AIB has reported solid results for 1999, with pre-tax profits up 10 per cent to €1.1 billion (£866 million). The figures, achieved on the back of continuing strong growth throughout AIB's Irish and Polish operations, were slightly better than market forecasts but failed to yield any improvement in the share price.

The positive news, presented together with details of the bank's Internet strategy, initially helped to push the shares ahead but was quickly reversed. By close of business, AIB shares closed unchanged at €8.60, its lowest value this year as banks continue to be shunned in favour of hitech stocks. There was some good news for shareholders though, with the bank approving a 20 per cent increase in its dividend to 22.7 cents a share.

Announcing the results yesterday, AIB group chief executive Mr Tom Mulcahy said the group had performed strongly, asset quality was at its highest and he had no concerns about overheating in the economy.

In the Republic, which accounts for 45 per cent of total group profits, the bank received a boost from the Eircom flotation while its retail banking and life assurance operations also had a good year. AIB Bank profits increased by 16 per cent to €585 million over the 12 months with its Ark Life assurance subsidiary achieving a 31 per cent rise in profits to €64 million.

Its capital markets division, which includes treasury, corporate banking and stockbroking operations, also did well with profits up 28 per cent to €151 million. AIB Capital Markets acted as adviser to the Government on the Eircom flotation while AIB Corporate Finance and Goodbody Stockbrokers also won lucrative advisory and joint sponsoring broker roles. The bank refused to disclose details of the profits generated by each of these units but Mr Mulcahy indicated that profits at Goodbody Stockbrokers had almost doubled on the year.

The bulk of the group's profits were generated outside the Republic.

In the US, its Allfirst division achieved marginal growth, with pre-tax profits up 2 per cent to €301 million.

AIB's Polish operations performed strongly, with profits up 29 per cent to €63 million, helped by a widening of net interest margins in the last quarter and lower bad debt provisions.

In a low interest rate environment, the bank's net interest margins tightened, falling from 3.33 per cent to 3.27 per cent. The biggest decline was in the Irish market, where margins fell from 3.09 per cent to 2.97 per cent mainly due to the intense competition in the mortgage market since the arrival of Bank of Scotland.

Mr Mulcahy said the bank held 23 per cent of the first-time buyers' mortgage market last year. The bank's operating costs increased by 12 per cent, mainly driven by increased business activity and investments in new technology in the Republic and Poland. Its cost/income ratio, however, continued to move lower to 52 per cent in line with the bank's stated policy.