UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the date of 11 June, 2003
ALLIED IRISH BANKS, public limited company
Bankcentre, Ballsbridge, Dublin 4, Republic of Ireland
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F..X... Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ..... No ..X...
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ________
FOR IMMEDIATE RELEASE 11 JUNE 2003
Allied Irish Banks, p.l.c.
Trading Update
Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) is issuing the following update on
trading before its half-year close period.
Growth in our Irish and British retail and commercial banking businesses
continues to be excellent. In both islands we are growing faster than our
competitors and we continue to target underlying double digit operating
performance growth in these businesses. In Ireland we are winning a greater
share of customers' business and in Britain we are gaining more customers within
our chosen niches. The Capital Markets Division continues to display resilience
in difficult market conditions. Performance in Poland is weaker, primarily due
to the impact of sharp interest rate cuts on our deposit base. Throughout our
business, we relentlessly focus on productivity and expect to maintain a
positive underlying gap between income and cost growth for the year 2003.
The weakening of the US dollar, sterling and Polish zloty against the euro will
give rise to an estimated negative currency impact of 4% on the translation of
earnings from our non euro denominated businesses, despite an active hedging
policy. Accordingly, we are now targeting low single digit growth in underlying
adjusted Group earnings per share for 2003.
At the interim stage, we expect an out-turn of marginal underlying adjusted
earnings per share growth because of:
- Particularly strong interest rate management performance in the first half
of 2002.
- Lower Allfirst performance in the first quarter compared with 2002,
notably a reduced yield from the restructured investment securities
portfolio.
- Significant, non recurring income generated by Ark Life in the early
months of 2002 during the closing stage of the Government sponsored savings
campaign (SSIAs).
At our annual results presentation in February our guidance for 2003 excluded
certain significant / one off items. We indicated then that we would seek to
clarify their effect in this trading update, including the impact of the merger
of Allfirst with M&T which was completed on April 1st 2003. We have appended an
analysis of our 2002 results to facilitate year on year comparisons, and the
following table and comment is intended to provide further clarification.
2002 Adjusted Earnings per Share 123.0c
Significant / one off items:
1. FRS 17 c. (5.9c)
Reduction in other finance income
Government levy c. (3.5c)
Total significant / one off items c. (9.4c)
A post tax gain of approximately EUR450m will be recognised on the
merger of Allfirst with M&T. Good progress is already evident in the
integration of Allfirst into M&T, and the 2003 results will include
AIB's 22.5% share of a one time M&T restructuring charge.
Republic of Ireland Division
Good economic management is essential to ensure Ireland remains well positioned
to benefit from a potential upswing in the global economy, which we expect to
gather momentum over the coming months. This year we anticipate GDP growth of
around 2% in Ireland.
Customer demand for our retail and commercial banking products and services is
very strong. Our primary focus on doing more business with our existing
customers is being tangibly reflected in increasing revenues and market shares.
This is particularly evident in our loan book which is on target to grow by
around 15% this year. Home mortgages continue to be the fastest growing product
category and we are extending our rate of growth relative to the market without
dilution of our credit criteria. Similarly, in our other loan portfolios,
volumes are ahead of expectations and there is a good pipeline of new business.
Deposits are increasing in line with expectations.
The repositioning of Ark Life in the bancassurance market, referred to at our
2002 results presentation, is progressing well. Performance in the first half
will be lower due to the closing of the SSIAs in 2002, however we expect the
second half will be better, reflecting the repositioning of the business.
Great Britain and Northern Ireland Division
The deepening and extending of this high quality franchise is being reflected in
strong loan and deposit volumes, both of which are recording good double digit
annual increases. Our drive to be recognised as the bank of choice in chosen
market segments in Great Britain is being rewarded by buoyant demand from new
and existing customers. Our differentiated approach to customer relationship
building and our growing presence in mid market sectors is being supported and
underpinned by significant investment in people and new locations. A similar
approach to the Republic of Ireland business model is being implemented in
Northern Ireland where we continue to gain market share in key product
categories.
Capital Markets Division
Operating performance from our corporate banking business continues to be
strong. We are seeing good loan growth in our international businesses, notably
in Great Britain and New York. Conversely, loan demand from our domestic
corporate banking customers remains subdued. Good fee income is being generated,
notably from our highly successful CDOs.
Our treasury performance is in line with expectations. The significant benefit
of being positioned for falling interest rates in 2002 will not be repeated as
positions run off. Our current utilisation of market risk limits is low.
