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, 2006 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) Part 1 Highlights - AIB Group Annual Results 2005 Basic earnings per share Eur 151.0c Less profit on new Bankcentre development Eur (4.4c) Less hedge volatility (1) under IFRS Eur (0.7c) Adjusted basic earnings per share (2) Eur 145.9c up 15% (3) (lower than expected taxation charge (4) + Eur 3c) Divisional pre-tax profit performance (5) - AIB Bank ROI up 24% or 15% excluding the EUR 50m investigation related charges incurred in 2004 - AIB Bank GB & NI up 18% - Capital Markets up 27% - Poland up 13% Income / cost gap +5% Cost income ratio down 2.5% to 55.2% Return on equity 20.6% Tier 1 capital ratio 7.2% Total dividend of EUR 65.3c, up 10% 16% US$ earnings growth from M&T AIB Group Chief Executive Eugene Sheehy said: 'Our 2005 performance reflects quality growth in all our main franchises. Strong customer demand continues to drive momentum and underpins our confidence in the outlook for 2006 and beyond.' (1) The impact of hedge volatility (combines the impact of economic and accounting hedges) under IFRS was an increase of EUR 6 million to profit before taxation for the year. (2) Excludes profit on new Bankcentre development(EUR 45 million) and the impact of hedge volatility. This is the relevant number for comparison to the earnings per share guidance in the trading update of 6 December 2005. (3) A 15% increase compared with the year to December 2004 pro-forma earnings per share of EUR 127.1c. The year to December 2004 statutory basic earnings per share was EUR 132.0c. A reconciliation of the pro-forma and statutory earnings per share for 2004 is shown on page 21 of this release. (4) Lower than expected when communicating the trading update on 6 December 2005. (5) Excluding the impact of exchange rate movements on the translation of foreign locations' profit. The percentage increase reflects the growth compared with the IFRS pro-forma accounts for 2004. The results for the year ended 31 December 2004 have been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32,IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Allied Irish Banks, p.l.c. Dividend The Board is recommending a final dividend of EUR 42.3c per share payable on 27 April 2006 to shareholders on the Company's register of members at the close of business on 3 March 2006. The final dividend, together with the interim dividend of EUR 23.0c per share, amounts to a total dividend of EUR 65.3c per share, an increase of 10% on 2004. For further information please contact: John O'Donnell Alan Kelly Catherine Burke Group Finance Director Head of Group Investor Relations Head of Corporate Relations Bankcentre Bankcentre Bankcentre Dublin Dublin Dublin 353-1-660-0311 353-1-660-0311 353-1-660-0311 Ext. 14412 Ext. 12162 Ext. 13894 This results announcement and a detailed informative 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 and 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 2005 31 December 1 January 31 December 2005 2005 2004 EUR m EUR m EUR m Results Total operating income 3,647 3,216 Operating profit 1,493 1,214 Profit before taxation - continuing operations 1,706 1,372 Profit attributable to equity holders of the parent 1,343 1,129 Per EUR 0.32 ordinary share Earnings - basic 151.0c 132.0c Earnings - diluted 149.8c 131.5c Dividend 65.3c 59.4c Dividend payout 44% 46% Net assets 773c 671c Performance measures Return on average total assets 1.20% 1.22% Return on average ordinary shareholders' equity 20.6% 20.7% Balance sheet Total assets 133,214 102,819 101,109 Ordinary shareholders' equity 6,672 5,975 5,745 Loans etc 92,361 68,230 67,278 Deposits etc 109,520 82,384 82,384 Capital ratios Tier 1 capital 7.2% 8.2% 8.2% Total capital 10.7% 10.7% 10.9% The results for the year ended 31 December 2004 have been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Consolidated income statement for the year ended 31 December 2005 2005 2004 Notes EUR m EUR m Interest and similar income 5 5,151 4,018 Interest expense and similar charges 6 2,621 1,946 Net interest income 2,530 2,072 Dividend income 17 27 Fee and commission income 1,061 1,043 Fee and commission expense (145) (131) Trading income 7 112 96 Other operating income 8 72 109 Other income 1,117 1,144 Total operating income 