Allied Irish Bank's confirmation that it is on track for earnings growth of more than 20 per cent this year disappointed the market yesterday following upgrades from the other Irish banks.
The shares fell as much as 2.5 per cent to €21.15, before recovering slightly to close down 1.2 per cent, at €21.45 yesterday, a day after positive results from Anglo pushed its share price up more than 3 per cent. This is the first time in at least three quarters that AIB has not upgraded its forecast.
Davy analyst Scott Rankin said: "People are interested in signals and the signals are not better than they would have been back in August." Analysts said that while there was no doubt the outlook was strong, the fact that both Anglo and Bank of Ireland have recently upgraded their earnings forecasts means that the same was expected of AIB.
In yesterday's update, released ahead of the group's full-year results due on March 6th, AIB said trading conditions were positive in all of its key markets of Ireland, Britain and Poland, and customer demand for its products remained buoyant.
"Throughout 2006 we have experienced very positive trading conditions in all our key markets," it said. "The focus of our people combined with buoyant customer demand for our products and services has been central to performance."
In Ireland, the group is forecasting growth in loans and deposit volumes of 30 and 20 per cent respectively. It said margins on its loan and deposit products remained stable despite intense competition, and that mortgage margins were falling in line with expectations.
Overall, AIB said its net interest margin would fall by about 20 basis points in 2006 as a result of the number of loans growing faster than deposits and increased com-petition. Analysts however weren't concerned by this figure, saying that the reason Anglo was more upbeat about its margins earlier in the week was because its business was not involved in the residential property market.
Costs will be up slightly at 12-13 per cent, still below the rate of income growth.
"It's a case of swings and round-abouts," said one analyst, pointing out that while margins and costs may be under pressure, volumes are likely to be a little higher than expected.
In the UK, the bank said it was targeting both loans and deposits to rise by about 20 per cent, while in Poland, loan growth was expected to be close to 20 per cent. Deposits in the region should be up by about 8 per cent.
The capital markets division was also performing strongly, AIB said, adding that the customer loan book was expected to increase by about 15 per cent.
Bank of Ireland last month raised its forecasts for fiscal 2007 earnings to growth of about 20 per cent, from "high teens."
