Business Services Industry
Allied Irish Banks, p.l.c. Interim Results 30 June 2000
Business Wire, August 2, 2000
Half-year Half-year Year
June 2000 June 1999 % Change 1999
USA profit and loss account EUR m EUR m 2000 v 1999 EUR m
----------------------------------------------------------------------
Net interest income 261 244 7 506
Other income (incl. associates) 174 150 16 297
----------------------------------------------------------------------
Total income 435 394 10 803
Total operating expenses 253 231 9 463
----------------------------------------------------------------------
Operating profit before
provisions (incl. associates) 182 163 12 340
Provisions 18 21 -13 33
Profit before taxation 164 142 15 307
----------------------------------------------------------------------
Allfirst's underlying profit, adjusting for currency and
securities gains, was up 5%. The performance was negatively impacted
by a 22 basis point reduction in the legal entity net interest margin
since June 1999 mainly reflecting increased competition and a higher
interest rate environment. Performance highlights included strong
growth of 16% in electronic banking income, 10% in trust revenues,
corporate deposit service charges up 10% and a 7% increase in
commercial loan balances since December 1999. A modest decline in
retail lending reduced overall growth in loans to 2%. Customer
accounts increased by 1% in a very competitive market.
Excluding currency translation factors, costs declined by 4% due
to lower recovery costs in relation to the maritime portfolio and
efficiencies achieved through cost saving initiatives. Provisions for
bad and doubtful debts decreased due to the significant improvement in
the foreign maritime portfolio. Allfirst's credit quality and
provision cover remains strong and is in line with its peer group.
Non-performing assets amounted to US $ 95 million or 0.87% of
loans, real estate and other assets owned at 30 June 2000, compared to
US $ 93 million, or 0.86% at 30 June 1999. The allowance for credit
losses totalled US $ 157 million at 30 June 2000, equal to 248% of
non-performing loans.
Allied Irish America produced a strong performance and continued
to expand its business geographically opening a representative office
in Chicago in addition to the established offices in New York,
Philadelphia and Los Angeles. Loans increased by 13% since December
1999 and there was a 17% increase in other income mainly due to
business growth in the charity and church sectors.
Divisional commentary
Capital Markets Treasury & International,
Corporate Banking and Investment Banking.
Capital Markets profit at EUR 90 million was up 12% with profit
growth achieved across all major business units.
Half-year Half-year Year
Capital Markets profit June 2000 June 1999 % Change 1999
and loss account EUR m EUR m 2000 v 1999 EUR m
----------------------------------------------------------------------
Net interest income 79 71 12 141
Other income (incl. associates) 146 122 19 272
----------------------------------------------------------------------
Total income 225 193 16 413
Total operating expenses 124 109 14 239
----------------------------------------------------------------------
Operating profit before
provisions (incl. associates) 101 84 20 174
Provisions 11 4 179 23
Profit before taxation 90 80 12 151
----------------------------------------------------------------------
Treasury & International had a very successful half-year and
reported stronger profit than planned. Wholesale Treasury and
Corporate and Commercial Treasury generated strong revenues and there
were also good performances in International Business Services and
treasury trading activities. Treasury and International maintained its
investment programme in new technological infrastructures.
Investment Banking activities achieved a significant growth in
profit with all major business units contributing to the growth.
Goodbody Stockbrokers had a very strong performance, benefiting
from buoyant trading conditions and considerably increased its market
share across both institutional and private client businesses.
Corporate Finance was awarded a number of advisory mandates from both
the public and private sectors, enhancing its leading position in the
market.
Asset Management business performed exceptionally well producing
buoyant profit growth and winning new business mandates. Profit in the
UK was higher and fees were earned from new investment trusts launched
in 1999 and 2000.
Profit from international financial services centre operations
was substantially higher due to increased volumes of business.
Custodial, Trustee and Funds Administration businesses
experienced strong growth, benefiting from the growth of fund
administration activities in the IFSC and the joint venture with the
Bank of New York.
Corporate Banking had a superb half-year with operating surplus
up over 50%. Loans increased by 10% since December 1999 and fee income
was very buoyant. Our business continues to grow strongly both
domestically and internationally. AIB participated in a number of
major international financings and is now widely recognised as a
leading player in the European acquisition and structured finance
markets.
Divisional commentary
Poland Wielkopolski Bank Kredytowy S.A., in which AIB has a 60.1%
shareholding, together with its subsidiaries and associates, and Bank
Zachodni S.A., in which AIB has an 81.6% shareholding, together with
its subsidiaries and associates.
Poland contributed EUR 43 million in 2000, an 82% increase on the
profit of EUR 23 million in 1999. A majority shareholding in BZ was
acquired in September 1999.
