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 22 February, 2005
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- ________
Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB)
HIGHLIGHTS - AIB GROUP ANNUAL RESULTS 2004
Adjusted earnings per share EUR 133.1c, up 22%
- up 13% compared to 2003 base of EUR 118.0c(1)
Income / cost gap +4%
Tangible cost income ratio down 2.0% to 56.3%
Currency translation impact, -4% on adjusted EPS growth
Tangible return on equity 29.6%
Tier 1 capital ratio 7.9%
Total dividend of EUR 59.4c, up 10%
Double-digit US$ earnings growth from M&T
EARNINGS AHEAD OF MARKET CONSENSUS DUE TO:
- Lower tax charge - effective rate 23.7%
- Strong fourth quarter business performance, notably in Capital Markets
- Technical adjustments in Ark Life including lower discount rate 7.5%
DIVISIONAL PROFIT PERFORMANCE (2)
AIB BANK ROI up 11%
After incurring EUR50 million investigation related charges Market share gains,
loans up 30%, deposits up 16%
AIB BANK GB & NI up 16%
Loans up 29%, deposits up 15%
CAPITAL MARKETS up 30%
Strong performance in Corporate Banking, Treasury and Investment Banking
POLAND up 135%
Costs down 9%; loans up 6%, deposits up 10%
AIB GROUP CHIEF EXECUTIVE MICHAEL BUCKLEY SAID:
'AIB had a record year in 2004. We had a great blend of earnings, strong profit
growth across all geographies and a wide range of market share gains. Total
shareholder return in 2004 was well ahead of our peers. The momentum in our
business is excellent.'
(1) Before restructuring and early retirement costs in 2003. A base of
EUR 118.0c was established for 2004 comparison with 2003. The adjusted
earnings per share for 2003 including restructuring and early
retirement costs was EUR 109.5c.
(2) 2003 base is before restructuring and early retirement costs, the
sale of Govett and the impact of exchange rate movements on the
translation of foreign locations' profit.
Allied Irish Banks, p.l.c.
Dividend
The Board is recommending a final dividend of EUR 38.5c per share payable on 28
April 2005 to shareholders on the Company's register of members at the close of
business on 4 March 2005. The final dividend, together with the interim dividend
of EUR 20.9c per share, amounts to a total dividend of EUR 59.4c per share, an
increase of 10% on 2003.
The Company's dividend reinvestment plan has been suspended due to the
increasing dilutive impact on earnings per share growth. Accordingly, the 2004
final dividend and future dividends will be paid in cash to all shareholders. A
special low cost dealing facility will be made available to shareholders who
wish to reinvest their dividend.
For further information please contact:
Declan Mc Sweeney Alan Kelly Catherine Burke
Chief Financial Head of Group Head of Corporate
Officer Investor Relations Relations
Bankcentre Bankcentre Bankcentre
Dublin Dublin Dublin
353-1-660-0311 353-1-660-0311 353-1-660-0311
Ext. 14954 Ext. 12162 Ext. 13894
This results announcement and a detailed presentation can be viewed on our
internet site at www.aibgroup.com/investorrelations
Forward-looking statements
A number of statements we make in this document will not be based on historical
fact, but will be 'forward-looking' statements within the meaning of the United
States Private Securities Litigation Reform Act of 1995. Actual results may
differ materially from those projected in the 'forward-looking' statements.
Factors that could cause actual results to differ materially from those in the '
forward-looking' statements include, but are not limited to, global, national,
regional economic conditions, levels of market interest rates, credit or other
risks of lending and investment activities, competitive and regulatory factors
and technology change. Any 'forward-looking' statements made by or on behalf of
the Group speak only as of the date they are made.
Financial highlights
for the year ended 31 December 2004
2004 2003 2002
EUR m EUR m EUR m
Results
Total operating income 3,264 3,176 3,927
Group profit before taxation 1,418 1,011 1,372
Profit attributable 1,047 677 1,034
Profit retained 477 174 560
Per EUR 0.32 ordinary share
Earnings - basic 122.9c 78.8c 119.1c
Earnings - adjusted (note 12) 133.1c 109.5c 122.7c
Earnings - diluted 122.4c 78.4c 117.9c
Dividend 59.40c 54.00c 49.06c
Dividend cover - times 2.0 1.5 2.4
Net assets 628c 587c 471c
Performance measures
Return on average total assets 1.17% 0.90% 1.24%
Return on average ordinary shareholders' equity 20.2% 14.5% 23.7%
Return on average ordinary shareholders' equity - tangible(1) 29.6% 20.0% 27.4%
Balance sheet
Total assets 102,240 80,960 85,821
Shareholders' funds: equity interests 5,399 4,942 4,180
Loans etc 67,156 53,326 58,483
Deposits etc 83,630 66,195 72,190
Capital ratios
Tier 1 capital 7.9% 7.1% 6.9%
Total capital 10.7% 10.4% 10.1%
(1) Tangible shareholders' equity excludes capitalised goodwill of EUR 1.2
billion at 31 December 2004 (2003: EUR 1.4 billion; 2002: EUR 0.5 billion).
In addition, profit attributable has been adjusted to exclude goodwill
amortisation and impairment of EUR 90.4 million at 31 December 2004 (2003:
EUR 72.6 million; 2002: EUR 31.7 million) in arriving at return on average
ordinary shareholders' equity - tangible.
Allied Irish Banks, p.l.c.
Group Headquarters &
Registered Office
Bankcentre, Ballsbridge
Dublin 4, Ireland
Telephone (01) 6600311
Registered number 24173
Consolidated profit and loss account
for the year ended 31 December 2004
2004 2003(1) 2002(1)
Notes EUR m EUR m EUR m
Interest receivable:
Interest receivable and similar income arising from
debt securities and other fixed income securities 888 712 946
Other interest receivable and similar income 4 3,118 2,898 3,807
Less: interest payable 5 (1,970) (1,676) (2,402)
Net interest income 2,036 1,934 2,351
Other finance income 18 12 62
Dividend income 27 16 14
Fees and commissions receivable 1,031 1,038 1,301
Less: fees and commissions payable (131) (125) (138)
Dealing profits 6 96 135 74
Other operating income 7 187 166 263
Other income 1,210 1,230 1,514
Total operating income 3,264 3,176 3,927
Administrative expenses
Staff and other administrative expenses 8(a) 1,713 1,709 2,098
Restructuring costs in continuing businesses 8(b) 9 72 13
1,722 1,781 2,111
Depreciation and amortisation 164 179 207
Total operating expenses 1,886 1,960 2,318
Group operating profit before provisions 1,378 1,216 1,609
Provisions for bad and doubtful debts 14 116 152 194
Provisions for contingent liabilities and commitments 20 9 2
Amounts (written back)/written off fixed asset investments 9 (1) 16 55
Group operating profit 1,243 1,039 1,358
Share of operating profits of associated undertakings 201 143 9
Share of restructuring and integration costs
in associated undertaking - (20) -
Amortisation of goodwill on acquisition of associated undertaking (52) (42) -
Profit on disposal of property 9 32 5
Profit/(loss) on disposal of businesses 10 & 2 17 (141) -
Group profit on ordinary activities before taxation 1,418 1,011 1,372
Taxation on ordinary activities 11 336 318 306
Group profit on ordinary activities after taxation 1,082 693 1,066
Equity and non-equity minority interests in subsidiaries 30 11 24
Dividends on non-equity shares 5 5 8
35 16 32
Group profit attributable to the ordinary shareholders
of Allied Irish Banks, p.l.c. 1,047 677 1,034
Consolidated profit and loss account (continued)
for the year ended 31 December 2004
2004 2003(1) 2002(1)
Notes EUR m EUR m EUR m
Group profit attributable to the ordinary shareholders
of Allied Irish Banks, p.l.c. 1,047 677 1,034
Dividends on equity shares 511 452 429
Transfer to reserves 59 51 45
570 503 474
Profit retained 477 174 560
Earnings per EUR 0.32 ordinary share - basic 12(a) 122.9c 78.8c 119.1c
Earnings per EUR 0.32 ordinary share - adjusted 12(b) 133.1c 109.5c 122.7c
Earnings per EUR 0.32 ordinary share - diluted 12(c) 122.4c 78.4c 117.9c
(1) The consolidated profit and loss account for 2002 reflects the
consolidation of Allfirst for a full year, while the profit and loss
account for 2003 reflects the consolidation of Allfirst for the period to
31 March 2003 (see note 2).
Consolidated balance sheet
31 December 2004
2004 2003
Notes EUR m EUR m
Assets
Cash and balances at central banks 887 838
Items in course of collection 368 339
Central government bills and other eligible bills - 45
Loans and advances to banks 2,320 2,633
Loans and advances to customers 13 64,836 50,490
Securitised assets - 719
Less: non-returnable proceeds - (516)
- 203
Debt securities 15 24,076 18,127
Equity shares 195 180
Interests in associated undertakings 1,317 1,361
Intangible fixed assets 380 420
Tangible fixed assets 785 792
Other assets 2,247 1,507
Deferred taxation 198 174
Prepayments and accrued income 918 636
Long-term assurance business attributable to shareholders 16 467 405
98,994 78,150
Long-term assurance assets attributable to policyholders 16 3,246 2,810
102,240 80,960
Liabilities
Deposits by banks 20,428 18,094
Customer accounts 17 51,397 44,612
Debt securities in issue 11,805 3,489
Other liabilities 3,900 3,144
Accruals and deferred income 911 595
Pension liabilities 676 502
Provisions for liabilities and charges 122 87
Deferred taxation 123 142
Subordinated liabilities 2,765 2,130
Equity and non-equity minority interests in subsidiaries 1,212 158
Share capital 299 295
Share premium account 1,870 1,885
Reserves 977 951
Profit and loss account 2,435 2,007
Shareholders' funds including non-equity interests 5,581 5,138
98,920 78,091
Long-term assurance liabilities to policyholders 16 3,320 2,869
102,240 80,960
Consolidated cash flow statement
for the year ended 31 December 2004
2004 2003 2002
EUR m EUR m EUR m
Net cash inflow/(outflow) from operating activities 3,168 1,631 (121)
Dividends received from associated undertakings 37 33 1
Returns on investments and servicing of finance (111) (93) (138)
Equity dividends paid (340) (378) (345)
Taxation (317) (273) (280)
Capital expenditure and financial investment (4,130) (1,049) 1,379
Acquisitions and disposals 9 (1,049) (5)
Financing 1,744 (173) (129)
Increase/(decrease) in cash 60 (1,351) 362
Reconciliation of Group operating profit to net 2004 2003 2002
cash inflow/(outflow) from operating activities EUR m EUR m EUR m
Group operating profit 1,243 1,039 1,358
(Increase)/decrease in prepayments and accrued income (280) 106 1,162
Increase/(decrease) in accruals and deferred income 302 (95) (1,191)
Provisions for bad and doubtful debts 116 152 194
Provisions for contingent liabilities and commitments 20 9 2
Amounts (written back)/written off fixed asset investments (1) 16 55
Increase in other provisions 33 57 16
Depreciation and amortisation 164 174 207
Profit/(loss) on disposal of businesses 17 (141) -
Interest on subordinated liabilities 68 47 83
Interest on reserve capital instruments 38 38 38
Profit on disposal of debt securities and equity shares (17) (40) (117)
Profit on termination of off-balance sheet instruments (36) - -
Average gains on debt securities held for hedging purposes (2) (1) (4)
Profit on disposal of associated undertakings (1) - (1)
Amortisation of premiums net of (discounts)
on debt securities held as financial fixed assets 24 23 (15)
Increase in long-term assurance business (63) (53) (48)
Net cash inflow from trading activities 1,625 1,331 1,739
Net increase in deposits by banks 2,703 4,207 3,975
Net increase in customer accounts 6,488 5,729 2,299
Net increase in loans and advances to customers (14,420) (10,043) (6,129)
Net decrease in loans and advances to banks 345 591 982
Decrease/(increase) in central government bills 45 (41) 18
Net increase in debt securities and equity shares
held for trading purposes (2,066) (1,216) (1,180)
Net (increase)/decrease in items in course of collection (29) (161) 174
Net increase/(decrease) in debt securities in issue 8,303 1,082 (1,425)
Net increase/(decrease) in notes in circulation 30 41 (3)
Increase in other assets (735) (920) (28)
Increase/(decrease) in other liabilities 737 701 (521)
Effect of exchange translation and other adjustments 142 330 (22)
1,543 300 (1,860)
Net cash inflow/(outflow) from operating activities 3,168 1,631 (121)
Statement of total recognised gains and losses
2004 2003 2002
EUR m EUR m EUR m
Group profit attributable to the ordinary shareholders 1,047 677 1,034
Gain recognised on disposal of Allfirst (note 2) - 489 -
Currency translation differences on foreign currency net investments (69) (457) (341)
Actuarial loss recognised in retirement benefit schemes (197) (50) (823)
Actuarial (loss)/gain recognised in associated undertaking (1) 8 -
Total recognised gains/(losses) relating to the year 780 667 (130)
Reconciliation of movements in shareholders' funds
2004 2003 2002
EUR m EUR m EUR m
Group profit attributable to the ordinary shareholders 1,047 677 1,034
Dividends on equity shares 511 452 429
536 225 605
Gain recognised on disposal of Allfirst (note 2) - 489 -
Goodwill written back on disposals - 1,043 -
Actuarial loss recognised in retirement benefit schemes (197) (50) (823)
Actuarial (loss)/gain recognised in associated undertaking (1) 8 -
Other recognised losses relating to the year (80) (491) (352)
Ordinary share buyback - (812) -
Ordinary shares issued in lieu of cash dividend 134 108 76
Other ordinary share capital issued 71 62 39
Net movement in own shares (20) 141 37
Net addition to/(deduction from) shareholders' funds 443 723 (418)
Opening shareholders' funds 5,138 4,415 4,833
Closing shareholders' funds 5,581 5,138 4,415
Shareholders' funds:
Equity interests 5,399 4,942 4,180
Non-equity interests 182 196 235
5,581 5,138 4,415
Note of historical cost profits and losses
Reported profits on ordinary activities before taxation would not be materially
different if presented on an unmodified historical cost basis.
