7th Dec 2006 12:00
Allied Irish Banks PLC07 December 2006 7th DECEMBER 2006 Allied Irish Banks, p.l.c. Trading Update Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) is issuing the following update ontrading before its year end close period. Please note that all trends in thisupdate are in constant currency terms. Throughout 2006 we have experienced very positive trading conditions in all ourkey markets. The focus of our people combined with buoyant customer demand forour products and services has been central to performance. Across our franchisesthis combination is driving significant, high quality growth in operating profitat good rates of return on capital. The operating performance is beingcomplemented by exceptionally good asset quality. The increase in contributionthat we anticipate from M&T this year reflects its quality and resilience inchallenging market conditions for US regional banks. We continue to target growth of over 20% in 2006 earnings per share*. This is inline with previous guidance given at our interim results presentation and isrelative to a 2005 base figure of 145.9c. The achievement of at least a 3% positive gap between the rates of income andcost growth is a core objective. We expect to exceed that objective this year inall our operating divisions. The investments we are making in operations andtechnology will heavily influence our capability to sustain productivity gainsin future years. We are encouraged by the early outcome of these investments -notably in improved operations, an enhanced risk and control framework and inassisting our preparations to meet the imminent regulatory requirements ofSarbanes Oxley and Basel II. Our capability to take advantage of the plentiful supply of businessopportunities is underpinned by solid capital and funding positions. Thesepositions are supported by the returns we are achieving on high quality businessdevelopment and by a range of available capital and fund raising options. * Excludes profit on property sales and leaseback transactions, businessdisposals and hedge volatility under IFRS REPUBLIC OF IRELAND DIVISION Our domestic franchise continues to outperform and extend its leading marketposition. Revisions and improvements to a range of products and services haveproven popular with new and existing customers. In a strong and resilienteconomy in which GDP is likely to increase by around 6% this year, growth inloan and deposit volumes is expected to be close to 30% and 20% respectively. Wecontinue to gain market share in deposits as well as in business and personallending. In mortgages, while retaining our relatively conservative riskcriteria, volume growth is now expected to be broadly in line with the marketthis year. Loan and deposit product margins overall are stable despite intensecompetition while mortgage margins are reducing in line with expectations. Our high potential wealth management business is gaining momentum. Within thisarea, our joint venture in life and pensions with Aviva/Hibernian has been wellintegrated and in recent months there has been a notable increase in customerdemand and sales through our franchise, particularly in higher margin products. CAPITAL MARKETS DIVISION The sustainable nature of this division will be underlined again this year byits strong performance, further extending its long record of unbroken profitgrowth. Performance will be led by Corporate Banking which now comprises almosttwo thirds of the division's profit. The customer loan book is targeted toincrease by around 15% in highly liquid corporate markets. There is an abundanceof lending opportunities, particularly for our international specialistfranchises, although we are vigilant in choosing those opportunities which meetstrict criteria for risk adjusted return on capital. This disciplined approachto optimising returns is also applied to our existing portfolios. In Global Treasury, performance is broadly in line with expectations. Ourcustomer service business is a highlight this year and this unit also providessignificant input to relationship management initiatives across our bankingfranchises. In Investment Banking, performance is very good and well spread across thebusiness units. UK DIVISION A high level of growth will be achieved again this year. We are targeting bothloans and deposits to increase by around 20%. In Great Britain we continue to grow our business in robust mid corporatebanking sectors. Our long established reputation for delivering outstandingservice was recently recognised again by the business community. In acomprehensive survey carried out every two years by the Forum of PrivateBusiness, we retained our position of "Britain's Best Business Bank" - theseventh consecutive occasion that we have been voted No. 1. In Northern Irelandgrowth is being achieved through a combination of a good performance in businessbanking, a refreshed product suite in the personal market and further efficiencygains. In both markets we are responding to customer demand by extending our productrange and delivery channels. We are developing a wealth management business as anatural, complementary extension to our proven success in business and corporatebanking. We continue to invest in the consistent addition of high qualitypeople, improved locations and systems to sustain our growth. POLAND DIVISION Significant progress is being made in Poland where well spread, buoyant customerdemand is a feature of our business. Anticipated loan growth of close to 20%reflects increases across all key business and personal portfolios. We are distributing to target markets through our corporate centres, branchesand external channels. This segmented approach together with the use ofsophisticated credit techniques by skilled, experienced people enables us growwithout compromising asset quality. Customer deposits are expected to increaseby around 8%. In the overall savings market our No. 1 ranked investmentperformance will be reflected by exceptional growth in funds under managementand our leading stockbroking business will be a further source of strong incomegrowth this year. M&T BANK CORPORATION M&T continues to outperform in a difficult trading environment. This was evidentagain in the above market consensus results for the first 9 months of 2006. Aclear focus on efficiency with income growing faster than costs was complementedby very solid asset quality. MARGINS Currently there are 3 principal causes of reduction in our net interest margin.In order of effect these are 1) loans growing faster than deposits 2)re-investment of customer account funds and 3) business mix and competition. Inthe cases of 1) and 2) the negative effects are beginning to moderate. In thecase of 3) the effect is broadly unchanged. This year we expect our net interestmargin to reduce by close to 20 basis points. NON INTEREST INCOME An increase of around 14% is targeted for 2006. Key growth areas include Polishasset management and brokerage services, customer treasury services, Irishcardholder activity, investment and protection and general insurance fees. COSTS Cost growth is expected to be 12-13%, which is above trend but driven by buoyantbusiness growth. It also reflects our accelerated commitment to invest heavilyin our people, systems and locations so that we can sustain long term profitablegrowth and meet all our regulatory requirements. As indicated earlier in thisupdate income is expected to grow at a rate of more than 3% greater than coststhis year. ASSET QUALITY Credit quality remains strong in all our markets. This year we expect the baddebt charge to be around 13 basis points of average loans, broadly in line withprevious guidance. This is higher than the charge (3 bps) incurred at theinterim stage, reflecting the anticipated lower level of recoveries andwritebacks rather than any material deterioration in the loan book. NOTE Group results for the year ending 31st December 2006 will be announced on 6thMarch 2007. -ENDS- For further information please contact:Alan Kelly Catherine BurkeGeneral Manager, Group Finance Head of Corporate RelationsAIB Group AIB GroupBankcentre BankcentreDublin 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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