Half-year Half-year Year
June 2000 June 1999 % change 1999
EURm EURm 2000 v'1999 EURm
Net interest income 122 50 141 139
Other income (incl. associates) 69 31 118 87
----------------------------------------------------------------------
Total income 191 81 132 226
Total operating expenses 136 53 155 154
----------------------------------------------------------------------
Operating profit before
provisions (incl. associates) 55 28 89 72
Provisions 12 5 117 9
Profit before taxation 43 23 82 63
----------------------------------------------------------------------
The above profit and loss account includes BZ in 2000 but not in June
1999.
WBK achieved profit growth of 31% in the period. The strong
results reflect wider interest margins in the higher rate environment
and good growth in fee income. WBK loans remained at a similar level
to December 1999 due to the repayment of a number of low margin large
loans in early 2000, customer accounts increased by 6%. Deposit
margins widened reflecting the increase in the average one month WIBOR
from 14% in 1999 to 18% in the current half-year.
Strong growth of 18% in other income was a highlight of the
performance and illustrates the growing revenue potential of our
Polish franchises. Costs increased as a result of expansion and
development of the branch and ATM networks and technology
enhancements.
BZ is included in the accounts for the first full half-year.
Progress is being achieved in transferring AIB's business and lending
processes to BZ. The analysis and assessment of credit quality for
fair value purposes is continuing and will be completed by the end of
2000. Loan and deposit volumes increased by 7% and 9% respectively
since December 1999.
AIB, in conjunction with BZ and WBK, has initiated a change
management process which includes a project to implement a new
centralised branch banking system common to both Polish banks.
Divisional commentary
Group includes interest income earned on capital not allocated to
divisions and central services costs.
Half-year Half-year Year
June 2000 June 1999 % change 1999
EURm EURm 2000 v 1999 EURm
Net interest income 21 38 -44 52
Other income (incl. associates) (17) (12) -26 (23)
----------------------------------------------------------------------
Total income 4 26 -78 29
Total operating expenses 17 18 -1 38
----------------------------------------------------------------------
Operating profit before
provisions (incl. associates) (13) 8 -272 (9)
Provisions - (19) - (18)
Profit before taxation (13) 27 -147 9
----------------------------------------------------------------------
Group reported a loss of EUR 13 million in the half-year to June 2000,
compared with a profit of EUR 27 million in the comparative period in
1999. This decrease was primarily due to provision write-backs of EUR
16 million in the half-year to June 1999 relating to Latin American
provisions no longer required, hedging costs in relation to the
translation of our foreign currency profits and the funding cost of
the BZ acquisition.
Notes
17 Group financial information for US investors
For convenience purposes this note contains translations of certain
euro amounts into US dollars at the rate EUR 1.00 to US$ 0.9556, the
period end translation rate used in the preparation of the Group's
financial statements. These translations should not be construed as
representations that the euro amounts actually represent such US
dollar amounts or could be converted into US dollars at the rate
indicated.
Half-year Half-year Half-year Year
June 30 June 30 June 30 December 31
Summary of consolidated 2000 2000 1999 1999
statement of income US $ m EUR m EUR m EUR m
----------------------------------------------------------------------
Amounts in accordance
with IR GAAP
Net interest income 941 985 843 1,770
Other income 584 611 488 1,052
----------------------------------------------------------------------
Total operating income 1,525 1,596 1,331 2,822
Total operating expenses 883 924 759 1,618
----------------------------------------------------------------------
Group operating profit
before provisions 642 672 572 1,204
Provisions 65 69 32 92
----------------------------------------------------------------------
Group operating profit
- continuing activities 577 603 540 1,112
Income from associated
undertakings 4 4 2 3
----------------------------------------------------------------------
Group profit before disposals 581 607 542 1,115
Profit on disposal of property 2 2 - 2
Profit on disposal of businesses - - - 15
----------------------------------------------------------------------
Group profit on ordinary
activities before taxation 583 609 542 1,132
Taxation on ordinary activities 160 167 157 327
----------------------------------------------------------------------
Group profit on ordinary
activities after taxation 423 442 385 805
----------------------------------------------------------------------
Group profit attributable to
the ordinary stockholders of
Allied Irish Banks, p.l.c. 395 414 365 761
----------------------------------------------------------------------
Notes
17 Group financial information for US investors (continued)
Half-year Half-year Half-year Year
June 30 December 31 June 30 December 31
2000 2000 1999 1999
US$ EUR EUR EUR
Per American Depositary
Share ('ADS')
Net income 0.93 0.97 0.86 1.79
Dividend(1) 0.26 0.27 0.24 0.68
Net assets 8.92 9.33 7.78 8.49
Amounts in accordance
with US GAAP
Net income 365m 382m 313m 695m
Net income attributable
to ordinary stockholders 356m 373m 306m 680m
Net income per ADS 0.83 0.87 0.72 1.60
Net assets per ADS 10.68 11.18 9.74 10.38
----------------------------------------------------------------------
(1) The actual dividend payable to US stockholders will depend on the
EUR/US $ exchange rate prevailing.
