AIB has reported record interim profits as it continued to benefit from the booming economy and housing market. Presenting the results, the group chief executive, Mr Tom Mulcahy, said the bank was actively looking for acquisitions in the US and was also examining possible expansion plans in Europe.

Following the trend set by Ulster Bank and ACC earlier this week, profits at the banking group reached £201.1 million for the first six months, from £177.1 million in the first six months of last year a rise of 13.6 per cent. The profits were well ahead of analysts' expectations.

Profits from lending and capital markets were mainly responsible for the rise. The growth however, was at the expense of margins which fell to 3.54 per cent from 3.75 per cent.

Earnings per share rose in line with profits to 18.3p while the return on equity was 20.5 per cent. The bank also managed a 14.4 per cent rise in the dividend to 5.95p per share.

In the retail bank division in Ireland and Britain profits rose by 12.8 per cent to £102.2 million, while profits at the capital markets division rose by 21.2 per cent to £34.9 million. Profits in the US were up 14.5 per cent at £56.9 million.

Group profits, including interest income on capital not allocated to divisions and central service costs, fell 11.3 per cent to £7.1 million.

Provision for bad debts at £25 million stayed at roughly the same level, although the provision for bad debts at the capital markets division rose to £2.9 million from £100,000.

Non performing loans fell to 2.2 per cent of all loans, from 2.4 per cent. The decline in this area is likely to have bottomed oiit according to Mr Kevin Kelly, group general manager at AIB, thanks to exceptionally strong lending.

Overall group lending was up 5.2 per cent to £16.6 billion. Lending growth in the Republic was exceptionally strong at 10.1 per cent, while lending in the US fell back 2.1 percent.

Kelly stressed this was due to the securitisation there. "Without that growth it would have been close to 3 per cent," he said.

The bank increased lending in the leasing market by 28.4 per cent. This was due to exceptionally buoyant car sales and made AIB number one for new business in this market, Mr Kelly said.

The bank has also increased market share in residential mortgages. Mr Kelly refused to specify the amount but said "it is below our natural share of 23 per cent."

Branch lendings were also strongly up, at an 11.5 per cent increase.

The bank expects lending to remain strong but to grow at a slower pace in the second half of the year. Mr Mulcahy noted the housing market was showing signs of slowing.

Growth in deposits was more modest. Overall growth for the group was up 3.4 per cent mainly, due to growth in Northern Ireland and Britain. The US saw deposit growth fall by 0.4 per cent.

Other income also grew strongly at 13.5 per cent. Profits at Ark Life, AIB's life assurance subsidiary, were up 85 per cent to £10 million. Regular premium income increased by 104 per cent while single premiums were up 32 per cent.

AIB's British fund management company Govett witnessed a 6 per cent growth in funds under management while the US unit, FMB, saw good growth in most areas and an overall 8.9 per cent increase.

The Tierl capital adequacy ratio stood at 8.1 per cent with a total capital adequacy ratio of 10.5 per cent.

This means the bank was well enough capitalised to make a substantial acquisition in the US, Mr Mulcahy noted. The group has a full time acquisitions department in the US which is looking at opportunities, he added.

Operating expenses grew by 5.2 per cent to £404.9 million from £348.9 million. Excluding the acquisition of Govett and the co branding of credit cards with Bell and other new initiatives, underlying costs increased by 2 per cent.

Nevertheless, staff costs increased by 6 per cent to £251.3 million. Overall the cost/income ratio showed a slight downward trend at 64.3 per cent form 65.7 per cent in the first half of 1995.