Investment banking and asset management revenues are also being affected by the
overall low levels of activity and market conditions generally.
Allied Irish America, now part of Capital Markets division, continues to perform
well.
Poland Division
The building of our Polish franchise is largely complete, enabling us maintain
good cost discipline and positioning us to deliver medium term profit growth.
The current low level of economic activity however is militating against
significant loan growth. We are maintaining our resolve not to compromise asset
quality, which is improving, and accordingly loan volumes this year will
increase by a single digit percentage. The very steep fall in interest rates
from 19% in 2001 to 5.5% recently, which we welcome as a prerequisite for future
growth in the economy, is having a significant adverse effect on interest income
from deposits, in what is still a heavily deposit led bank.
USA
While still at an early stage following the merger, our interaction with our
colleagues in M&T is very positive and we are confident as to the growth and
synergies this partnership will deliver. We continue to expect that the
combination of earnings generated by Allfirst in the first quarter of this year,
our 22.5% share of M&T's net income for the subsequent quarters and the impact
of the recently completed buyback of 35.9m shares will give a marginally
accretive overall result in 2003 relative to the contribution of Allfirst to
2002 group earnings.
Costs
We are targeting an underlying reduction in the cost/income ratio this year.
Underlying cost growth for the Group is expected to be around 5%.
Asset Quality
Our retail and commercial loan portfolios are all retaining a high level of
quality and resilience, with no signs of material disimprovement. We remain
prudent and conservative in our monitoring of corporate credit exposures and do
not anticipate loan loss experience that will exceed our expected loan loss
parameters. We continue to expect the overall full year provision charge not to
exceed 40 basis points as a percentage of average loans. We deem provision
coverage, both specific and general, to be good.
Margins
Changing product mix is currently the main factor affecting the net interest
margin and we expect attrition of around 20 basis points for the year. To date
the lower interest rate environment has been managed to minimise the impact on
margins (although, as already noted, the dramatic reduction in Poland has had a
negative effect). Further significant cuts would compress margins on the
liability side of the balance sheet and have a negative endowment effect as we
reinvest maturing investment funds.
Capital Management
In the transition of Allfirst into M&T, the weighted average number of AIB
shares for earnings per share purposes increased by approx. 16m. These shares
were previously held in trust for Allfirst staff compensation plans. The impact
of this increase in our share base will be to dilute 2003 earnings per share by
approx. 2.0c, about 1.5%, and is included in the guidance in this update.
We have recently concluded the share buy back programme undertaken following
completion of the M&T / Allfirst merger. A total of EUR483m was returned to
shareholders through the repurchase of 35.9m shares. The Group's capital ratios
remain very strong and a further rolling share buyback programme is one of the
actions we intend to pursue as part of our ongoing capital management
activities.
Group results for the half-year ended 30th June 2003 will be announced on 29th
July 2003.
-ENDS-
For further information please contact:
Alan Kelly Catherine Burke
Head of Group Investor Relations Head of Corporate Relations
AIB Group AIB Group
Bankcentre Bankcentre
Dublin 4 Dublin 4
Tel: +353-1-6600311 ext. 12162 Tel: +353-1-6600311 ext. 13894
APPENDIX 1
Consolidated profit and loss account (unaudited)
for the half-year ended 30 June 2002
Half-year 30 June 2002
Continuing Discontinued
Activities Activities
EUR m EUR m EUR m
Interest receivable:
Interest receivable and similar income arising from
debt securities and other fixed income securities 399 98 497
Other interest receivable and similar income 1,478 342 1,820
Less: interest payable (960) (160) (1,120)
Net interest income 917 280 1,197
Other finance income 29 - 29
Other income 549 196 745
Total operating income 1,495 476 1,971
Total operating expenses 855 290 1,145
Group operating profit before provisions 640 186 826
Provisions for bad and doubtful debts 48 48 96
Amounts written off fixed asset investments 20 16 36
Group operating profit 572 122 694
Income from associated undertakings 5 - 5
