A busy week is in store in the banking sector with interim results due from AIB, Ulster Bank and ACCBank all of which are expected to confirm the health of the economy. AIB is expected to announce an increase of between 5 and 9 per cent in first-half profits when it releases its interim figures on Wednesday, mainly on foot of continued strong growth in its retail banking division.
Analysts believe the bank will report pre-tax profits of between €536 million and €556 million (£422 million and £438 million) compared with €510 million in the first half of last year. The reason the bank is expected to deliver only single-digit increases, rather than the double-digit rises seen in the sector in recent years, is mainly due to a significant securities gain by its US subsidiary, Allfirst, in the first half of 1998 which boosted last year's results.
Although Allfirst, formerly known as First Maryland Bank, has yet to release results, analysts do not expect a similar-sized gain in the current year. If this gain was stripped out, the increase at the half-way stage would have been greater, analysts say.
The main driver of the bank's growth will continue to be the retail banking division, particularly in Ireland where lending growth remains strong.
"Domestic results will reflect the sustained buoyancy of credit growth in Ireland which continued to run at over 27 per cent up to the end of May - albeit diluted by a sharp contraction in margins - and strong growth in fee-based income," says Davy Stockbrokers, which is looking for pre-tax profits of €536 million.
However, the rest of the bank's divisions are not expected to perform as strongly. AIB's Polish subsidiary has already announced first-half results which were well below last year's figure, in common with the rest of the Polish banking sector where margins have been under pressure.
Pre-tax profits in the first six months were 117.6 million zloty (€28.6 million), down nearly 31 per cent on the year-earlier levels of 154 million zloty.
The US results will suffer from comparison with last year because of the $19 million gain from the sale of securities and a profit of $37.4 million on the sale of credit card receivables.
Nor is the capital markets division expected to perform as strongly as in 1998, when investment markets were buoyant. "I would expect capital markets to be flat at best and maybe slightly behind, mainly because of lower dealing profits," says Mr Eamon Hughes, banking analyst at ABN AMRO, who is at the upper end of expectations with a profits forecast of €556 million.
Last year, the bank made two-thirds of its full-year dealing profits in the first half, helped by market volatility, a performance unlikely to have been repeated in the first six months of this year, he says.
Nonetheless, analysts expect the bank to announce a sizeable dividend increase. Goodbody analyst Mr Oliver O'Shea expects shareholders to be awarded an interim dividend of 13 cents per share, a 26 per cent increase on last year's pay-out of 10.3 cents.
Meanwhile, Natwest subsidiary Ulster Bank and ACCBank, which is to be merged with TSB and floated on the Stock Exchange, should also continue to benefit from the strong credit growth in the economy when they report on Tuesday, a day ahead of AIB.
However, all three banks will probably also face some awkward questions in the wake of the recent report from the Comptroller and Auditor General outlining the scale of the problem of bogus non-resident accounts in the late 1980s and early 1990s.
