AIB shares fell heavily initially when the bank issued a trading statement reducing its earnings per share forecast for the year to around 7 per cent and to single-digit growth in 2002. AIB shares fell to €10.40 from the overnight €10.75 level and an early trade at €11.10. But by close of business the shares had recovered to close up nine cents at €10.84 as the market accepted the statement contained no real surprises.
AIB's latest statement follows interim results released in August when the group said it was targeting double-digit earnings growth this year. Yesterday the group said business volumes had weakened on the back of slower economic growth in all its markets and that it expected this trend to continue for the rest of the year and into at least the first half of 2002. Poland and the US remain difficult markets for the group, while second-half growth has slowed in Ireland and the UK.
The bank's latest guidance to the market is broadly in line with forecasts - analysts have been scaling back earnings forecasts since September. At Davy, analyst Ms Emer Lang had cut her 2001 earnings growth forecast to 7 per cent in September and is leaving her 2002 forecast of 3.3 per cent growth unchanged, pointing out that the bank has cut its Irish gross domestic growth forecast to 3 per cent from 7 per cent.
Merrion analyst Mr Seamus Murphy was already forecasting earnings growth of 6 per cent to 110.7 cents for 2001 (from 104 cents last year) followed by 3 per cent growth to 113.6 cents next year, implying flat earnings in the current half on the first half.
In its statement, following the completion of accounts for the first nine months, AIB forecast "high single-digit" loan growth this year, deposit growth of close to 7 per cent, "broadly stable" margins down about 0.15 of a percentage point and high single-digit percentage growth in non-interest income. AIB said asset quality remained "robust" and that the provision charge for bad and doubtful debts would be similar to the 2000 outcome at 0.30 of a percentage point of average loans.
Costs will be up about 11 per cent this year, the group said, pointing out the inclusion of a number of one-off costs in Ireland and the US and stating that costs next year would rise by a more moderate 6 to 7 per cent.
In the Irish market, AIB said home loan growth would be strong but commercial lending was subdued in the second half with overall growth of 10 per cent forecast for the year. Deposit and current account growth has been strong in the second half in the Republic with year on year growth of 10 per cent expected. In the US home and SME lending is growing but overall growth would be flat because of weak commercial demand and "curtailment of exposure to less attractive segments".