3,647 3,216 Administrative expenses 9 1,881 1,724 Depreciation of property, plant and equipment 83 82 Amortisation/impairment of intangible assets and goodwill 47 63 Total operating expenses 2,011 1,869 Operating profit before provisions 1,636 1,347 Provisions for impairment of loans and receivables 17 115 114 Provisions for liabilities and commitments 20 20 Amounts written off/(written back) financial investments 8 (1) Operating profit 1,493 1,214 Share of results of associated undertakings 149 132 Profit on disposal of property 14 9 Construction contract income 10 45 - Profit on disposal of businesses 11 5 17 Profit before taxation - continuing operations 1,706 1,372 Taxation on ordinary activities 12 319 267 Profit after taxation - continuing operations 1,387 1,105 Discontinued operation, net of taxation 3 46 53 Profit for the period 1,433 1,158 Attributable to: Equity holders of the parent 1,343 1,129 Minority interests in subsidiaries 90 29 1,433 1,158 Basic earnings per share - continuing operations 145.7c 125.8c Basic earnings per share - discontinued operations 5.3c 6.2c Total 13 151.0c 132.0c Diluted earnings per share - continuing operations 144.6c 125.3c Diluted earnings per share - discontinued operations 5.2c 6.2c Total 13 149.8c 131.5c The results for the year ended 31 December 2004 have been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Consolidated balance sheet 31 December 2005 31 December 1 January 31 December 2005 2005 2004 Notes EUR m EUR m EUR m Assets Cash and balances at central banks 742 887 887 Treasury bills and other eligible bills 201 - - Items in course of collection 402 368 368 Trading portfolio financial assets 15 10,113 7,957 - Financial assets designated at fair value through profit - 1,871 - or loss Derivative financial instruments 2,439 2,581 - Loans and receivables to banks 7,129 2,538 2,540 Loans and receivables to customers 16 85,232 65,692 64,738 Financial investments available for sale 18 16,864 15,720 - Debt securities and equity shares - - 26,142 Interests in associated undertakings 1,656 1,395 1,379 Intangible assets and goodwill 517 540 540 Property, plant and equipment 706 745 745 Other assets 778 1,435 2,597 Current taxation 18 25 25 Deferred taxation 253 204 228 Prepayments and accrued income 801 861 920 Disposal group and assets classified as held for sale 3 & 19 5,363 - - Total assets 133,214 102,819 101,109 Liabilities Deposits by banks 29,329 20,428 20,428 Customer accounts 20 62,580 50,151 50,151 Trading portfolio financial liabilities 240 332 - Derivative financial instruments 1,967 2,541 - Investment and insurance contract liabilities - 3,887 3,286 Debt securities in issue 17,611 11,805 11,805 Current taxation 133 197 175 Other liabilities 1,599 1,593 3,387 Accruals and deferred income 1,092 705 913 Retirement benefit liabilities 1,227 886 886 Provisions for liabilities and commitments 140 122 122 Deferred taxation 32 38 52 Subordinated liabilities and other capital instruments 3,756 2,451 2,766 Disposal group classified as held for sale 3 & 19 5,091 - - Total liabilities 124,797 95,136 93,971 Shareholders' equity Share capital 294 294 294 Share premium account 1,693 1,693 1,693 Other equity interests 497 497 182 Reserves 1,152 1,159 985 Profit and loss account 3,533 2,829 2,773 Shareholders' equity 7,169 6,472 5,927 Minority interests 1,248 1,211 1,211 Total shareholders' equity including minority interests 8,417 7,683 7,138 Total liabilities, shareholders' equity and minority interests 133,214 102,819 101,109 The financial position as at 31 December 2004 has been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Condensed statement of cash flows for the year ended 31 December 2005 Year IFRS Year 31 December 31 December 2005 2004 Consolidated statement of cash flows EUR m EUR m Net cash flows from operating activities 4,510 3,389 Investing activities Net increase in financial investments (264) (4,038) Additions to tangible fixed assets (100) (68) Disposal of tangible fixed assets 89 20 Additions to intangible fixed assets (36) (66) Disposal of intangible assets 3 - Investment in associated undertaking (3) (7) Disposal of associated undertakings 4 1 Disposal of investment in subsidiary 7 15 Dividends received from associated undertakings 41 37 Cash flows from investing activities (259) (4,106) Financing activities Issue of ordinary share capital 47 53 Redemption of subordinated liabilities (630) (32) Issue of new subordinated liabilities 1,813 733 Issue of preferred securities - 990 Interest paid on subordinated liabilities (90) (105) Equity dividends paid (532) (345) Dividends on other equity interests (38) (4) Dividends paid to minority interests (14) (2) Cash flows from financing activities 556 1,288 Net increase in cash and cash equivalents 4,807 571 Analysis of changes in cash At 1 January 2,772 2,152 Net cash inflow before the effect of exchange translation 4,807 571 adjustments Effect of exchange translation adjustments 92 49 At 31 December 7,671 2,772 The financial position as at 31 December 2004 has been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Consolidated statement of recognised income and expense 2005 2004 EUR m EUR m Foreign exchange translation differences 287 (73) Net change in cash flow hedges, net of tax (76) - Net change in fair value of available for sale securities, net of tax (6) - Net actuarial gains and losses in retirement benefit schemes, net of tax (285) (198) Income and expense recognised directly in equity (80) (271) Profit for the period 1,433 1,158 Total recognised income and expense for the period 1,353 887 Transition adjustment at 1 January 2005 arising from IAS32, IAS 39 and IFRS 4 (note 2) 545 - Total recognised income and expense for the period including transition adjustment 1,898 887 Attributable to: Equity holders of the parent 1,808 858 Minority interests in subsidiaries 90 29 Total recognised income and expense for the period including transition adjustment 1,898 887 Condensed consolidated reconciliation of movements in shareholders' equity 2005 2004 EUR m EUR m Profit attributable to equity holders of the parent 1,343 1,129 Transition adjustment at 1 January 2005 arising from IAS32, IAS 39 and IFRS 4 (note 2) 545 - Dividends on ordinary shares (532) (475) Dividends on other equity interests (38) (4) Share based payments 16 14 Actuarial loss recognised in retirement benefit schemes (285) (198) Other recognised gains/(losses) relating to the period 198 (85) Other recognised (losses)/gains in associated undertaking (65) 15 Ordinary shares issued in lieu of cash dividend - 134 Other ordinary shares issued 66 71 Net movement in own shares (6) (20) Net additions to shareholders' equity 1,242 581 Opening shareholders' equity 5,927 5,346 Closing shareholders' equity 7,169 5,927 Shareholders' equity: Ordinary shareholders' equity 6,672 5,745 Other equity interests 497 182 7,169 5,927 The results for the year ended 31 December 2004 have been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005. See Basis of preparation on page 23. Commentary on results Earnings per share The table below shows the basic earnings per share and continuing earnings per share excluding the profit on the new Bankcentre development (construction contract income) and the impact of hedge volatility (combines the impact of economic and accounting hedges) under IFRS. IFRS IFRS IFRS % change Year Year Pro-forma(1) 2005 v Earnings per share 2005 2004 2004 Pro-forma 2004 Basic - continuing operations(2) 145.7c 125.8c 123.3c 18 Basic - discontinued operations 5.3c 6.2c 3.8c 39 Basic - total 151.0c 132.0c 127.1c 19 less profit on new Bankcentre development (4.4c) - - - less hedge volatility under IFRS (0.7c) - - - Adjusted basic earnings per share 145.9c 132.0c 127.1c 15 Basic continuing operations(2) 145.7c 125.8c 123.3c 18 less profit on new Bankcentre development (4.4c) - - - less hedge volatility under IFRS (0.7c) - - - Adjusted basic earnings per share - continuing 140.6c 125.8c 123.3c 14 operations Rates of exchange The following table shows the average accounting rates for 2004 and 2005. Average Average accounting accounting rates rates 2005 2004 US dollar 1.25 1.25 Sterling 0.69 0.68 Polish zloty 4.03 4.53 The movement in exchange rates including currency hedging activities was not material from an earnings per share perspective. (1) A reconciliation of the pro-forma and statutory earnings per share for 2004 is shown on page 21 of this release. (2) Continuing operations exclude Ark life which is reported as a discontinued operation following its disposal in 2005. Commentary on results Basis of presentation The results for 