolidated • m • m • m • m • m balance sheet(1) 157,152 Total assets 133,214 101,109 80,960 85,821 89,061 108,959 Total loans 92,361 67,278 53,326 58,483 57,445 129,201 Total deposits 109,520 82,384 66,195 72,190 72,813 3,159 Dated capital notes 2,678 1,923 1,276 1,287 1,594 1,023 Undated capital notes 868 346 357 389 426 248 Other loan capital 210 497 497 496 496 1,473 Minority interests in 1,248 1,211 158 274 312 subsidiaries 586 Shareholders' equity: 497 182 196 235 279 non-equity interests 7,871 Shareholders' equity: equity 6,672 5,745 4,942 4,180 4,554 interests 14,360 Total capital resources 12,173 9,904 7,426 6,861 7,661 Five year financial summary (continued) Year ended 31 December 2005 2004 2003 2002 2001 IFRS IFRS IR GAAP IR GAAP IR GAAPOther financial data(1) % % % % % Return on average total assets 1.2 1.22 0.90 1.24 0.62(2)Return on average ordinary shareholders' 20.6 20.7 14.5 23.7 10.4(3)equityDividend payout ratio 43.5 45.5 66.8 41.5 78.5Average ordinary shareholders' equityas a percentage of average total assets 5.3 5.7 6.0 5.1 5.8Allowance for loan losses as a percentageof total loans to customers at year end 0.8 1.2 1.3 1.6 1.9Net interest margin 2.38 2.45 2.72 3.00 2.99Tier 1 capital ratio 7.2 8.2 7.1 6.9 6.5Total capital ratio 10.7 10.9 10.4 10.1 10.1 (1) The results and financial position for the year ended 31 December 2004 havebeen restated to represent the results of Ark Life as a discontinued operationto reflect the disposal (note 3) and the application of International FinancialReporting Standards ('IFRS'), with the exception of IAS 32, IAS 39 and IFRS 4which apply with effect from 1 January 2005 (see Basis of preparation on page23). The historical information has not been restated for IFRS and is thereforepresented as previously reported under Irish GAAP. Thus the five year trendswill not be entirely comparable. (2) Excluding the impact of the exceptional foreign exchange dealing losses, thereturn on average total assets was 1.23% and the return on average ordinaryshareholders' equity was 20.4%. (3) Excluding the impact of the deposit interest retention tax settlement, thereturn on average total assets was 1.26% and the return on average ordinaryshareholders' equity was 19.5%. Accounts in sterling, US dollars and Polish zloty • m STG £m US $m PLN mSummary of consolidated statement of STG £ 0.6853 US $1.1797 PLN 3.8600income = • 1 = • 1 = • 1for the year ended 31 December 2005 Operating profit before provisions 1,636 1,121 1,930 6,314Provisions 143 98 168 549 Operating profit 1,493 1,023 1,762 5,765Share of results of associated 149 102 176 577undertakingsProfit on disposal of property 14 10 16 52Construction contract income 45 31 53 172Profit on disposal of businesses 5 3 5 18 Profit before taxation - continuing 1,706 1,169 2,012 6,584operationsTaxation 319 219 376 1,231 Profit after taxation - continuing 1,387 950 1,636 5,353operationsDiscontinued operation, net of taxation 46 32 54 176 Profit for the period 1,433 982 1,690 5,529Minority interests in subsidiaries 90 62 106 346 Profit attributable to equity holders 1,343 920 1,584 5,183of the parent Basic earnings per share 151.0c 103.5p 178.1c 582.9 PLNDiluted earnings per share 149.8c 102.7p 176.8c 578.2 PLN Summary of consolidated balance sheet31 December 2005 • m Stg £m US $m PLN mAssetsTrading portfolio financial assets 10,113 6,931 11,931 39,037Derivative financial instruments 2,439 1,671 2,877 9,415Loans and receivables to banks 7,129 4,886 8,411 27,519Loans and receivables to customers 85,232 58,409 100,548 328,996Financial investments available for sale 16,864 11,557 19,894 65,095Intangible assets and goodwill 517 354 609 1,994Property, plant and equipment 706 484 833 2,724Disposal group and assets classified as held for 5,363 3,675 6,326 20,700saleOther assets 4,851 3,324 5,723 18,725 133,214 91,291 157,152 514,205 LiabilitiesDeposits by banks 29,329 20,099 34,600 113,211Customer accounts 62,580 42,886 73,825 241,558Derivative financial instruments 1,967 1,348 2,320 7,591Debt securities in issue 17,611 12,069 20,776 67,979Other liabilities 4,463 3,058 5,265 17,227Subordinated liabilities and other capital 3,756 2,573 4,430 14,495instrumentsDisposal group classified as held for sale 5,091 3,489 6,006 19,652Minority interests in subsidiaries 1,248 856 1,473 4,819Shareholders' equity 7,169 4,913 8,457 27,673 133,214 91,291 157,152 514,205 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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