Commentary on results
Translation of foreign locations' profit
Approximately 50% of the Group's earnings are denominated in currencies other
than the EUR. As a result, movements in exchange rates can have an impact on
earnings growth. In 2004, the US dollar and Polish zloty average accounting
rates weakened relative to the EUR by 9% and 3% respectively and sterling
strengthened relative to the EUR by 1% compared with the year to December 2003.
These rate movements, coupled with hedging profits of EUR 28 million in the year
to December 2003 (EUR 1 million in 2004) had a 4% negative impact on the
adjusted earnings per share growth rate in the year to December 2004.
The following table shows the average accounting rates and average effective
rates for both periods. The average effective rates include the impact of
currency hedging activities.
Average Average Average Average
accounting rates accounting rates effective rates effective rates
2004 2003 2004 2003
US dollar 1.2474 1.1346 1.17 1.01
Sterling 0.6813 0.6901 0.70 0.67
Polish zloty 4.5314 4.4157 4.58 4.28
The following commentary on profit and loss account headings covers continuing
activities, which exclude Allfirst in 2003, and is based on underlying
percentage growth adjusting for the impact of exchange rate movements on the
translation of foreign locations' profit and excludes the transfer of Ark Life's
sales force to AIB's payroll (resulted in higher payroll costs which were
previously recorded as a deduction in other income as part of Ark Life profit).
Allfirst, which was merged with M&T Bank Corporation ('M&T') on 1 April 2003, is
a discontinued activity.
Investigation related charges referred to in the following commentary relate
primarily to the application of prices to foreign exchange products without
regulatory approval. AIB provided EUR 50 million for investigation related
charges and costs with EUR 12 million charged to net interest income, EUR 24
million charged to other income and EUR 14 million of costs included in other
administrative expenses.
"Total income up 11%"
"Group loans up 28%"
Total income
Total income increased by 11% to EUR 3,264 million in 2004.
Year Year Underlying
2004 2003 % Change
Total operating income EUR m EUR m 2004 v 2003
Net interest income 2,036 1,840 11
Other finance income 18 14 28
Other income 1,210 1,124 11
Total operating income 3,264 2,978 11
Commentary on results
Net interest income
Net interest income increased by 11% to EUR 2,036 million after incurring EUR 12
million of investigation related charges. Strong and deposit growth in Republic
of Ireland and GB & NI divisions as well as exceptional loan growth in Corporate
Banking were key factors generating the increase. Loans to customers increased
by 28% and customer accounts increased by 14% on a constant currency basis since
December 2003 (details of loan and deposit growth by division are contained on
page 14 of this release).
Half-year Half-year Year Year
Dec 2004 June 2004 % 2004 2003 %
EUR m EUR m Change (1) Average interest earning EUR m EUR m Change (1)
assets - continuing
activities
88,543 79,986 11 Average interest earning 84,288 68,270 23
assets
(1) This particular analysis is not adjusted for the impact of exchange rate
movements.
Half-year Half-year Basis Year Year Basis
Dec 2004 June 2004 point 2004 2003 point
% % change Net interest margin - % % change
continuing activities (2)
2.38 2.46 -8 Net interest margin 2.42 2.70 -28
Business margin -20
Technical margin -8
(2) The net interest margin for AIB Group for the year to December 2003 is
included on page 39 of this release.
As disclosed in our interim results announcement, AIB introduced a new policy in
respect of the investment of its capital funds. This action increased our
balance sheet debt securities with a corresponding reduction in off balance
sheet derivatives, the effect of which has increased reported average interest
earning assets with no impact on net interest income except for any reduction in
yield. This technical factor reduced the reported net interest margin by 8 basis
points.
Half-year Half-year Basis Year Year Basis
Dec 2004 June 2004 point 2004 2003 point
% % change Domestic and foreign margins - continuing activities % % change
2.18 2.20 -2 Domestic 2.19 2.54 -35
2.81 2.99 -18 Foreign 2.90 2.98 -8
2.38 2.46 -8 Net interest margin - continuing activities 2.42 2.70 -28
The domestic margin for the year, adjusted for the technical factor, was down 24
basis points compared with 2003 and the foreign margin decreased by 8 basis
points. The domestic margin in the second half was 2 basis points lower than the
first half and the foreign margin declined 18 basis points on the first half.
AIB Group manages its business divisionally on a product margin basis with
funding and groupwide interest exposure centralised and managed by Global
Treasury. While a domestic and foreign margin is calculated for the purpose of
statutory accounts, the analysis of net interest margin trends is best explained
by analysing business factors as follows: The Group net interest margin was
2.42% in 2004, with the business margin reducing by 20 basis points on 2003.The
margin reduction was due to a continuation of trends evident in 2002 and 2003
with loans increasing at a stronger rate than deposits, higher growth in mid-
market loans in the Republic of Ireland and the United Kingdom, a changing mix
of products, growth in our international corporate operations and the impact of
low interest rates on deposit margins and capital income.
Average loans increased at over double the rate of deposits compared with 2003
and was the largest factor in the margin reduction. While this strong lending
growth generated good incremental profit, the funding impact resulted in a
reduction in the overall net interest margin calculation when net interest
income is expressed as a percentage of average earning assets.
While it is difficult to disaggregate trends in product margins between mix and
competitive factors, competitive pricing behaviour did have some impact on
deposit margins in Ireland and the United Kingdom. Our new business lending
continued to meet our targeted return on economic capital hurdles. The full year
impact in 2004 of ECB and Polish interest rate cuts in 2003 also had a negative
impact on retail deposit margins.
The structural effect of loans growing faster than deposits and changes in
business mix are expected to be continuing features with consequent impact on
the net interest margin calculation. Our expectation is that the Group net
interest margin will again reduce by around 20 basis points in 2005.
Commentary on results
"Other income up 11% after incurring euro24 million of
investigation related charges"
"Buoyant loan arrangement fees"
"Change in Ark Life discount rate - Profit up 18%"
Other income
Other income at EUR 1,210 million was up 11%.
Year Year Underlying
2004 2003 % Change
Other income EUR m EUR m 2004 v 2003
Dividend income 27 15 80
Banking fees and commissions 873 830 6
Asset management and investment banking fees 158 128 23
Fees and commissions receivable 1,031 958 8
Less: fees and commissions payable (131) (117) 12
Dealing profits 95 103 -6
Contribution of life assurance company 72 60 18
Profit on termination of off-balance sheet instruments 36 - -
Other 79 81 -
Other operating income 187 141 34
Hedging profits 1 24 -
Total other income 1,210 1,124 11
Banking fees and commissions increased by 6%, or 9% excluding EUR 24 million of
investigation related charges and amounted to over 70% of other income. The
strong growth reflects increased business volumes and strong growth in lending
related fees in Republic of Ireland, GB & NI and Corporate Banking. In Poland
there was good growth in international payment fees and credit card income.
Investment banking revenues were higher due to particularly strong growth in
Goodbody Stockbrokers and a good increase in AIB Corporate Finance. Asset
Management revenues were lower following the sale, in November 2003, of Govett
to Gartmore Investment Management p.l.c.
Ark Life profit was EUR 72 million compared with the 2003 profit of EUR 60
million. The profit increase included EUR 12 million from a reduction in the
discount rate used in the calculation of its embedded value profit after
providing for the solvency margin. The discount rate was reduced from 10% to
7.5% in the fourth quarter.
Included in other income was a gain of EUR 36 million from closing out capital
invested positions in January 2004 resulting from the introduction of a new
policy in respect of the investment of AIB's capital funds.
Dividend income increased significantly reflecting a very strong increase in
Poland.
The other income as a percentage of total income reduced from 38.2% to 37.6%.
Commentary on results
"Tangible cost income ratio down 2.0% to 56.3%"
"Additional investment in groupwide information systems to meet
new regulatory initiatives"
Total operating expenses
Operating expenses increased by 7% compared with 2003,(excluding restructuring
and early retirement costs in both years and the Ark Life sales force
reorganisation in 2003).
Year Year Underlying
2004 2003 % Change
Operating expenses EUR m EUR m 2004 v 2003
Staff costs 1,132 1,082 5
Other costs 581 515 13
Depreciation and amortisation 164 170 -3
Operating expenses before restructuring/early retirement costs 1,877 1,767 7
Early retirement costs - 62
Restructuring costs in continuing businesses 9 10
Total operating expenses 1,886 1,839
The increase of 7% includes euro14 million of costs relating to the
investigation. Excluding these costs the increase was 6%. The growth of 6%
should be viewed in the context of significantly higher business volumes and
buoyant revenue growth.