Summary of consolidated
balance sheet US $ m EUR m EUR m EUR m
----------------------------------------------------------------------
Amounts in accordance
with IR GAAP
Total assets 71,371 74,687 62,895 67,070
Ordinary stockholders' equity 3,880 4,061 3,342 3,651
Deposits etc 58,830 61,563 51,704 55,241
Loans etc 45,695 47,818 40,994 43,127
Amounts in accordance
with USGAAP
Total assets 70,124 73,383 62,303 65,942
Ordinary stockholders' equity 4,648 4,864 4,185 4,465
----------------------------------------------------------------------
Notes
17 Group financial information for US investors (continued)
Adjustments to financial statements
The Group financial statements conform with accounting principles
generally accepted in Ireland. The following tables provide the
significant adjustments to the consolidated net income (Group profit
attributable to the stockholders of AIB) and consolidated ordinary
stockholders' equity, which would be required if accounting principles
generally accepted in the United States (US GAAP) had been applied
instead of those generally accepted in Ireland (IR GAAP).
Half-year Half-year Year
June 30 June 30 December 31
Consolidated net income 2000 1999 1999
-------------------------------------------------------------------------------------------------------------------
(millions except per share amounts)
Net income (Group profit
attributable to the stockholders
of AIB) as in the consolidated
profit and loss account EUR 414 EUR 365 EUR 761
Adjustments in respect of:
Depreciation of freehold and
long leasehold property - (2) (5)
Long-term assurance policies (35) (32) (43)
Goodwill (38) (30) (73)
Premium on core deposit intangibles (5) (5) (11)
Pension cost 52 23 97
Preference dividends 9 7 16
Securities held for hedging purposes (20) 53 34
Internal derivative trades - - (3)
Post-retirement benefits - - (1)
Internal use computer software 4 - -
Deferred tax effect of the
above adjustments 1 (11) (22)
Impact of phased reduction in
Irish corporation tax rates - (55) (55)
----------------------------------------------------------------------
Net income in accordance
with US GAAP EUR 382 EUR 313 EUR 695
Net income attributable to
ordinary stockholders of AIB
in accordance with US GAAP EUR 373 EUR 306 EUR 680
Equivalent to US $ 356
----------------------------------------------------------------------
Income per American Depositary
Share (ADS(a)) in accordance
with US GAAP EUR 0.87 EUR 0.72 EUR 1.60
----------------------------------------------------------------------
Equivalent to US $ 0.83
Period-end exchange EUR/US $ 0.9556
----------------------------------------------------------------------
(a) An American Depositary Share represents two ordinary shares of
EUR0.32 each.
Half-year Half-year Year
June 30 June 30 December 31
Comprehensive income 2000 1999 1999
----------------------------------------------------------------------
(millions)
Net income in accordance
with US GAAP EUR 382 EUR 313 EUR 695
Net movement in unrealized holding
gain/(loss) on investment securities
arising during the period 38 (151) (237)
Exchange translation adjustments 104 357 489
Comprehensive income EUR 524 EUR 519 EUR 947
----------------------------------------------------------------------
Notes
17 Group financial information for US investors (continued)
Adjustments to financial statements (continued)
Consolidated ordinary June 30 June 30 December 31
stockholders' equity 2000 1999 1999
(millions except per share amounts)
Ordinary stockholders' equity as
in the consolidated balance sheet EUR 4,061 EUR 3,342 EUR 3,651
Revaluation of property (210) (210) (211)
Depreciation of freehold and
long leasehold property (27) (24) (27)
Goodwill 1,097 1,071 1,074
Core deposit intangibles 30 37 33
Dividends payable on ordinary shares 116 101 188
Preference dividend declared - - (1)
Long-term assurance policies (123) (89) (97)
Unrealised (losses)/gains not
yet recognised on:
Available-for-sale debt securities (168) (11) (208)
Available-for-sale equity securities - 14 10
Derivatives hedging
available-for-sale securities 8 (89) (17)
Securities held for hedging purposes 31 69 51
Internal derivative trades (3) - (3)
Pension cost 187 65 138
Post-retirement benefits (5) (4) (4)
Internal use computer software 4 - -
Own shares (127) (70) (123)
Deferred tax effect of
the above adjustments (7) (17) 11
Ordinary stockholders' equity in
accordance with US GAAP EUR 4,864 EUR 4,185 EUR 4,465
Equivalent to US $ 4,648
Ordinary stockholders' equity per
ADS in accordance with US GAAP EUR 11.18 EUR 9.74 EUR 10.38
Equivalent to US $ 10.68
Ordinary stockholders' equity per
ADS in accordance with IR GAAP EUR 9.33 EUR 7.78 EUR 8.49
Equivalent to US $ 8.92
----------------------------------------------------------------------
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