AIB has reported a better-than-expected 5 per cent rise in half-year profits, proving its resilience in tough times, according to chief executive Mr Michael Buckley.
Despite a first-half marred by the $691 million (€703.8 million) fraud at US subsidiary Allfirst and the deterioration in global economic conditions, the bank reported pre-tax profits of €703 million, or nearly €3.9 million a day. "It was a really strong performance for the first half, particularly given the tough environment in which we generated it," Mr Buckley said.
With the exception of its US operation, all the bank's main divisions posted an increase in profits.
But reflecting the downturn in the global corporate environment, the bank announced it was increasing its provisions by €67 million to €132 million.
Mr Buckley said the increase did not foreshadow any overall deterioration in the bank's loan book with non-performing loans accounting for 2 per cent of all loans, the same as last year, but the bank felt it was prudent.
Shares in the bank rose by €1.00, or nearly 9 per cent, to €12.25 as analysts hailed the results as robust.
"The results are a bit better than our below-consensus expectations and we will be taking a close look at our forecasts," according to Davy analyst Ms Emer Lang.
Basic earnings per share were up by 8 per cent to 60 cents and the bank said it would pay an interim dividend of 17.25 cents, an increase of 12 per cent.
The bank's retail and commercial operations in the Republic posted an 8 per cent increase in profits to €307 million, driven by strong loan growth of 9 per cent and market share gains in certain key products.
AIB's homeloans book, an area it has been focusing on of late, was up 12 per cent, taking its share of the mortgage market to around 16 per cent.
Its business in Britain and Northern Ireland also proved a strong performer, delivering profit growth of 14 per cent to €116 million as loan and deposit volumes rose by 10 per cent.
The bank has earmarked the British market for growth, saying it can double its business banking capability there within three years using its existing model and without recourse to acquisitions.
The capital markets division also generated a 14 per cent rise in profits to €117 million, performing ahead of expectations due to good growth in corporate banking profits and a strong performance from treasury interest rate management activities.
Despite a difficult economic climate, the bank's Polish operations also managed an 18 per cent rise in profits to €31 million.
The bank has around 460 branches there, having expanded its network in Warsaw from 19 to 40 in the past year.
While non-performing loans remain an issue in Poland, they declined as a percentage of the total to 18 per cent from 18.4 per cent.
The bank, which said its cost-to-income ratio fell by more than one percentage point to 57.3 per cent, is aiming to continue delivering mid single-digit growth in adjusted earnings per share.
Mr Buckley said the difficulties experienced by the bank because of the US fraud had prompted the bank to accelerate the development of a group-wide focus.
"AIB has become more coherent, more together, more focused on a single business strategy due to our difficulties at the beginning of the year. We have become more than a portfolio of banks."