Staff costs were up 5% due to higher business activity levels and normal salary
increases partly offset by some benefits from the early retirement programme
provided for in 2003. Other costs increased by 13%,or 11% excluding
investigation related charges. The 11% increase includes consultancy and other
costs to facilitate AIB's preparation for Basel II, Sarbanes Oxley and IFRS,
strengthening of compliance and internal audit structures and investment in
growth businesses.
Depreciation and amortisation decreased by 3% reflecting lower depreciation in
Poland following branch rationalisations in 2003 and the sale of AIB's IFSC
property in 2003.
Productivity improved significantly with the tangible cost income ratio reducing
to 56.3% from 58.3% in 2003.
Commentary on results
"Lower provision charge at 20 basis points"
"Prudent provision cover"
"NPLs as a percentage of loans declining"
Provisions
Total provisions decreased from EUR 167 million in 2003 to EUR 135 million in
2004.
Year Year
2004 2003
Provisions EUR m EUR m
Bad and doubtful debts 116 142
Contingent liabilities and commitments 20 9
Amounts (written back)/written off fixed asset investments (1) 16
Total provisions 135 167
The provision for bad and doubtful debts was EUR 116 million compared with EUR
142 million in 2003,representing a charge of 0.20% of average loans compared
with 0.30% in 2003. The reduction reflected strong asset quality across
divisions and favourable economic environments in 2004. There was a reduction in
non- performing loans as a percentage of total loans from 1.4% at 31 December
2003 to 1.2% at 31 December 2004 and provision coverage for non-performing loans
was 87%.
Asset quality was strong in AIB Bank Republic of Ireland where non-performing
loans reduced to 0.6% of average loans from 0.8% in 2003. There was also a
reduction in the provision charge as a percentage of average loans from 0.24% to
0.14% in 2004. The provision benefited from recoveries with all portfolios
proving robust.
In AIB Bank GB & NI, provision experience was particularly good with the bad
debt charge reducing from 0.21% to 0.11% in 2004. Non-performing loans increased
from 0.8% to 1.0% at 31 December 2004 but underlying trends remained positive.
Asset quality in Capital Markets was strong with non-performing loans remaining
at 0.8% and the provision charge at 0.27% of average loans.
In Poland, the provision charge reduced to 0.9% of loans from 1.0% in 2003
including a EUR 4 million general provision release. Asset quality continued to
improve with non-performing loans continuing a downward trend and as a
percentage of loans declined to 8.4% from 10.9%.
Provisions for contingent liabilities and commitments increased from EUR 9
million in 2003 to EUR 20 million in 2004 while provisions for amounts (written
back)/written off fixed asset investments decreased from EUR 16 million to a net
credit of EUR 1 million in 2004.
Share of operating profits of associated undertakings
The operating profit in 2004 was EUR 201 million compared to EUR 143 million in
2003 and mainly reflects AIB's 22.5% share of the income before taxes of M&T
Bank Corporation, under Irish GAAP, for the year 2004 and the period from 1April
2003 to 31 December 2003.
Commentary on results
The following commentary is in respect of the total Group.
"AIB Bank Republic of Ireland deposits particularly strong, up 16%"
"Lower effective tax rate - some taxation provision releases"
"Tangible return on equity at 29.6%"
"Strong capital position - Tier 1 ratio at 7.9%"
Balance sheet
Total assets amounted to EUR 102 billion at 31 December 2004 compared to EUR 81
billion at 31 December 2003. Adjusting for the impact of currency, total assets
and loans to customers were up 26% and 28% respectively since 31 December 2003
while customer accounts increased by 14%. Risk weighted assets excluding
currency factors increased by 26% to EUR 79 billion.
Risk weighted assets, loans to customers and customer accounts (excluding money
market funds and currency factors)
Risk weighted Loans to Customer
assets customers accounts
% change December 2004 v December 2003 % Change % Change % Change
AIB Bank Republic of Ireland 29 30 16
AIB Bank GB & NI 25 29 15
Capital Markets 25 31 6
Poland 16 6 10
AIB Group 26 28 14
Assets under management/administration and custody
Assets under management in the Group amounted to EUR 13 billion and assets under
administration and custody amounted to EUR 183 billion at 31 December 2004.
Taxation
The taxation charge was EUR 336 million compared with EUR 318 million in 2003.
The effective tax rate was 23.7% compared with 31.4% in 2003 (24.0% having
adjusted for taxation arising on the Allfirst / M&T transaction and the sale of
Govett). The effective tax rate is influenced by the geographic mix of profits
which are taxed at the rates applicable in the foreign jurisdictions.
Return on equity and return on assets
The tangible return on equity increased to 29.6% compared to 20% in 2003. The
basic return on equity increased to 20.2% from 14.5% in 2003 and the return on
assets was 1.17%, up from 0.90% in 2003.
Capital ratios
The Group was strongly capitalised at 31 December 2004 with the Tier 1 ratio at
7.9% and the total capital ratio at 10.7%. These ratios include the
EUR 1.0 billion of perpetual preferred securities issued in December 2004.
Commentary on results
"Outlook - business expected to continue to perform very strongly"
Commentary on half-year December 2004 performance
Adjusted earnings per share increased by 7% in the half-year to December 2004
compared with the half-year to June 2004. There was strong business momentum in
the second half with all divisions performing well. Loan and deposit volumes
increased by 29% and 18% respectively on an annualised basis since 30 June 2004.
Capital Markets performed very well and enjoyed a very strong fourth quarter
performance. In Ark Life, there were technical adjustments, including a
reduction in the discount rate used in the calculation of its embedded value
profits from 10% to 7.5% generating profit of EUR 12 million, after providing
for the solvency margin.
In the second half the effective tax rate was lower, benefiting from some
taxation provision releases.
The strong business momentum coupled with the above mentioned items delivered a
particularly strong second half adjusted earnings per share of EUR 68.7c.
Outlook
Accounts for 2005 will be prepared under IFRS for the first time. This will also
result in a restatement of 2004 results in line with IFRS. To facilitate
shareholders the following outlook is prepared on the traditional Irish GAAP
basis, as it allows the use of these 2004 accounts as a reference base. Adjusted
earnings per share amounted to EUR 133.1c in 2004. This outcome benefited from
some taxation provision releases and technical adjustments in Ark Life.
Our business is expected to continue to perform very strongly and we are
anticipating another year in 2005 of buoyant loan and deposit growth. The
decline in the US dollar will affect the EUR translation of these profits, with
an overall negative impact of approximately 1% to 2% in earnings per share
growth terms anticipated from currency translation of earnings. Based on these
factors our guidance for adjusted earnings per share growth in 2005 on an Irish
GAAP basis would be for a range of EUR 142c to EUR 144c.
Implementation of International Financial Reporting Standards
AIB's primary financial statements for the year ended 31 December 2004 are
prepared in accordance with Irish generally accepted accounting principles ('IR
GAAP') which differ in certain significant respects from International Financial
Reporting Standards ('IFRS'). Arising from the adoption of a regulation by the
European Commission, from 1 January 2005, the Group accounts of all listed
companies in the European Union ('EU') are required to be completed on the basis
of IFRS as adopted by the EU. The objective is to improve financial reporting
and enhance transparency to assist the free flow of capital throughout the EU
and to improve the efficiency of the capital markets. AIB intends to implement
IFRS in such a manner as to comply with EU endorsed IFRS as well as ensuring
compliance with IFRS as issued by the International Accounting Standards Board
('IASB').
A groupwide programme has been in place since 2003 to ensure full compliance
with IFRS in 2005. The significant deliverables include the necessary
adjustments to the Group accounting policies, training so as to ensure the
requirements are met, addressing the business impacts and making the necessary
adjustments to the Group's accounting and reporting systems, including
replacement where necessary. Progress is monitored by a Group level steering
committee.
While many of the uncertainties concerning whether and how IFRS will be adopted
for use in the EU have been resolved, some questions remain, particularly
regarding the adoption of amendments to standards, interpretative guidance
issued by the IASB/International Financial Reporting Committee ('IFRIC') and the
requirements of companies legislation. This could have an effect on the 2005
financial statements. In addition, there remains some uncertainty as to the
impact that the new accounting treatments will have on the calculation of
regulatory capital.
The IFRS implementation work is nearing completion, although conversion work
including verifying the accuracy of the opening balances will continue during
2005.The audit of the impact of transition to IFRS has not been completed at the
date of this release. It is intended that restated comparative data for 2004
excluding the impact of IAS32 and IAS39 on financial instruments and IFRS 4 on
insurance contracts, together with the opening 2005 IFRS balance sheet including
these standards will be issued in the second quarter of 2005.AIB's first results
prepared under IFRS will be published in the interim report for the six months
to 30 June 2005.
Divisional commentary
On a divisional basis profit is measured in EUR and consequently includes the
impact of currency movements. The underlying percentage change is reported in
the divisional profit and loss accounts adjusting for the impact of exchange
rate movements on the translation of foreign locations' profit. The profit
segments by division for 2003 have been restated to reflect a change in the
allocation of pension costs across business segments. Previously business
segments accounted for the normalised pension contribution rate appropriate to
individual pension schemes. The full impact of FRS 17 (Retirement Benefits) is
now charged to each operating division. Each division now accounts for the full
service cost, the expected return on pension scheme assets and the interest on
pension scheme liabilities.
AIB Bank Republic of Ireland profit was up 11%
"Banking operations profit up 19%"
"Strong volume growth; loans +30%, deposits +16%"
"Ark Life discount rate reduced from 10.0% to 7.5% (+EUR 12 million)"
"EUR 50 million investigation related charges incurred"
AIB Bank Republic of Ireland Retail and commercial banking operations in
Republic of Ireland, Channel Islands and Isle of Man; AIB Finance and Leasing;
Card Services; and AIB's life and pensions subsidiary Ark Life Assurance
Company.
Year 2003
before early Early Year
Year retirement retirement 2003
2004 costs costs as reported Underlying
AIB Bank Republic of Ireland profit and loss EUR m EUR m EUR m EUR m % change(1)
account
Net interest income 1,126 1,016 - 1,016 11
Other finance income 20 17 - 17 22
Other income 399 389 - 389 1
Total operating income 1,545 1,422 - 1,422 8
Operating expenses 812 747 - 747 8
Early retirement costs - - 40 40 -
Total operating expenses 812 747 40 787 8
Operating profit before provisions 733 675 (40) 635 9
Provisions 44 62 - 62 -29
Operating profit 689 613 (40) 573 12
Share of operating profits of associated (1) - - - -
undertakings
Profit on disposal of property 7 13 - 13 -
Profit on ordinary activities before taxation 695 626 (40) 586 11
The divisional profit increase of 11% included EUR 50 million of investigation
related charges. The profit was up 19% before these charges. Operating income
and operating expenses were both up 8%. Excluding the investigation related
charges these growth rates were 11% and 6% respectively, demonstrating a strong
operating income/cost gap.
Banking operations performed strongly with profit increasing by 19%.
Particularly strong loan and deposit growth, higher productivity and a reduced
bad debt provision charge were the key performance drivers. Loans increased by
30% and deposits performed particularly well with a 16% increase since 31
December 2003. Operating expenses were up 6% excluding the transfer of the Ark
Life sales force to AIB's payroll and investigation related costs. Higher levels
of business volumes and customer activity coupled with normal salary increases
were the main drivers of the 6% increase. The cost income ratio was 52.5% and
was impacted by the EUR 50 million investigation related charges, excluding
these the ratio decreased to 50.4%.
