Allied Irish Banks, p.l.c. Interim Results 30 June 2000

Business Wire, August 2, 2000

Other income

Other income, including associates, increased by 26% to EUR 615 million. Excluding the impact of BZ and currency factors, the increase was 14%.

Other income as a percentage of total operating income was 38% in the half-year to June 2000 compared with 37% in 1999.

AIB Bank achieved an 18% increase in other income, on a constant currency basis, with branch banking, credit card and finance and leasing revenues well ahead of 1999. Sales of investment products were also strong and Ark Life had a 31% increase in annual premium equivalent sales in 2000.

In the USA, other income was up 2% or 5% excluding the impact of EUR 5 million investment securities gains in 1999. Strong growth was achieved in key categories, in particular there was a 16% growth in electronic banking income and a 10% growth in trust and investment advisory fees. The newly titled Allied Irish America had growth of 17% in other income mainly reflecting a strong performance in the charity and church sectors.

In Capital Markets, other income was up 19% with strong performances from stockbroking, corporate banking, asset management, international financial services and corporate finance.

In Poland, WBK reported good growth of 18% reflecting a 191% increase in card fees, strong growth of 49% in foreign exchange income and a 13% increase in current account fees. The strong performance reflects the ongoing business development programme in WBK. On a pro-forma basis BZ other income increased by 18% due to strong growth in foreign exchange income and card fees.

Commentary on results

Total operating expenses

Operating expenses increased by 22% to EUR 924 million compared with 1999. Excluding the impact of BZ and currency factors, operating expenses increased by 6%.

The Group's tangible cost income ratio, excluding goodwill amortisation, remained at 57%. The increase in operating expenses was mainly attributable to increased business activity, technology and e-business expenditure, and branch network expansion in Poland. Operating expenses included amortisation of goodwill of EUR 12 million mainly related to the Bank Zachodni acquisition.

In AIB Bank, efficiency continued to improve and the cost income ratio in the Republic of Ireland reduced from 54% to 52%. Costs were up 9% on a constant currency basis primarily reflecting substantial growth in business activity and investment in new channel developments.

Costs increased by 11% in Capital Markets on a constant currency basis due to increased business activities and technology expenditure. A substantial proportion of the increase related to variable costs.

In Poland, excluding BZ, costs increased by 22%. WBK expanded its franchise opening 27 new outlets and 55 new ATM's since June 1999. Significant new business developments since June 1999 included the introduction of the WBK 24-hour service which includes GSM, Internet and telephone banking. BZ opened 10 new outlets and installed 12 new ATM's since December 1999.

These increases were partly offset by cost reductions of 4% in the USA resulting from lower maritime related collection expenses and efficiencies achieved through cost saving initiatives throughout the business.