2004 have been restated to take account of International Financial Reporting Standards ('IFRS') as adopted by the European Union and implemented with effect from 1 January 2004. This restatement of results for 2004 excludes adjustments for standards implemented with effect from 1 January 2005. IAS 32, IAS 39 and IFRS 4 have been implemented from 1 January 2005. Had these standards been implemented from 1 January 2004, it would have impacted the accounting for derivatives, loan impairment, income recognition on loans (Effective Interest Rate 'EIR'), insurance accounting and classification of financial instruments. In addition to the IFRS restated accounts, the following commentary shows the IFRS pro-forma accounts for 2004. The pro-forma accounts for 2004 reflect the impacts of EIR, insurance accounting and classification of non-derivative financial instruments in order to establish a 2004 pro-forma IFRS restatement but do not reflect the impact of accounting for derivatives and loan impairment. A reconciliation of the statutory IFRS accounts for 2004 to the IFRS pro-forma accounts is shown on page 21 of this release. In order to show comparable trends, the growth percentages in the following commentary reflect the IFRS year to December 2005 compared with the IFRS pro-forma year to December 2004. The growth percentages are also shown on an underlying basis adjusted for the impact of exchange rate movements on the translation of foreign locations' profit and excluding hedge volatility under IFRS. Investigation related charges referred to in the following commentary were incurred in 2004 and 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 in the year to December 2004 with EUR 12 million charged to net interest income, EUR 24 million charged to other income and EUR 14 million of costs included in operating expenses. "Double-digit income growth" "Very strong loan and deposit volume growth" Total income Total income increased by 12% to EUR 3,647 million. IFRS IFRS IFRS Underlying Year Year Pro-forma % change 2005 2004 2004 2005 v Total operating income EUR m EUR m EUR m Pro-forma 2004 Net interest income 2,530 2,072 2,178 15 Other income 1,117 1,144 1,042 6 Total operating income 3,647 3,216 3,220 12 Commentary on results Net interest income Net interest income increased by 15% to EUR 2,530 million in the year to December 2005. The key drivers of the increase were strong loan and deposit growth in Republic of Ireland and GB & NI, strong loan growth in Corporate Banking and very good growth in loan arrangement fees. Loans to customers increased by 27% and customer accounts increased by 16% on a constant currency basis since 1 January 2005 (details of loan and deposit growth by division are contained on page 14 of this release). Net interest income also benefited from income earned on the EUR 1 billion of perpetual preferred securities issued in December 2004. IFRS IFRS Year Year % 2005 2004 change (1) Average interest earning assets EUR m EUR m 2005 v 2004 Average interest earning assets 106,380 84,541 26 (1) This particular analysis is not adjusted for the impact of exchange rate movements. IFRS IFRS Year Pro-forma Basis 2005 2004 point Net interest margin % % change Group net interest margin 2.38 2.58 -20 The domestic and foreign margins for 2005 are reported on page 37 of this release. 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 2.38% in 2005, a decrease of 20 basis points compared with 2004 on a pro-forma IFRS basis. The margin reduction was due to a combination of the following factors: (a) loans increasing at a faster rate than deposits. (b) a changing mix of products where stronger volume growth has been achieved in lower margin products; corporate loans, home loans and prime advances on the lending side and term deposits and other lower margin products on the deposit side. There was higher growth in mid-market loans in the Republic of Ireland and the United Kingdom and growth in our international corporate operations. (c) competitive pressures on loan and deposit pricing. (d) lower yields on the re-investment of deposit and current account funds as they mature, due to the flattening of the yield curve. The largest factor in the margin reduction was average loans increasing at a greater rate than average deposits compared with 2004. 