There was a particularly good increase in AIB Card Services profit resulting
from higher loan volumes, a 21% increase in merchant turnover, good growth in
fee income reflecting higher consumer spending and a lower bad debt charge. In
AIB Finance and Leasing, profit was higher reflecting a 17% increase in loan
volumes and a lower bad debt charge.
Ark Life reported profit of EUR 72 million, an 18% increase compared with the
2003 profit of EUR 60 million. The profit increase included EUR 12 million from
a reduction in the discount rate used in the calculation of its embedded value
profit after providing for the solvency margin. The discount rate was reduced
from 10% to 7.5% in the fourth quarter. While Annual Premium Equivalent (APE)
sales marginally decreased from EUR 104 million to EUR 100 million, there was a
significant increase of 30% in new pension APE sales.
(1) Excludes currency movements and the impact of the transfer of the Ark Life
sales force to AIB's payroll.
Divisional commentary
AIB Bank GB & NI profit was up 16%
"Strong double-digit profit growth"
"Loans up 29%, deposits up 15%"
"Lower bad debt charge"
AIB Bank GB & NI Retail and commercial banking operations in Great Britain and
Northern Ireland.
Year 2003
before early Early Year
Year retirement retirement 2003
2004 costs costs as reported Underlying
AIB Bank GB & NI profit and loss account EUR m EUR m EUR m EUR m % change
Net interest income 411 364 - 364 12
Other finance income (6) (5) - (5) 8
Other income 191 165 - 165 14
Total operating income 596 524 - 524 12
Operating expenses 295 261 - 261 11
Early retirement costs - - 15 15 -
Total operating expenses 295 261 15 276 11
Operating profit before provisions 301 263 (15) 248 13
Provisions 13 19 - 19 -35
Operating profit 288 244 (15) 229 17
Profit on disposal of property 1 2 - 2 -
Profit on ordinary activities before taxation 289 246 (15) 231 16
AIB Bank GB & NI continued its strong business performance in the year to 31
December 2004 with profit before taxation increasing by 16%. Loans and deposits
increased by 29% and 15% respectively since 31 December 2003. Other income
increased by 14%, mainly due to higher levels of arrangement fees, reflecting
the growth in the loan book. While investment continued in future business
development capability and regulatory driven projects, the cost income ratio
reduced to 49.5%. Credit quality also remained robust and was reflected in a 35%
decrease in the bad debt provision charge compared to 2003.
Allied Irish Bank (GB), primarily a business bank, achieved very significant
profit growth of 21% to euro149 million in 2004. There was very substantial
expansion in our business base with loans and deposits increasing by 33% and 19%
respectively. Significant growth was achieved in niche corporate markets, in
line with strategic targets and this focus has now been extended to include the
hotel and healthcare sectors. Future business capacity continues to be enhanced
with five business development offices and two full business banking branches
opened in the year. For the sixth consecutive occasion, 'Britain's Best Business
Bank' award from the Forum of Private Business was won by Allied Irish Bank (GB)
with the improved score reflecting growing out-performance in customer
satisfaction, relative to our competitors.
First Trust Bank, a retail bank in Northern Ireland, also reported good profit
growth with a 12% increase to EUR 140 million. Loans and deposits were buoyant,
up 23% and 10% respectively with strong growth emanating from corporate and home
mortgage lending activity, resulting in increased market share. The cost income
ratio was maintained at 49%. Automation of delivery channels and improving
marketing and customer relationship systems will further enhance productivity in
2005.
Divisional commentary
Capital Markets profit was up 30%
"Exceptional growth in Corporate Banking profit"
"Strong profit growth in Treasury and Investment Banking"
Capital Markets Global Treasury, Corporate Banking, Investment Banking and
Allied Irish America ('AIA').
Year 2003
before loss on Loss on
disposal of disposal of
Govett/early Govett/early Year
Year retirement retirement 2003
2004 costs costs as reported Underlying
Capital Markets profit and loss account EUR m EUR m EUR m EUR m % change
Net interest income 359 312 - 312 16
Other finance income 3 2 - 2 38
Other income 389 365 - 365 9
Total operating income 751 679 - 679 12
Operating expenses 403 391 - 391 5
Early retirement costs - - 3 3 -
Total operating expenses 403 391 3 394 5
Operating profit before provisions 348 288 (3) 285 22
Provisions 29 46 - 46 -37
Operating profit 319 242 (3) 239 34
Share of operating profits of associated 6 7 - 7 -26
undertakings
Profit/(loss) on disposal of businesses 4 7 (153) (146) -
Profit on ordinary activities before 329 256 (156) 100 30
taxation
Profit before taxation increased by 30% reflecting a very strong performance
across each business area.
Corporate Banking performed exceptionally with operating profit up 30% and pre-
tax profit up 54% on the comparative period. We experienced significant customer
loan growth in both the domestic and international businesses leading to a 32%
increase in advances in 2004. International businesses continued to experience
substantial profit growth, notably in acquisition finance, structured finance,
United Kingdom and US banking units. We retain a rigorous approach to credit
risk management and continue to seek to optimise value in a quality loan
portfolio.
Global Treasury profit was 20% ahead of the comparative period. Our wholesale
business performed very strongly, despite having exceptionally low trading risk
limits at work during the year. We were well positioned to take advantage of
movements in interest rates and credit spreads and generated substantial value
from our trading activities. Our customer business continued to perform very
well.
Investment Banking profit was substantially ahead of 2003. Strong profit growth
experienced in stockbroking services, equity trading, and corporate advisory
work was underpinned by substantial market share gains across each of these
businesses.
The tangible cost income ratio reduced substantially from 57% in 2003 to 52% in
2004. Operating expenses were 5% higher than 2003 reflecting a substantial
investment in the growth of our business internationally and a higher level of
variable costs.
Total provisions declined due to a lower credit related charge, reflecting the
strong quality of our credit portfolio together with a significantly reduced
level of equity investment write-downs compared to 2003.
Divisional commentary
Poland profit was EUR 80 million, up 135%
"Substantial increase in Poland division profit"
"Good growth recorded in other income"
"Benefits of restructuring programme being realised"
Poland Bank Zachodni WBK ('BZWBK'), in which AIB has a 70.5% shareholding,
together with its subsidiaries and associates. BZWBK Wholesale Treasury and
share of Investment Banking subsidiaries results are reported in Capital Markets
division.
Year 2003
before Year
Year restructuring Restructuring 2003
2004 costs costs as reported Underlying
Poland profit and loss account EUR m EUR m EUR m EUR m % change(1)
Net interest income 174 175 - 175 2
Other income 188 170 - 170 13
Total operating income 362 345 - 345 8
Operating expenses 268 298 - 298 -9
Restructuring costs - - 10 10 -
Total operating expenses 268 298 10 308 -9
Operating profit before provisions 94 47 (10) 37 67
Provisions 29 31 - 31 -4
Operating profit 65 16 (10) 6 119
Share of operating profit of associated 1 - - - -
undertakings
Profit on disposal of property 1 - - - -
Profit on disposal of businesses 13 4 - 4 -
Profit on ordinary activities before 80 20 (10) 10 135
taxation
The profit before taxation was EUR 80 million in 2004 compared with EUR 10
million in 2003. Excluding restructuring costs of EUR 10 million in 2003, the
profit on a local currency basis increased by 135%.
Net interest income increased by 2% with increased volumes in both loans and
deposits offset by lower deposit margins. Demand for lending products improved
with performing loans up 10% since 31 December 2003. Growth was recorded in key
strategic products, namely mortgages, commercial leasing and credit cards.
Business loans performed well in a difficult environment when overall demand for
credit in the market declined in the period. Customer deposits performed
strongly, particularly in the second half year benefiting from higher interest
rates and better economic climate and were up 10% on 31 December 2003.
Other income growth of 13% was driven by exceptional dividend income, strong
growth in international payment fees, asset management and distribution fees and
brokerage revenues.
Operating expenses were lower by 9%. This reflects the ongoing focus on strong
cost management together with the realisation of benefits of previous
restructuring. Staff numbers have decreased by over 3,500 since the merger of
WBK and Bank Zachodni in 2001 and now stand at approximately 7,500 in December
2004 (7,800 in December 2003). Staff costs reduced by 5%, operating costs by 8%
and depreciation by 19%.
The provision experience across the portfolio improved considerably in the year,
with the exception of provisions raised on a very small number of corporate
cases. The charge as a percentage of average loans declined from 1.0% in 2003 to
0.9% in 2004 including a EUR 4 million general provision release. The downward
trend in non-performing loans continued with non-performing loans as a
percentage of total loans declining from 10.9% to 8.4%.
The profit on disposal of business relates to the sale in April 2004 of
CardPoint S.A., a merchant acquiring business responsible for card payment
processing.
(1) Percentage growth excludes restructuring costs and currency movements. As
goodwill is a EUR denominated asset, goodwill amortisation is excluded when
calculating trends on a constant currency basis.
Divisional commentary
Group
Group includes interest income earned on capital not allocated to divisions, the
funding cost of certain acquisitions, hedging in relation to the translation of
foreign locations' profit, unallocated costs of enterprise technology and
central services, and the contribution from AIB's share of approximately 22.5%
in M&T Bank Corporation ('M&T').
Year 2003
before early Early Year
Year retirement retirement 2003
2004 costs costs as reported
Group profit and loss account EUR m EUR m EUR m EUR m
Net interest income (34) (20) - (20)
Other finance income 1 - - -
Other income 43 38 - 38
Total operating income 10 18 - 18
Operating expenses 99 66 - 66
Restructuring and early retirement costs 9 - 4 4
Total operating expenses 108 66 4 70
Operating loss before provisions (98) (48) (4) (52)
Provisions 20 8 - 8
Operating loss (118) (56) (4) (60)
Share of operating profits of associated undertaking - M&T 195 136 - 136
Share of restructuring and integration costs in associated - (20) - (20)
undertaking - M&T
Amortisation of goodwill on acquisition of associated (52) (42) - (42)
undertaking - M&T
Profit on disposal of property - 17 - 17
Profit on disposal of business - 1 - 1
Profit on ordinary activities before taxation 25 36 (4) 32
Group reported profit of EUR 25 million for 2004 compared with a profit of EUR
32 million in 2003 (EUR 36 million excluding early retirement costs).
Net interest income decreased due to lower capital income as a result of lower
investment yields. Other income included gains of euro36 million (EUR 23 million
net of loss of yield) made in relation to closing out capital invested
positions. Other income in 2003 included euro28 million hedging profits in
relation to foreign currency translation exposure compared to a profit of EUR 1
million in 2004.
Operating expenses were higher facilitating AIB's preparation for Basel II and
Sarbanes Oxley. During 2004 there were costs relating to preparation for IFRS,
strengthening of compliance and internal audit structures and higher pension
service costs and corporate donations.
Restructuring costs were EUR 9 million in 2004 relating to a write-down of
property values at Group level. There were early retirement costs of EUR 4
million in 2003.
Provisions increased from EUR 8 million in 2003 to EUR 20 million in 2004.
AIB's share of M&T profit in 2004 amounted to EUR 195 million, before goodwill
amortisation. On a local currency basis M&T's contribution to AIB of US$ 243
million increased by 15% relative to the Allfirst quarter March 2003 combined
with M&T nine months to December 2003 contribution of US$ 212 million excluding
restructuring costs. M&T reported its full year results on 11 January 2005,
showing strong earnings growth with US GAAP-basis diluted earnings per share up
21% to US$ 6.00 from US$ 4.95 in 2003. Diluted net operating earnings per share,
which excludes the amortisation of core deposit and other intangibles and merger
related expenses, was US$ 6.38, up 12% from US$ 5.70.
