Allied Irish Banks PLC Chairman's Address - 1996 AGM

Business Wire, May 1, 1996

BALTIMORE--(BUSINESS WIRE)--May 1, 1996--Allied Irish Banks, p.l.c. (AIB) [NYSE: AIB;AIBPR:FMBPR] today holds its AGM and the following is a transcript of the Chairman s address.

Fellow shareholders, nineteen ninety five was a year of challenge and achievement. In a period of intense competition our pre-tax profit was three hundred and seventy two point six million pounds. That's a nine point two per cent increase on 1994's figure. Return on equity was nineteen point four per cent. And with earnings per share at thirty four point two pence, that's a healthy twelve point five per cent rise year-on-year.

In looking at such good results, it's useful to reflect for a few moments on where our profit comes from, and on our policy of geographical diversification. It was clear in the early eighties that there was only limited scope for AIB to grow in the heavily over-banked domestic market, and that it was necessary to look to foreign markets for our future expansion. Spreading the sources of risk and profit was wise. And it was also right to meet the needs of our customers for a wider array of international services. After all, we had the skills. I'm pleased to report this strategy continues to bear fruit. We are strong domestically, but, as a result of prudent diversification, about fifty per cent of our earnings are now generated outside the Republic. And this figure is set to grow but not, I emphasise, at the expense of our domestic operations.

AIB has been firmly established in the United States, the largest economy in the world, for over 12 years and last year our U.S. division recorded an increase in profits in U.S. dollar terms of seven point three per cent. First Maryland's agreement to buy First Washington Bancorp will consolidate our position in the stable and prosperous Greater Washington market. And we've also linked up with Bell Atlantic in a credit card venture which gives us access to more than eleven million customers on the eastern seaboard of America. 1996 will see us completing and consolidating these developments and pursuing further growth initiatives, both organic and strategic.

I'm pleased to report that we have got off to a good start in 1996 and our profit level is running ahead of the first quarter of 1995. A feature of the year to date has been the good progress across a broad range of business units within the Group.

Now, going back to 1995, in Britain, the economy hasn't been so buoyant as here but still deposit volumes were up sixteen point seven percent. Our decision to buy a majority shareholding in London-based John Govett makes AIB Ireland's leading fund manager with more than eleven billion of assets under management worldwide. Govett has particular expertise in the fast growing countries of the Pacific Rim and should be an excellent source of fee income. Our involvement with John Govett should be helpful to us in building up our funds management presence in Singapore and Malaysia.

In the fast developing Polish economy we have a 16.3% strategic share in WBK, one of the larger commercial banks in Poland, with a network of 49 branches, 12 sub-offices, 7 agencies and a representative office in Berlin.

Another success story has been our International Consultants, whose expertise is in demand from the European Union, the World Bank and the European Bank for Reconstruction and Development. Let me give you just three examples of more than forty consultancy projects which are earning good income for AIB. In China, we are working for the World Bank with the Shanghai Urban Co-op Development Bank. In the Middle East, AIB staff are advising the Saudi Arabian Monetary Agency - that nation's equivalent of our Central Bank. And, last but not least, we were the first Western bank to twin with a Russian counterpart - in this case the Bank Saint- Petersburg. This project will last more than two years and involves approximately 40 people.

Closer to home, 1995 was a year when First Trust Bank in Northern Ireland saw branch lendings increase by more than a quarter in a rejuvenated local economy. Let's hope that the conditions that have contributed to this rejuvenation will continue not least because the people of Northern Ireland deserve the opportunity to live and work in a peaceful environment.

I said earlier that 50% of our profits came from outside the Republic. Well, the corollary of that, of course, is that 50% of our profits were made here in our important home market which remains the cornerstone of the AIB Group. 1995 was an excellent year for us in our home market. But it would be a mistake to think that success has come easy. Competition has never been more intense, as evidenced by further contraction in our net interest margin. But we know what we have to do to stay ahead. We know we can never be satisfied with our levels of customer service - that we must constantly strive for improvement.

Technology is one important strand in our plans to achieve this. That's why we have developed a new branch banking system which will significantly reduce the cheque clearing timescale and allow us to update customer account information much more promptly. We are launching, in association with other financial institutions, the Laser debit card - the forerunner of the "smart card". We are market leaders in communicating with our Corporate Treasurer customers on market developments by pagers and video links, as well as by traditional means. And we are delivering to Irish customers one of the most advanced 24 Hour banking services in Europe.