6th Dec 2005 11:00
Allied Irish Banks PLC06 December 2005 EMBARGO 11am 6 DECEMBER 2005 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 and relative to 2004 pro-forma IFRS results. 2005 has been a year in which we have achieved strong performance across theenterprise. We expect the consistent, recurring and sustainable nature of our business to beunderlined in each of our operating divisions by: • Double digit profit growth • Income growing faster than costs, resulting in lower cost / income ratios • Market share gains in targeted sectors and products. Our partnership with M&T continues to flourish and we expect this to be againreflected in its profit contribution this year. Earnings momentum is driven by our franchises being located in outperformingeconomies which underpin high volume, high quality growth. Momentum is furtherassured by very robust asset quality. Our growth is built on customer demand,most clearly illustrated by expected record levels of deposit growth in both ourIrish and British franchises. We actively manage our sound capital and fundingpositions so as to support the deep supply of high quality growth opportunitieswe continue to identify. At our interim results in August, we guided earnings per share (EPS) in 2005 ina range of 140c - 142c. Performance in our franchises since then now leads us totarget the upper end of that range. This compares to the pro-forma IFRS EPS in2004 of 127.1c. Guidance for 2005 assumes zero volatility due to accountinghedge ineffectiveness under IFRS. We continue investing to support and sustain growth. Significant financial andpeople investment is being made in our risk, compliance and governanceframework. Our work programmes to ensure we meet our extensive regulatoryrequirements are on track. The resourcing and restructuring of our enterprisewide approach to operations is in implementation and we expect this to furtherbolster our business capability. REPUBLIC OF IRELAND DIVISION Buoyant, high quality volume growth has again been a feature of our Irish retailand commercial banking business this year. Loans are expected to grow by around25% and reflect further gains from our long held position as the number onebusiness bank in the market. Our mortgage growth is broadly in line with themarket which is being achieved while ensuring new business written is of thesame high quality as the back book. The effectiveness of our customerrelationship management approach is underlined by the high teens deposit growthanticipated this year. Profit at Ark Life - which will shortly begin its partnership with Aviva's Irishsubsidiary, Hibernian - is expected to be up on last year. GREAT BRITAIN AND NORTHERN IRELAND DIVISION In Great Britain our focus on chosen mid market business sectors is drivingstrong profit growth. A growing number of customers are selecting us as theirbank of choice, attracted by our differentiated and consistent service offering.Our growth is supported by recruitment and investment in people and businessinfrastructure. Quality is underpinned by our long established practice ofavoiding exposure to higher risk sectors, those which are heavily commoditisedand those in which we do not hold an advantage over our competitors with largerscale and market coverage. In Northern Ireland solid profit growth is anticipated on the back of strongincreases in both loans and deposits. Overall in the division we expect loan growth of around 25% and deposits toincrease by around 18%. CAPITAL MARKETS DIVISION Profit growth anticipated this year will again demonstrate the strength andsustainability of this division. A key catalyst for growth is the expectedsignificantly increased contribution from Corporate Banking which representsmore than half the profit of Capital Markets division. Our domestic corporateunit is performing satisfactorily and in particular, our international business- which now comprises c. 70% of Corporate Banking's profit - is growingstrongly. We expect loans overall to grow by around 25% while remaining rigorousin our assessment of loan quality and returns. In Treasury we expect satisfactory revenues from customer activities. Our bondmanagement and interest rate trading units are performing well, whilemaintaining low risk positions. In line with expectations, Investment Banking is having a good year with aparticularly notable performance from Goodbody Stockbrokers and our CorporateFinance teams. POLAND DIVISION Building on the strong recovery in 2004, the full year will reflect furtherpositive performance momentum. The main drivers continue to be non interest income growth underpinned by marketshare gains in investment funds and stockbroking, sustained tight costmanagement and best in class asset quality. Customer demand for savings products is heavily biased towards mutual funds inthe current lower interest rate environment. We are now a top 3 mutual fundprovider following growth of over 100% in funds under management this year. Inbank deposits we expect growth of around 3%. Loans are expected to be up byaround 2%, a little better than at the half year stage. Attainment of more rapidgrowth continues to be challenging due to subdued business demand, combined withour continued focus on lower risk local currency mortgages, in which we continueto grow market share. M&T BANK CORPORATION At M&T we anticipate another year of good profit growth in 2005. A highlight ofperformance in the first 9 months has been management's ability to contain costsduring a period of slow industry wide revenue growth. The efficiency ratio hasbeen reduced to 50% in the third quarter and productivity gains are beingcomplemented by very good asset quality. MARGINS Consistent with guidance at our interim results, the expected rate of reductionin our net interest margin of around 20 basis points is unchanged. The causesare also the same as previously advised - loans growing faster than deposits,lower reinvestment rates for customer account funds, business mix andcompetition. NON INTEREST INCOME An increase of around 4% is expected this year. Momentum in this income categoryis affected by the inclusion of lending related fees under IFRS in interestincome. Corporate banking and card fees are notably higher sources of noninterest income in 2005. COSTS We expect an increase of around 7 - 8% in 2005. Regulatory costs continue to bea significant factor. We are investing heavily in our business and people. Wewill continue to do so at this time of widespread opportunity in our franchises.Our focus remains on efficiency and improving productivity in which we aremaking further progress this year. ASSET QUALITY Asset quality remains resilient and there has been no deterioration in any ofour portfolios. All leading indicators of loan impairment continue to be stable.At our interim results we guided a loan loss charge of less than 20 basis pointsof average loans for 2005 and stated that the lower charge in the first half wasexceptional. We now reiterate both aspects of that previous guidance. NOTE Group results for the year end 31st December 2005 will be announced on 22ndFebruary 2006. -ENDS- For further information please contact: Alan Kelly Catherine BurkeHead of Group Investor Relations 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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