In 2003 there was a profit of EUR 17 million from the sale of AIB's IFSC
property.
Notes
1 Accounting policies and presentation of financial information
The currency used in these accounts is the EUR which is denoted by 'EUR' or the
symbol EUR.
Change in accounting policy and divisional restatements
(a) Derivatives
The Group has amended its policy in respect of the accounting for termination of
derivative transactions held to hedge the impact of fluctuations in interest
rates on the income stream on the Group's capital fund. Previously it was Group
policy that, on early termination of all non-trading derivative transactions,
any realised gain or loss was deferred and amortised to net interest income over
the life of the original hedge, as long as the designated assets or liabilities
remained. This policy has not been amended in respect of hedging positions
generated from the Group's retail businesses and treasury operations. Non-
trading derivatives held for hedging purposes are accounted for on an accruals
basis. Upon early termination of derivative transactions, classified as hedges
of the income stream on Group capital, any realised gain or loss is taken to
profit and loss account as it arises. The change in accounting policy follows a
revision in the Bank's policy with respect to the investment of its capital
funds. The directors believe that the new accounting policy is more appropriate
than the previous accounting policy in dealing with the financial impact of this
revision because of the manner in which the Group's capital funds are now
managed.
The change in accounting policy had a positive impact of EUR 23m in the year
ended 31 December 2004.The change in accounting policy has no impact on the
reported numbers for prior years.
(b) Divisional restatements
The profit segments by division have been restated to reflect a change in the
allocation of pension costs across business segments. Previously business
segments accounted for the normalised pension contribution rate appropriate to
individual pension schemes. The full impact of FRS 17 (retirement benefits) is
now charged to each operating division. Each division now accounts for the full
service cost, the expected return on pension scheme assets and the interest on
pension scheme liabilities.
2 Acquisition of a strategic stake in M&T Bank Corporation. Disposal of Allfirst
Financial Inc.
AIB's US subsidiary, Allfirst, was acquired by M&T on 1 April 2003. AIB received
26.7 million M&T shares, representing a stake of approximately 22.5% in the
enlarged M&T, together with US$ 886.1m in cash. The agreement allowed for the
cash consideration to be reduced by the amount of a pre-close dividend from
Allfirst to AIB and prior to closing a dividend of US$ 865.0m was declared and
paid by Allfirst Financial Inc. Consequently, the cash consideration payable by
M&T reduced to US$ 21.1m.
The transaction is accounted for in accordance with the Urgent Issue Task Force
Abstract No.31 'Exchanges of businesses or other non-monetary assets for an
interest in a subsidiary, joint venture or an associate' ('UITF31'). Under UITF
31, the transaction is accounted for as an exchange of 77.5% of Allfirst for
22.5% of M&T pre-merger. Under this approach, the 22.5% of Allfirst that is
owned by AIB, both directly before the transaction and indirectly thereafter, is
treated as being owned throughout the transaction. The total recognised gains
arising from the transaction amounted to EUR 449m (after tax) and was reflected
in the accounts for the year ended 31 December 2003 as follows:-
Gain recognised on the disposal of Allfirst EUR m
Recognised in the profit and loss account (40)
Recognised in the statement of total recognised gains and losses 489
449
The transaction gave rise to a profit before tax of EUR 1m (loss of EUR 40m
after tax). In accordance with the requirements of UITF 31, the unrealised
element of the gain, of EUR 489m,has been recognised in the statement of total
recognised gains and losses.
The consolidated profit and loss account for the year ended 31 December 2002
reflects the consolidation of Allfirst for a full year, while the profit and
loss account for the year ended 31 December 2003 reflects the consolidation of
Allfirst for the period to 31 March 2003.
To facilitate comparisons to the year ended 31 December 2004 financial
statements presented in this Media Release, the consolidated profit and loss
accounts for the years ended 31 December 2003 and 31 December 2002,split between
continuing and discontinued activities (arising from the disposal of Allfirst
Financial Inc. on 1 April 2003), have been presented in the Additional Financial
Information section on page 40 of this Media Release.
Notes
Year 31 December 2004
AIB Bank AIB Bank Capital Poland Group Total
ROI GB&NI Markets
3 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m
Operations by business segments(1)
Net interest income 1,126 411 359 174 (34) 2,036
Other finance income 20 (6) 3 - 1 18
Other income 399 191 389 188 43 1,210
Total operating income 1,545 596 751 362 10 3,264
Total operating expenses 812 295 403 268 108 1,886
Provisions 44 13 29 29 20 135
Group operating profit/(loss) 689 288 319 65 (118) 1,243
Share of operating (loss)/profit
of associated undertakings (1) - 6 1 195 201
Amortisation of goodwill on
acquisition of associated undertaking - - - - (52) (52)
Profit on disposal of property 7 1 - 1 - 9
Profit on disposal of businesses - - 4 13 - 17
Group profit on ordinary
activities before taxation 695 289 329 80 25 1,418
Balance sheet
Total loans 35,671 13,755 13,798 3,765 167 67,156
Total deposits 28,424 9,084 40,537 5,452 133 83,630
Total assets 43,065 15,082 32,398 6,666 5,029 102,240
Total risk weighted assets 31,194 12,531 29,650 4,238 926 78,539
Net assets (2) 2,145 861 2,038 291 64 5,399
Notes
Year 31 December 2003(3)
AIB Bank AIB Bank Capital Poland Group Allfirst Total
ROI GB&NI Markets
3 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m EUR m
(continued)
Operations by business
segments (1)
Net interest income 1,016 364 312 175 (20) 87 1,934
Other finance income 17 (5) 2 - - (2) 12
Other income 389 165 365 170 38 103 1,230
Total operating income 1,422 524 679 345 18 188 3,176
Total operating expenses 787 276 394 308 70 125 1,960
Provisions 62 19 46 31 8 11 177
Group operating 573 229 239 6 (60) 52 1,039
profit/(loss)
Share of operating profits - - 7 - 136 - 143
of associated undertakings
Share of restructuring and
integration costs in associated - - - - (20) - (20)
undertaking
Amortisation of goodwill
on acquisition of associated - - - - (42) - (42)
undertaking
Profit on disposal of 13 2 - - 17 - 32
property
(Loss)/profit on disposal - - (146) 4 1 - (141)
of businesses
Group profit on ordinary
activities before taxation 586 231 100 10 32 52 1,011
Balance sheet
Total loans 27,428 10,353 12,404 2,939 202 - 53,326
Total deposits 24,572 7,881 29,318 4,222 202 - 66,195
Total assets 34,101 11,643 28,365 5,301 1,550 - 80,960
Total risk weighted assets 24,119 10,055 24,506 3,259 676 - 62,615
Net assets (2) 1,904 794 1,934 257 53 - 4,942
Year 31 December 2002(3)
AIB Bank AIB Bank Capital Poland Group Allfirst Total
ROI GB & NI Markets
EUR m EUR m EUR m EUR m EUR m EUR m EUR m
Operations by business
segments (1)
Net interest income 921 363 313 263 (25) 516 2,351
Other finance income 40 (1) 7 - 18 (2) 62
Other income 353 166 382 165 - 448 1,514
Total operating income 1,314 528 702 428 (7) 962 3,927
Total operating expenses 681 266 405 341 54 571 2,318
Provisions 55 22 63 46 (30) 95 251
Group operating 578 240 234 41 (31) 296 1,358
profit/(loss)
Share of operating profits - - 9 - - - 9
of associated undertakings
Profit/(loss) on disposal 8 - - (2) - (1) 5
of property
Group profit/(loss) on
ordinary activities
before taxation 586 240 243 39 (31) 295 1,372
Balance sheet
Total loans 21,367 8,967 13,371 3,473 143 11,162 58,483
Total deposits 22,522 7,449 24,482 5,014 132 12,591 72,190
Total assets 27,186 10,158 26,618 6,261 126 15,472 85,821
Total risk weighted assets 18,821 8,666 22,833 3,549 257 15,113 69,239
Net assets (2) 1,136 523 1,378 215 16 912 4,180
Notes
Year 31 December 2004
Republic of United United Poland Rest of Total
Ireland States of Kingdom the world
America
3 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m
(continued)
Operations by (4)
geographical segments
Net interest income 1,283 23 538 190 2 2,036
Other finance income 25 (1) (6) - - 18
Other income 636 102 261 205 6 1,210
Total operating income 1,944 124 793 395 8 3,264
Total operating 1,130 81 383 288 4 1,886
expenses
Provisions 72 (4) 38 29 - 135
Group operating profit 742 47 372 78 4 1,243
Share of operating profits
of associated undertakings 5 195 - 1 - 201
Amortisation of
goodwill on acquisition
of associated - (52) - - - (52)
undertaking
Profit on disposal of 7 - 1 1 - 9
property
Profit on disposal of - - 4 13 - 17
business
Group profit on
ordinary activities
before taxation 754 190 377 93 4 1,418
Balance sheet
Total loans 42,744 1,467 19,060 3,765 120 67,156
Total deposits 56,535 2,691 18,952 5,452 - 83,630
Total assets 70,458 2,449 22,546 6,666 121 102,240
Net assets(2) 3,460 260 1,370 298 11 5,399
Year 31 December 2003
Republic of United United Poland Rest of Total
Ireland States of Kingdom the world
America
EUR m EUR m EUR m EUR m EUR m EUR m
Operations by geographical
segments (4)
Net interest income 1,155 121 465 193 - 1,934
Other finance income 20 (2) (6) - - 12
Other income 562 217 261 188 2 1,230
Total operating income 1,737 336 720 381 2 3,176
Total operating expenses 1,056 210 369 322 3 1,960
Provisions 68 20 58 31 - 177
Group operating profit/(loss) 613 106 293 28 (1) 1,039
Share of operating profits of 7 136 - - - 143
associated undertakings
Share of restructuring and
integration costs
of associated undertakings - (20) - - - (20)
Amortisation of goodwill on
acquisition
of associated undertaking - (42) - - - (42)
Profit on disposal of property 30 - 2 - - 32
Profit/(loss) on disposal of 1 7 (153) 4 - (141)
businesses
Group profit/(loss) on ordinary
activities
before taxation 651 187 142 32 (1) 1,011
Balance sheet
Total loans 34,944 1,095 14,336 2,935 16 53,326
Total deposits 46,876 1,083 14,014 4,222 - 66,195
Total assets 54,667 2,101 18,880 5,295 17 80,960
Net assets (2) 2,979 369 1,316 278 - 4,942
Notes
Year 31 December 2002
Republic of United United Poland Rest of Total
Ireland States of Kingdom the world
America
Segmental information EUR m EUR m EUR m EUR m EUR m EUR m
(continued)
Operations by geographical
segments (4)
Net interest income 1,050 563 455 283 - 2,351
Other finance income 62 (2) 2 - - 62
Other income 538 555 234 184 3 1,514
Total operating income 1,650 1,116 691 467 3 3,927
Total operating expenses 924 676 363 351 4 2,318
Provisions 71 109 25 47 (1) 251
Group operating profit 655 331 303 69 - 1,358
Share of operating profits of associated - - - - 9
undertakings 9
Profit/(loss) on disposal of 8 (1) - (2) - 5
property
Group profit on ordinary
activities
before taxation 672 330 303 67 - 1,372
Balance sheet
Total loans 29,899 12,594 12,516 3,473 1 58,483
Total deposits 37,944 14,453 14,779 5,014 - 72,190
Total assets 45,151 17,629 16,769 6,271 1 85,821
Net assets (2) 1,873 1,179 895 233 - 4,180
(1)The business segment information is based on management accounts information.
