ALBK.L Regulatory News (ALBK)

6 Jun 2007 10:30

Allied Irish Banks PLC06 June 2007 FOR IMMEDIATE RELEASE 6th JUNE 2007 Allied Irish Banks, p.l.c. Trading Update Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) is issuing the following update ontrading before its half year close period. Please note that all trends in thisupdate are in constant currency terms. All the franchises are performing very well driven by strong customer demand forour products and services. Productivity continues to improve and we are makinggood progress in the heavy investment in our single enterprise agenda to supportand sustain long term growth. We expect income to grow by a rate at least 3%higher than costs again this year at both overall enterprise level and in eachof our operating divisions - Republic of Ireland, Capital Markets, UnitedKingdom and Poland. In M&T, we expect an improved performance following achallenging first quarter. We continue to target low double digit growth in 2007 earnings per share*. Thisis relative to a 2006 base figure of 182.8c. Based on good business trends andpipelines, we are targeting mid to high teen growth in operating profit beforebad debt provisions. Asset quality remains strong and bad debt provisions areexpected to remain low. In the half year period to 30th June we expect toachieve similar levels of growth to those targeted for the full year in bothoperating profit and earnings per share. All our businesses have sufficient capital to fully support their growth and ourfunding position remains good and well diversified. * Excludes profit on property sales and leaseback transactions, businessdisposals and hedge volatility under IFRS REPUBLIC OF IRELAND DIVISION The Irish economy remains strong and while it is likely to grow at a lower ratethan 2006, forecast growth of around 5% this year provides a positive operatingenvironment for our domestic franchise. We are confident that we will continue in 2007 to expand our share of keyproducts and services in what remains a very competitive market. Overall loan growth is targeted to be around 20% this year. Robust demand fromour business customers is a particular feature and lending to this sector is ontrack to grow by over 20% in 2007. We view the slowdown in house priceappreciation and supply of new houses as a welcome development following thestrong rates of growth in previous years. The market remains underpinned bypositive demographics and we expect mortgage volumes to increase by a low to midteen percentage this year. In deposits we are targeting growth of close to 10%. We continue to make good progress in the high potential area of wealthmanagement and our business, including the joint venture with Aviva / Hibernian,is growing strongly. CAPITAL MARKETS DIVISION The sustainable and recurring nature of income in this high quality franchise isexpected to be evident again this year. Growth is being driven primarily by Corporate Banking with all businessesperforming strongly, particularly our US and specialist international units. Weare performing well in Ireland where our prime position is underlined by ourleading role in a number of recent significant transactions. The overall loanbook is on track to increase by close to 20% this year, though the rate ofgrowth will continue to be dictated by return rather than volume targets. Therecontinues to be a plentiful supply of lending opportunities but we are selectingonly those that satisfy our unchanged criteria for risk adjusted return oncapital. The book is well diversified by chosen sectors with typicallyconservative individual loan sizes. In Global Treasury, performance is in line with our expectations. Customerdemand continues to be good across our banking franchises with particularlyencouraging growth this year in Poland. Investment Banking is performing well and an increased contribution from ourstockbroking and asset management businesses is expected to be a highlight thisyear. For the first half year to June, profit growth is expected to be lower than forthe full year 2007 in this division. This is due to the particularly strongoutcome in the first half of 2006 when we had exceptional bad debt netwritebacks and recoveries of €34m. UK DIVISION Both our Great Britain and Northern Ireland franchises are performing strongly.We are targeting both loan and deposit volumes for the division to increase byaround 20%. The reconfiguration of our network and operations is progressing well and isenabling us achieve significant productivity gains. The principal purpose ofthis initiative is to ensure our people, branches and outlets are best deployedto meet strong customer demand and that our operations can most effectivelydeliver our range of products and services. In Great Britain our long term strategy of focusing on chosen business sectorsand the complementary development of a niche private banking business continuesto prove successful. Customer demand is strong and the most significantchallenge remains the recruitment and retention of high quality people to fullyharvest the opportunities in this business. In Northern Ireland economic trends are improving and our First Trust franchiseis achieving good growth and is well positioned in both the business andpersonal markets. POLAND DIVISION The significant progress seen in our Polish business last year is continuing in2007. The economy is currently growing by around 7% this year and this is creating apositive environment in which we are achieving well spread, high qualitybusiness growth. Loan demand is buoyant in both the business and personal customer sectors. Weare also noting a pick up in house mortgage demand where there has been anincrease in the proportion of local currency mortgages which we favour. Overallwe are targeting our loan book to increase by over 20% this year. Our depositsare on track to increase by around 10%. Customer demand in the savings market isstill heavily biased in favour of investment products. Our best in class productsuite continues to drive very strong growth in assets under management. Our brokerage business, where we have a leading market share, and our paymentsbusiness are also expected to grow strongly this year. We are investing heavily in our people and network in targeted locations andthis year we expect to add over 30 branches and business centres. Asset quality continues to improve. In the first half of this year the bad debtprovision figure will be particularly low due to one-off recoveries in the earlypart of 2007. M&T BANK CORPORATION Management is focused on sustaining growth by improving productivity andmaintaining solid asset quality in a relatively low growth environment. In thefirst quarter of this year, M&T reported a decrease in earnings per share due inlarge part to one off and non recurring items. This decrease will be reflectedin M&T's contribution to our earnings in the first half but we expect anincrease in contribution for the full year 2007. MARGINS The rate of net interest margin attrition due to business factors (excludes theeffect of treasury assets) is likely to reduce from 16 basis points last year toaround 12 basis points in 2007. Loans growing faster than deposits is likely toremain the principal cause of attrition with the reinvestment of customeraccount funds being less of a factor than in previous years. There is a growingdemand from our Irish commercial property investors for investment rather thandevelopment finance and this may have an adverse mix effect. Product marginsacross our franchises are either broadly stable or, where reducing as is thecase in Irish mortgages, are doing so in line with our expectations. NON INTEREST INCOME An increase of around 9% is targeted this year. Growth in the first half yearmay be a little higher due to particularly strong growth in Polish assetmanagement and IPO fees. Account activity fees in Ireland are also likely to beaffected in the second half as more customers opt for fee free current accounts. COSTS Costs are expected to increase by around 9% this year. The key drivers arebusiness growth, investment in people, locations and operations to develop ourbusiness and to meet regulatory requirements. Cost growth in the first half willbe higher but the rate of growth will moderate in the second half. This is dueto the non recurrence of the significant step up in regulatory and very strongperformance related remuneration costs incurred in the latter months of 2006(the effect of which was to create a higher base figure). For both the half yearand full year periods, we are targeting the rate of income growth to exceed thatof cost growth by at least 3%. ASSET QUALITY Across the enterprise the quality of our loan portfolios remains high and thereare no signs of any material deterioration. In the continuing benign creditenvironment our guidance for a bad debt charge of around 15 basis points ofaverage loans this year is unchanged from that issued at our 2006 resultspresentation in March. The charge for the half year is expected to be materiallylower than for the full year due to lower levels of new provisions and goodprovision recoveries and writebacks. NOTE Group results for the half year ending 30th June 2007 will be announced on 1stAugust 2007. -ENDS- For further information please contact: Alan Kelly Catherine BurkeGeneral Manager, Group Finance Head of Corporate RelationsAIB Group AIB GroupDublin 4 Dublin 4Tel: +353-1-6600311 ext. 12162 Tel: +353-1-6600311 ext. 13894 This information is provided by RNS The company news service from the London Stock Exchange