Profit on disposal of property 4 - 4
Group profit on ordinary activities before taxation 581 122 703
Taxation on ordinary activities 131 35 166
Group profit on ordinary activities after taxation 450 87 537
Equity and non-equity minority interests in subsidiaries 12 2 14
Dividends on non-equity shares 4 - 4
16 2 18
Group profit attributable to the ordinary shareholders
of Allied Irish Banks, p.l.c. 434 85 519
Dividends on equity shares 149
Transfer to reserves 40
189
Profit retained 330
(unaudited)
Consolidated profit and loss account
for the year ended 31 December 2002
Year 31 December 2002
Continuing Discontinued
Activities Activities
EUR m EUR m EUR m
Interest receivable:
Interest receivable and similar income arising from
debt securities and other fixed income securities 783 163 946
Other interest receivable and similar income 3,164 643 3,807
Less: interest payable (2,117) (285) (2,402)
Net interest income 1,830 521 2,351
Other finance income 63 (1) 62
Other income 1,058 459 1,517
Total operating income 2,951 979 3,930
Total operating expenses 1,747 571 2,318
Group operating profit before provisions 1,204 408 1,612
Provisions for bad and doubtful debts 110 84 194
Provisions for contingent liabilities and commitments 2 - 2
Amounts written off fixed asset investments 43 12 55
Group operating profit 1,049 312 1,361
Income from associated undertakings 9 - 9
Profit / (loss) on disposal of property 6 (1) 5
Group profit on ordinary activities before taxation 1,064 311 1,375
Taxation on ordinary activities 232 74 306
Group profit on ordinary activities after taxation 832 237 1,069
Equity and non-equity minority interests in subsidiaries 20 4 24
Dividends on non-equity shares 8 - 8
28 4 32
Group profit attributable to the ordinary shareholders
of Allied Irish Banks,p.l.c. 804 233 1,037
Dividends on equity shares 429
Transfer to reserves 45
474
Profit retained 563
Consolidated balance sheet (unaudited)
31 December 2002
31 December 2002
Continuing Discontinued
Activities Activities
EUR m EUR m EUR m
Assets
Cash and balances at central banks 996 180 1,176
Items in course of collection 330 841 1,171
Central government bills and other eligible bills 11 13 24
Loans and advances to banks 3,364 1,424 4,788
Loans and advances to customers 43,708 9,739 53,447
Securitised assets 1,002 - 1,002
Less: non-returnable proceeds (754) - (754)
248 - 248
Debt securities 16,046 2,158 18,204
Equity shares 161 85 246
Interests in associated undertakings 31 - 31
Intangible fixed assets 457 - 457
Tangible fixed assets 954 224 1,178
Own shares 21 155 176
Other assets 679 474 1,153
Deferred taxation 95 150 245
Prepayments and accrued income 791 136 927
Long-term assurance business attributable to shareholders 352 - 352
68,244 15,579 83,823
Long-term assurance assets attributable to policyholders 2,226 - 2,226
70,470 15,579 86,049
Liabilities
Deposits by banks 14,883 1,254 16,137
Customer accounts 41,894 11,082 52,976
Debt securities in issue 2,159 918 3,077
Other liabilities 2,458 133 2,591
Accruals and deferred income 725 104 829
Pension liabilities 443 94 537
Provisions for liabilities and charges 49 11 60
Deferred taxation 116 411 527
Subordinated liabilities 1,605 567 2,172
Equity and non-equity minority interests in subsidiaries 181 93 274
Total Liabilities 64,513 14,667 79,180
Shareholders' funds including non-equity interests 4,643
83,823
Long-term assurance liabilities to policyholders 2,226
86,049
APPENDIX 2
Operations by business segment
Profit / (loss) on ordinary activities before
taxation Half-year Year
30 June 2002 31 December 2002
EUR m EUR m
AIB Bank ROI 294 560
AIB Bank GB & NI 117 241
USA Division 117 295
Capital Markets 127 220
Poland Division 31 61
Group 17 (2)
Total AIB Group 703 1,375
The above table shows the profit / (loss) on ordinary activities before taxation
by business segment for the half-year 30 June 2002 and the year 31 December
2002. The business segment profits have been restated to reflect the following:
- The movement of Allied Irish America from USA Division to Capital Markets
Division
- The allocation of pension costs across business segments has been amended.
The normalised pension contribution rate appropriate to individual pension
schemes has been charged to each operating division. The residual impact of
the expected return on pension scheme assets and the interest on pension
scheme liabilities is recorded in Group.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
ALLIED IRISH BANKS, p.l.c.
(Registrant)
Date: 11 June, 2003 By: ___________________
Gary Kennedy
Group Director, Finance,
Risk and Enterprise
Technology
Allied Irish Banks, p.l.c.