Income on capital is allocated to the divisions on the basis of the capital
required to support the level of risk weighted assets. Interest income earned on
capital not allocated to divisions is reported in Group.
(2)The fungible nature of liabilities within the banking industry inevitably
leads to allocations of liabilities to segments, some of which are necessarily
subjective. Accordingly, the directors believe that the analysis of total assets
is more meaningful than the analysis of net assets.
(3) The December 2003 and 2002 amounts have been restated to reflect the
divisional restatements as discussed in Note 1 on page 21 of this Release.
(4)The geographical distribution of profit before taxation is based primarily on
the location of the office recording the transaction.
Notes
2004 2003 2002
4 Other interest receivable and similar income EUR m EUR m EUR m
Interest on loans and advances to banks 94 113 196
Interest on loans and advances to customers 2,866 2,622 3,423
Income from leasing and hire purchase contracts 158 163 188
3,118 2,898 3,807
2004 2003 2002
5 Interest payable EUR m EUR m EUR m
Interest on deposits by banks and customer
accounts 1,608 1,490 2,178
Interest on debt securities in issue 256 101 103
Interest on subordinated liabilities 68 47 83
Interest on reserve capital instruments 38 38 38
1,970 1,676 2,402
2004 2003 2002
6 Dealing profits EUR m EUR m EUR m
Foreign exchange contracts 67 92 78
Profits less losses from securities held for
trading purposes 54 23 7
Interest rate contracts (30) 16 (11)
Equity index contracts 5 4 -
96 135 74
Dealing profits is a term prescribed by the European Communities (Credit
Institutions: Accounts) Regulations, 1992. Dealing profits reflects trading
income and excludes interest payable and receivable arising from these
activities. Staff and other administrative expenses arising from trading
activities are not included here but are included under the appropriate heading
within administrative expenses
(note 8).
2004 2003 2002
7 Other operating income EUR m EUR m EUR m
Profit on disposal of debt securities held for investment purposes 15 37 106
Profit on termination of off-balance sheet instruments 36 - -
Profit on disposal of investments in associated undertakings 1 - 1
Profit on disposal of equity shares 2 3 11
Contribution of life assurance company (note 16) 72 60 57
Contribution from securitised assets 3 1 4
Mortgage origination and servicing income - 2 7
Miscellaneous operating income 58 63 77
187 166 263
8 Administrative expenses
2004 2003 2002
(a) Staff and other administrative expenses EUR m EUR m EUR m
Staff costs 1,132 1,157 1,391
Other administrative expenses 581 552 707
1,713 1,709 2,098
Notes
8 Administrative expenses (continued)
(b) Restructuring costs in continuing businesses
During 2003, BZWBK commenced a branch network restructuring process resulting in
the closure of approximately 40 branches across Poland. A provision of EUR 10m
was recorded in 2003 in respect of this process with a further charge of EUR 9m
in 2004.
AIB Group introduced an Early Retirement Package in 2003 for certain staff over
the age of 50 working in Ireland and
Northern Ireland with staff located in the UK who have repatriation rights to
Ireland also included. A provision of EUR 62m was made in the 2003 accounts of
which EUR 41m forms part of the retirement benefit past service cost.
Approximately 250 people left the organisation during 2004 under the package.
The charge of EUR 13m in 2002 relates to the cost of an Allfirst Early
Retirement Program. This also forms part of the retirement benefit past service
cost.
2004 2003 2002
9 Amounts (written back)/written off fixed asset investments EUR m EUR m EUR m
Debt securities (4) 13 19
Equity shares 3 3 36
(1) 16 55
10 Profit/(loss) on disposal of businesses
2004
The profit on disposal of businesses in 2004 of EUR 17m relates to the sale of
BZWBK's subsidiary, CardPoint S.A. of EUR 13m (tax charge EUR 2m), and the
accrual of EUR 4m (tax charge EUR 1m),arising from the sale of the Govett
business in 2003.
2003
The loss on disposal of businesses of EUR 141m relates to the loss on disposal
of Govett of EUR 153m (loss of EUR 152m after tax), offset by the realised gain
on disposal of Allfirst of EUR 1m (loss of EUR 40m after tax), the profit on
disposal of the AIB New York retail branch of EUR 7m (tax charge EUR 3m) and the
profit on disposal of Polsoft of EUR 4m (tax charge EUR 1m).
In 2003, AIB sold the majority of the Govett business its UK based asset
management business to Gartmore. Certain management contracts were excluded from
the sale and were managed by AIB's Irish based asset management company, AIB
Investment Managers (AIB IM).The operations of AIB IM were otherwise unaffected
by this transaction.
Total consideration for the business was estimated as EUR 17m and is payable in
cash. The consideration is made up of an initial payment of EUR 6m plus a series
of payments based on the level of fees earned by Gartmore on the Govett
management contracts over the following three years. The initial payment of EUR
6m is reflected in the financial statements for the year ended 31 December 2003.
The transaction gave rise to a loss on disposal of EUR 153m in profit and loss
account in the financial statements for the year ended 31 December 2003.The loss
on disposal was made up of the EUR 6m consideration less goodwill previously
written off of EUR 139m and one off closure costs of EUR 20m.The goodwill of EUR
139m was previously written off to reserves on the purchase of Govett, in 1995.
The after tax loss is EUR 152m.The financial statements for the year ended 31
December 2003 also reflect the income and expenses for Govett for the period as
part of continuing activities, which amounted to a loss before tax of EUR 12m.
Notes
2004 2003 2002
11 Taxation EUR m EUR m EUR m
Allied Irish Banks, p.l.c. and subsidiaries
Corporation tax in Republic of Ireland
Current tax on income for the period(1) 138 173 81
Adjustments in respect of prior periods (5) 4 (7)
133 177 74
Double taxation relief (13) (49) (4)
120 128 70
Foreign tax
Current tax on income for the period 181 210 212
Adjustments in respect of prior periods (11) - (4)
170 210 208
Total current tax 290 338 278
Deferred tax
Origination and reversal of timing differences (7) (54) 21
Other (8) (5) 6
Total deferred tax (15) (59) 27
Associated undertakings 61 39 1
Taxation on ordinary activities 336 318 306
Effective tax rate 23.7% 31.4% 22.3%
Effective tax rate - adjusted 23.7%(2) 24.0%(2) 22.3%
(1) The December 2004 figure includes a charge of EUR 29.5m (2003: euro29.5m;
2002: nil) in relation to the Irish Government bank levy.
(2) The adjusted effective tax rate has been presented to eliminate the disposal
of Govett in 2004 and 2003 and the withholding tax on the Allfirst dividend in
2003.
Notes
12 Earnings per EUR0.32 ordinary share 2004 2003 2002
(a) Basic
Group profit attributable to the ordinary shareholders(1) EUR 1,047m EUR 677m EUR 1,034m
Weighted average number of shares in issue during the year(1) 852.0m 859.6m 868.7m
Earnings per share EUR 122.9c EUR 78.8c EUR119.1c
(1)In accordance with FRS 14 - 'Earnings per share', dividends arising on the
shares held by the employee share trusts are excluded in arriving at profit
before taxation and deducted from the aggregate of dividends paid and proposed.
The shares held by the trusts are excluded from the calculation of weighted
average number of shares in issue.
Earnings per EUR 0.32 ordinary share
2004 2003 2002
(b) Adjusted cent per EUR 0.32 share
As reported 122.9 78.8 119.1
Adjustments
Goodwill amortisation and impairment 10.6 8.4 3.6
Impact of Govett disposal on profit and (0.4) 17.6 -
loss account
Impact of Allfirst disposal on profit - 4.7 -
and loss account
133.1 109.5 122.7
The adjusted earnings per share figure has been presented to eliminate the
effect of the goodwill amortisation in all years, goodwill impairment loss in
2004,the impact of the Govett disposal in 2004 and 2003 and the Allfirst
disposal in 2003.
(c) Diluted 2004 2003 2002
Number of shares (millions)
Weighted average number of shares in issue during the period 852.0 859.6 868.7
Dilutive effect of options outstanding 3.1 4.7 8.4
Diluted 855.1 864.3 877.1
The weighted average number of ordinary shares reflects the dilutive effect of
options outstanding under the employee share trusts, the Share option scheme and
the Allied Irish Bank stock option plan.
Notes
2004 2003
13 Loans and advances to customers EUR m EUR m
Loans and advances to customers 62,219 47,828
Amounts receivable under finance leases 1,625 1,636
Amounts receivable under hire purchase contracts 968 873
Money market funds 24 153
64,836 50,490
2004 2003
EUR m EUR m
Loans accounted for on a non-accrual basis (including loans where interest
is accrued but provisions have been made against it)
AIB Bank ROI division 221 209
AIB Bank GB & NI division 139 84
Capital Markets division 100 82
Poland division 299 332
759 707
2004 2003
14 Provisions for bad and doubtful debts EUR m EUR m
At 1 January 664 862
Exchange translation adjustments 25 (51)
Disposal of subsidiary undertaking - (135)
Transfer to contingent liabilities and commitments (15) -
Charge against profit and loss account 116 152
Amounts written off (151) (182)
Recoveries of amounts written off in previous years 21 18
At 31 December 660 664
At 31 December
Specific 383 348
General 277 316
660 664
Amounts include:
Loans and advances to banks 2 2
Loans and advances to customers 658 662
660 664
Notes
2004 2003
Book Market Book Market
amount value amount value
15 Debt securities EUR m EUR m EUR m EUR m
Held as financial fixed assets
Issued by public bodies:
Government securities 7,101 7,227 5,237 5,346
Other public sector securities 854 867 562 569
Issued by other issuers:
Bank and building society certificates of deposit 585 585 589 588
Other debt securities 7,710 7,823 6,057 6,122
16,250 16,502 12,445 12,625
Held for trading purposes
Issued by public bodies:
Government securities 1,048 630
Other public sector securities 73 85
Issued by other issuers:
Bank and building society certificates of deposit - -
Other debt securities 6,705 4,967
7,826 5,682
24,076 18,127
16 Long-term assurance business
Income from long-term assurance business included in the profit and loss account
can be divided into those items comprising operating profit of the business and
other items as set out below.
Income from Ark Life's long-term assurance 2004 2003
business is set out below: EUR m EUR m
New business contribution 39 39
Contribution from existing business
- expected return 27 24
- experience variances (2) (1)
Investment returns 4 4
Distribution costs (13) (15)
Operating profit 55 51
Other items:
Change in value of future unit linked fees - 3
Changes in economic assumptions 12 -
Changes in operating assumptions 4 -
Exceptional items 1 6
Income from long-term assurance business before tax 72 60
Attributable tax 9 8
Income from long-term assurance business after tax 63 52
Notes
16 Long-term assurance business (continued)
The assets and liabilities of Ark Life representing the value of the assurance
business together with the policyholders' funds are:
2004 2003
EUR m EUR m
Investments:
Cash and short-term placings with banks 1,466 1,546
Debt securities 425 239
Equity shares 1,521 1,179
Property 51 45
3,463 3,009
Embedded value adjustment 198 167
Other assets - net 126 98
3,787 3,274
Long-term assurance liabilities to policyholders (3,320) (2,869)
Long-term assurance business attributable to shareholders 467 405
Represented by:
Shares at cost 19 19
Reserves 435 376
Profit and loss account 13 10
467 405
Presentation in the Group balance sheet
Under UITF 37, holdings of shares in Allied Irish Banks, p.l.c., (by the parent
or subsidiary companies),for any reason, are deducted in arriving at
shareholders' funds. At 31 December 2004, shares in AIB with a value of EUR 74m
(2003: EUR 59m) were held within the long-term business funds to meet the
liabilities to policyholders.
Long-term assurance assets attributable to policyholders are presented in the
Group balance sheet net of the carrying value of the shares in AIB held within
the fund. Group shareholders' funds have been reduced by a similar amount.
2004 2003
17 Customer accounts EUR m EUR m
Current accounts 17,099 14,657
Demand deposits 7,321 6,788
Time deposits 22,676 19,539
47,096 40,984
Securities sold under agreements to repurchase 77 -
Other short-term borrowings 4,224 3,628
4,301 3,628
51,397 44,612
Notes
18 Supplementary Group financial information for US reporting purposes
For convenience purposes this note contains translations of certain EUR amounts
into US dollars at the rate of EUR 1.00 to US$ 1.3621, the year end translation
rate used in the preparation of the Group's financial statements. These
translations should not be construed as representations that the EUR amounts
actually represent such US dollar amounts or could be converted into US dollars
at the rate indicated.
2004 2004 2003 2002
US $ EUR EUR EUR
Per American Depositary Share ('ADS')
Net income for US reporting purposes 3.35 2.46 1.58 2.34
Dividend(1) 1.63 1.20 1.05 0.98
Net assets for US reporting purposes 17.26 12.67 11.50 9.62
Amounts in accordance with US GAAP
Net income 1,573m 1,155m 1,523m 926m
Net income attributable to ordinary stockholders 1,563m 1,148m 1,518m 918m
Net income per ADS 3.67 2.69 3.53 2.11
Net assets per ADS 21.74 15.96 13.90 13.61
(1) The actual dividend payable to US stockholders will depend on the EUR/US $
exchange rate prevailing.
2004 2004 2003 2002
Summary of consolidated balance sheet US $ m EUR m EUR m EUR m
Amounts in accordance with IR GAAP
Total assets 139,261 102,240 80,960 85,821
Ordinary stockholders' equity 7,354 5,399 4,942 4,180
Total loans 91,473 67,156 53,326 58,483
Total deposits 113,913 83,630 66,195 72,190
Amounts in accordance with USGAAP
Total assets 136,555 100,253 79,565 86,432
Ordinary stockholders' equity 9,258 6,797 5,972 5,911
Under US reporting requirements, the filing of AIB's 2001 financial statements
by way of Annual Report on Form 20-F constituted a reissue of the financial
statements for prior years. The US Securities and Exchange Commission requires
all material errors in respect of prior years to be accounted for and reported
as prior year adjustments, in the years in which they occurred. Accordingly, in
AIB's Annual Report on Form 20-F for December 2001,the Fraud Losses were charged
in the years in which they occurred and this approach has been reflected in the
financial information provided in this note.
Alternative presentation of consolidated statements of income
As outlined above, under US reporting requirements the losses arising from the
fraud would be reflected in the Group figures in the years in which the losses
arose. The following alternative presentation of consolidated statements of
income reflects this approach for the year ended 31 December 2002.
2002
EUR m
Consolidated net income as in the consolidated statements of income 1,034
Adjustments:
Exceptional foreign exchange dealing losses (18)
Administration expenses (10)
Applicable taxes 10
Consolidated net income under alternative presentation 1,016
Alternative presentation of consolidated balance sheet
Reflecting the losses in the period in which they arose had no impact on
consolidated ordinary stockholders' equity, consolidated total assets and
consolidated total liabilities for the year ended 31 December 2002.
Notes
18 Supplementary Group financial information for US reporting purposes
(continued)
Reconciliation of alternative presentation to US GAAP
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).
Year ended December 31
Consolidated net income 2004 2003 2002
(millions except per share amounts)
Net income (Group profit
attributable to the stockholders
of AIB)
as in the consolidated profit
and loss account under alternative
presentation (page 33) EUR 1,047 EUR 677 EUR 1,016
Adjustments in respect of:
Depreciation of freehold and 2 2 2
long leasehold property
Long-term assurance policies (58) (13) (27)
Goodwill 26 30 4
Premium on core deposit - (1) (5)
intangibles
Retirement benefits (29) 7 (5)
Dividends on non-equity 7 5 8
shares
Securities held for hedging 5 1 (3)
purposes
Internal use computer 2 (1) 1
software
Derivatives FAS 133 113 11 (82)
adjustment
Gain recognised on the - 832 -
disposal of businesses
Share of income of associated 39 33 -
undertakings
Deferred tax effect of the 1 (60) 17
above adjustments
Net income in accordance with US EUR 1,155 EUR 1,523 EUR 926
GAAP
Net income applicable to ordinary 1,148 EUR 1,518 EUR 918
stockholders of AIB in accordance with US
GAAP EUR
Equivalent to US$ 1,563
Income per American Depositary Share 2.69 EUR 3.53 EUR 2.11
(ADS*) in accordance with US GAAP EUR
Equivalent to US$ 3.67
Year end exchange rate EUR/US $ 1.3621
* An American Depositary Share represents two ordinary shares of EUR0.32 each.
Year ended December 31
Comprehensive income 2004 2003 2002
(millions)
Net income in accordance with USGAAP EUR 1,155 EUR 1,523 EUR 926
Net movement in unrealised holding gains on
investment securities
arising during the period 68 (41) 84
Exchange translation adjustments (88) (501) (480)
Comprehensive income EUR 1,135 EUR 981 EUR 530
Notes
18 Supplementary Group financial information for US reporting purposes
(continued)
Consolidated ordinary stockholders' equity 2004 2003 2002
(millions except per share amounts)
Ordinary stockholders' equity as in the
consolidated balance sheet
under alternative presentation (page 33) EUR 5,399 EUR 4,942 EUR 4,180
Revaluation of property (165) (168) (201)
Depreciation of freehold and long (27) (27) (27)
leasehold property
Goodwill 275 223 925
Core deposit intangibles - - 12
Dividends payable on ordinary shares 333 296 284
Dividends on non-equity shares 3 1 1
Long-term assurance policies (334) (276) (263)
Unrealized gains not yet recognised on:
Available-for-sale debt securities 252 180 244
Available-for-sale equity securities 20 14 15
Securities held for hedging purposes 2 (3) (4)
Derivatives FAS 133 adjustment 46 (16) (79)
Retirement benefits 1,087 899 1,012
Internal use computer software 19 18 18
Other recognised gains in associated 4 2 -
undertaking
Share of income of associated undertaking 64 33 -
Deferred tax effect of the above (181) (146) (206)
adjustments
Ordinary stockholders' equity in EUR 6,797 EUR 5,972 EUR 5,911
accordance with US GAAP
Equivalent to US$ 9,258
Ordinary stockholders' equity per ADS in EUR 15.96 EUR 13.90 EUR 13.61
accordance with USGAAP
Equivalent to US$ 21.74
Ordinary stockholders' equity per ADS in EUR 12.67 EUR 11.50 EUR 9.62
accordance with IR GAAP
Equivalent to US$ 17.26
Notes
19 Average balance sheets and interest rates
The following tables show the average balances and interest rates of interest
earning assets and interest bearing liabilities for the years ended 31 December
2004 and 2003.The calculation of average balances include daily and monthly
averages for reporting units. The average balances used are considered to be
representative of the operations of the Group.
Year ended 31 December 2004 Year ended 31 December 2003
Average Interest Average Average Interest Average
balance rate balance rate
Assets EUR m EUR m % EUR m EUR m %
Placings with banks
Domestic offices 2,859 66 2.3 3,138 85 2.7
Foreign offices 824 28 3.4 770 27 3.5
Loans to customers (1)
Domestic offices 35,328 1,592 4.5 28,361 1,352 4.8
Foreign offices 20,681 1,185 5.7 18,642 1,012 5.4
Placings with banks and
loans to customers (1)
Domestic offices 38,187 1,658 4.3 31,499 1,437 4.6
Foreign offices 21,505 1,213 5.6 19,412 1,039 5.4
Funds sold
Domestic offices - - - - - -
Foreign offices - - - 288 4 1.3
Debt securities and
government bills
Domestic offices 17,270 636 3.7 11,278 397 3.5
Foreign offices 4,736 252 5.3 6,006 315 5.3
Installment credit and
finance lease receivables
Domestic offices 1,874 104 5.5 1,902 108 5.7
Foreign offices 716 54 7.5 826 55 6.7
Total interest earning
assets
Domestic offices 57,331 2,398 4.2 44,679 1,942 4.3
Foreign offices 26,957 1,519 5.6 26,532 1,413 5.3
84,288 3,917 4.6 71,211 3,355 4.7
Allowance for loan losses (671) (741)
Non-interest earning 9,028 6,766
assets
Total assets 92,645 3,917 4.2 77,236 3,355 4.3
Percentage of assets
applicable to
foreign activities 32.3 37.9
(1) Loans to customers include money market funds. Non-accrual loans and loans
classified as problem loans are also included within this caption.
Notes
19 Average balance sheets and interest rates (continued)
Year ended 31 December 2004 Year ended 31 December 2003
Average Interest Average Average Interest Average
balance rate balance rate
Liabilities and EUR m EUR m % EUR m EUR m %
stockholders' equity
Interest bearing deposits
and
other short-term
borrowings
Domestic offices 49,209 1,037 2.1 36,836 727 2.0
Foreign offices 22,021 738 3.3 21,230 606 2.9
Funds purchased
Domestic offices - - - - - -
Foreign offices - - - 264 3 1.2
Subordinated liabilities
Domestic offices 2,273 106 4.7 1,682 78 4.7
Foreign offices - - - 132 7 5.2
Total interest bearing
liabilities
Domestic offices 51,482 1,143 2.2 38,518 805 2.1
Foreign offices 22,021 738 3.3 21,626 616 2.8
73,503 1,881 2.6 60,144 1,421 2.4
Interest-free liabilities
Current accounts 7,706 7,798
Other liabilities 5,880 4,219
Minority equity and 188 191
non-equity interests
Preference share capital 197 215
Ordinary stockholders' 5,171 4,669
equity
Total liabilities and 92,645 1,881 2.0 77,236 1,421 1.8
stockholders' equity
Percentage of liabilities
applicable to
foreign activities 30.6 35.6
Contract amount
2004 2003
20 Memorandum items: contingent liabilities and commitments EUR m EUR m
Contingent liabilities:
Acceptances and endorsements 14 12
Guarantees and assets pledged as collateral security 5,394 4,157
Other contingent liabilities 830 722
6,238 4,891
Commitments 16,127 13,932
22,365 18,823
The Group's maximum exposure to credit loss under contingent liabilities and
commitments to extend credit, in the event of non-performance by the other party
where all counterclaims, collateral or security prove valueless, is represented
by the contractual amounts of those instruments.
Notes
20 Memorandum items: contingent liabilities and commitments (continued)
The following table presents the notional principal amount and gross replacement
cost of interest rate, exchange rate and equity contracts.
31 December 2004 31 December 2003
Notional Gross Notional Gross
principal replacement principal replacement
amount cost amount cost
EUR m EUR m EUR m EUR m
Interest rate contracts (1) 141,067 1,059 99,781 1,030
Exchange rate contracts (1) 15,870 599 15,565 501
Equity contracts (1) 3,575 112 2,445 73
(1) Interest rate, exchange rate and equity contracts have been entered into for
both hedging and trading purposes.
In respect of interest rate and exchange rate contracts, notional principal
amounts are used to express the volume of these transactions. However, the
amounts subject to risk are much lower in accordance with the terms of the
contracts. Credit risk arises when market movements are such that the deal has
positive value to the Group so that a cost would be incurred if the contract had
to be replaced in the event of counterparty default. The sum of these positive
values is known as gross replacement cost and does not reflect the netting of
offsetting positions.
21 Form 20-F
An annual report on Form 20-F will be filed with the Securities and Exchange
Commission, Washington D.C. and, when filed, will be available to shareholders
on application to the Company Secretary.
22 Approval of accounts
The accounts were approved by the board of directors on 21 February 2005.
Financial and other information
Financial and other information 2004 2003
Operating ratios
Operating expenses (1)/operating income 57.5% 59.4%
Tangible operating expenses (2)/operating income 56.3% 58.5%
Other income (3)/operating income 37.6% 39.1%
Net interest margin:
Group 2.42% 2.72%
Domestic 2.19% 2.54%
Foreign 2.90% 3.00%
Rates of exchange
EUR /US $
Closing 1.3621 1.2630
Average 1.2474 1.1346
EUR /Stg GBP
Closing 0.7051 0.7048
Average 0.6813 0.6901
EUR /PLN
Closing 4.0845 4.7019
Average 4.5314 4.4157
(1) Excludes restructuring costs of EUR 8.7m in 2004 (2003: EUR 72.4m).
(2) Excludes amortisation and impairment of goodwill of EUR 38.8m (2003: EUR
30.8m) and restructuring costs of EUR 8.7m in 2004 (2003: EUR 72.4m).
(3) Other income includes other finance income.
2004 2003
Capital adequacy information EUR m EUR m
Risk weighted assets
Banking book:
On balance sheet 61,718 48,831
Off-balance sheet 10,960 8,602
72,678 57,433
Trading book:
Market risks 5,149 4,566
Counterparty and settlement risks 712 616
5,861 5,182
Total risk weighted assets 78,539 62,615
Capital
Tier 1 6,220 4,451
Tier 2 2,659 2,439
8,879 6,890
Supervisory deductions 469 389
Total 8,410 6,501
Additional financial information
The following consolidated profit and loss accounts for the years ended
31 December 2003 and 2002 have been presented to facilitate comparisons to the
financial statements presented in this report.
Year ended 31 December 2003 Year ended 31 December 2002
Continuing Discontinued Continuing Discontinued
activities activities Total activities activities Total
EUR m EUR m EUR m EUR m EUR m EUR m
Interest receivable:
Interest
receivable and similar
income arising from
debt 700 12 712 783 163 946
securities and other
fixed income securities
Other interest 2,773 125 2,898 3,164 643 3,807
receivable and similar
income
Less: interest payable (1,633) (43) (1,676) (2,117) (285) (2,402)
Net interest income 1,840 94 1,934 1,830 521 2,351
Other finance income 14 (2) 12 63 (1) 62
Other income 1,124 106 1,230 1,055 459 1,514
Total operating income 2,978 198 3,176 2,948 979 3,927
Total operating 1,839 121 1,960 1,747 571 2,318
expenses
Group operating profit 1,139 77 1,216 1,201 408 1,609
before provisions
Provisions for bad and 142 10 152 110 84 194
doubtful debts
Provisions for 9 - 9 2 - 2
contingent liabilities
and commitments
Amounts written off 16 - 16 43 12 55
fixed asset investments
Group operating profit 972 67 1,039 1,046 312 1,358
Share of operating 143 - 143 9 - 9
profits of associated
undertakings
Share of restructuring
and integration costs
in associated (20) - (20) - - -
undertaking
Amortisation of
goodwill in acquisition
of associated
undertaking (42) - (42) - - -
Profit/(loss) on 32 - 32 6 (1) 5
disposal of property
(Loss)/profit on (142) 1 (141) - - -
disposal of business
Group profit on
ordinary activities
before taxation 943 68 1,011 1,061 311 1,372
Taxation on ordinary 299 19 318 232 74 306
activities
Group profit on
ordinary activities
after taxation 644 49 693 829 237 1,066
Equity and non-equity
minority interests
in subsidiaries 10 1 11 20 4 24
Dividends on non-equity 5 - 5 8 - 8
shares
15 1 16 28 4 32
Group profit
attributable to the
ordinary
shareholders of 629 48 677 801 233 1,034
Allied Irish Banks,
p.l.c.
Dividends on equity 452 429
shares
Transfer to reserves 51 45
503 474
Profit retained 174 560
Five year financial summary
Year ended 31 December
2004 Summary of consolidated 2004 2003 2002 2001 2000
US $m profit and loss account EUR m EUR m EUR m EUR m EUR m
2,773 Net interest income before exceptional 2,036 1,934 2,351 2,258 2,022
items
- Deposit interest retention tax - - - - (113)
2,773 Net interest income after exceptional 2,036 1,934 2,351 2,258 1,909
items
25 Other finance income 18 12 62 67 71
1,648 Other income before exceptional item 1,210 1,230 1,514 1,426 1,304
- Exceptional foreign exchange dealing - - - (789) -
losses
4,446 Total operating income after 3,264 3,176 3,927 2,962 3,284
exceptional items
2,569 Total operating expenses 1,886 1,960 2,318 2,284 1,997
1,877 Group operating profit before 1,378 1,216 1,609 678 1,287
provisions
184 Provisions 135 177 251 204 134
1,693 Group operating profit 1,243 1,039 1,358 474 1,153
274 Share of operating profits of 201 143 9 4 3
associated undertakings
Share of restructuring & integration
costs in
- associated undertaking - (20) - - -
Amortisation of goodwill on acquisition
of
(71) associated undertaking (52) (42) - - -
12 Profit on disposal of property 9 32 5 6 5
23 Profit/(loss) on disposal of businesses 17 (141) - 93 -
1,931 Group profit before taxation 1,418 1,011 1,372 577 1,161
458 Taxation on ordinary activities 336 318 306 55 319
41 Equity and non-equity minority 30 11 24 23 38
interests
7 Dividends on non-equity shares 5 5 8 15 20
Group profit attributable to the
ordinary
1,425 shareholders of Allied Irish 1,047 677 1,034 484 784
Banks, p.l.c.
696 Dividends on equity shares 511 452 429 380 335
2.0 Dividend cover - times 2.0 1.5 2.4 1.3 2.3
167.4c Earnings per EUR 0.32 share - basic 122.9c 78.8c 119.1c 56.2c 91.6c
181.3c Earnings per EUR 0.32 share - adjusted 133.1c 109.5c 122.7c 108.6c 106.7c
166.7c Earnings per EUR 0.32 share - diluted 122.4c 78.4c 117.9c 55.9c 91.0c
Year ended 31 December
2004 Summary of consolidated 2004 2003 2002 2001 2000
US $m balance sheet EUR m EUR m EUR m EUR m EUR m
139,261 Total assets 102,240 80,960 85,821 89,061 80,318
91,473 Total loans 67,156 53,326 58,483 57,445 50,239
113,913 Total deposits 83,630 66,195 72,190 72,813 65,210
2,619 Dated capital notes 1,923 1,276 1,287 1,594 1,836
470 Undated capital notes 345 357 389 426 413
677 Reserve capital instruments 497 497 496 496 -
Equity and non-equity minority
1,651 interests in subsidiaries 1,212 158 274 312 272
248 Shareholders' funds: non-equity 182 196 235 279 264
interests
7,354 Shareholders' funds: equity interests 5,399 4,942 4,180 4,554 4,719
13,019 Total capital resources 9,558 7,426 6,861 7,661 7,504
Five year financial summary (continued)
Year ended 31 December
2004 2003 2002 2001 2000
Other financial data % % % % %
Return on average total assets 1.17 0.90 1.24 0.62(1) 1.12(2)
Return on average ordinary shareholders' equity 20.2 14.5 23.7 10.4(1) 17.4(2)
Dividend payout ratio 48.8 66.8 41.5 78.5 42.7
Average ordinary shareholders' equity
as a percentage of average total assets 5.6 6.0 5.1 5.8 6.1
Allowance for loan losses as a percentage
of total loans to customers at year end 1.0 1.3 1.6 1.9 1.9
Net interest margin 2.42 2.72 3.00 2.99 3.02
Tier 1 capital ratio 7.9 7.1 6.9 6.5 6.3
Total capital ratio 10.7 10.4 10.1 10.1 10.8
(1) Excluding the impact of the exceptional foreign exchange dealing losses, the
return on average total assets was 1.23% and the return on average ordinary
shareholders' equity was 20.4%.
(2) Excluding the impact of the deposit interest retention tax settlement, the
return on average total assets was 1.26% and the return on average ordinary
shareholders' equity was 19.5%.
Accounts in sterling, US dollars and Polish zloty
EUR m STG GBPm US $m PLN m
Summary of consolidated profit and loss account STG GBP 0.7051 US $ 1.3621 PLN 4.0845
for the year ended 31 December 2004 = EUR 1 = EUR 1 = EUR 1
Group operating profit before provisions 1,378 972 1,877 5,628
Provisions 135 95 184 551
Group operating profit 1,243 877 1,693 5,077
Income from associated undertakings 149 105 203 609
Profit on disposal of property 9 6 12 37
Profit on disposal of businesses 17 12 23 69
Group profit on ordinary activities before taxation 1,418 1,000 1,931 5,792
Taxation 336 237 458 1,372
Group profit on ordinary activities after taxation 1,082 763 1,473 4,420
Group profit attributable to the ordinary
shareholders of Allied Irish Banks, p.l.c. 1,047 738 1,425 4,276
Dividends on equity shares 511 360 696 2,087
Earnings per EUR 0.32 share - basic 122.9c 86.7p 167.4c 502.1 PLN
Earnings per EUR 0.32 share - adjusted 133.1c 93.9p 181.3c 543.8 PLN
Earnings per EUR 0.32 share - diluted 122.4c 86.3p 166.7c 499.9 PLN
Summary of consolidated balance sheet
31 December 2004 EUR m Stg GBPm US $m PLN m
Assets
Loans and advances to banks 2,320 1,636 3,160 9,476
Loans and advances to customers 64,836 45,713 88,313 264,823
Debt securities and equity shares 24,271 17,112 33,060 99,135
Intangible fixed assets 380 268 518 1,552
Tangible fixed assets 785 553 1,069 3,206
Other assets 6,402 4,514 8,720 26,149
Long-term assurance assets
attributable to policyholders 3,246 2,288 4,421 13,258
102,240 72,084 139,261 417,599
Liabilities
Deposits by banks 20,428 14,403 27,825 83,438
Customer accounts 51,397 36,237 70,008 209,931
Debt securities in issue 11,805 8,323 16,080 48,217
Other liabilities 5,732 4,041 7,807 23,412
Subordinated liabilities 2,765 1,949 3,766 11,294
Equity and non-equity minority interests in
subsidiaries 1,212 855 1,651 4,950
Shareholders' funds 5,581 3,935 7,602 22,796
Long-term assurance liabilities to policyholders 3,320 2,341 4,522 13,561
102,240 72,084 139,261 417,599
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 22 February, 2005 By: ___________________
Gary Kennedy
Group Director, Finance,
Risk and Enterprise
Technology
Allied Irish Banks, p.l.c.