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 interest earning assets. The impact of low yields on the investment of deposit funds particularly affected AIB Bank Republic of Ireland and GB&NI divisions. While it is difficult to disaggregate trends in product margins between mix and competitive factors, competitive pricing behaviour did impact loan and deposit margins. The Group's new business lending continued to meet targeted return on capital hurdles. The factors affecting the net interest margin trend are expected to be continuing features. Commentary on results "Investment banking and asset management fees up 23%" Other income Other income was up 6% to EUR 1,117 million since the year to December 2004. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v Other income EUR m EUR m EUR m Pro-forma 2004 Dividend income 17 27 27 -41 Banking fees and commissions 863 888 786 8 Investment banking and asset management fees 198 155 155 23 Fee and commission income 1,061 1,043 941 11 Less: fee and commission expense (145) (131) (131) 7 Trading income 119 95 95 25 Currency hedging (losses)/profits (13) 1 1 - Hedging volatility (IAS 39)(1) 6 - - - Trading income 112 96 96 16 Profit on termination of off-balance sheet - 36 36 - instruments Other 72 73 73 -6 Other operating income 72 109 109 -37 Total other income 1,117 1,144 1,042 6 Banking fees and commissions increased by 8%, or 5% excluding the EUR 24 million of investigation related charges incurred in 2004. The growth reflects increased business and transaction volumes in AIB Bank Republic of Ireland, GB & NI and Corporate Banking and there was good growth in credit card revenue in Ireland and e-business business and payment fees in Poland. Investment banking and asset management fees increased by 23% driven by particularly strong performances in Goodbody stockbrokers, AIB Corporate Finance, Asset Management in Poland and BZWBK's brokerage operation. Total fee and commission income was up 11% or 8% excluding the investigation related charges in 2004. Trading income increased, with strong growth in bond management activities. Trading income excludes interest payable and receivable arising from these activities, which is included in net interest income. Included in other income in 2004 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. Loan arrangement fees for the year were strong and are reported in the net interest income line under IFRS. The growth in other income no longer benefits from the growth in arrangement fees associated with strong lending growth. Other income as a percentage of total income reduced to 31% from 32% in 2004 (33% excluding the investigation related charges incurred). (1) Combines the impact of economic and accounting hedges, (IAS 39) Commentary on results "Cost income ratio down 2.5% to 55.2%" "Continued investment to meet customer demand and ensure compliance with new regulatory requirements" "Lower depreciation charge" Total operating expenses Operating expenses increased by 7% compared with 2004. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v Operating expenses EUR m EUR m EUR m Pro-forma 2004 Personnel expenses 1,298 1,136 1,136 13 General and administrative expenses 583 579 578 -1 Depreciation(1)/amortisation(2) 130 145 145 -13 Total operating expenses before restructuring costs 2,011 1,860 1,859 7 Restructuring costs - 9 9 Total operating expenses 2,011 1,869 1,868 Operating expenses increased by 7%. The cost base in the comparative year to December 2004 included EUR 14 million of investigation related costs. Under IFRS, operating expenses include other finance income relating to the return on pension fund assets and the cost of pension fund liabilities and this income reduced in 2005, increasing the growth in personnel expenses. Excluding the above two offsetting items, the growth in operating expenses remained at 7%. The 7% increase reflects the very strong business volume and strong revenue growth in 2005. In the period there were costs to ensure compliance with a range of regulatory initiatives such as Sarbanes Oxley and Basel II and there was higher performance related remuneration resulting from strong revenue growth. Excluding these items the increase was 5%. The resourcing and restructuring of our single enterprise agenda is in implementation and we expect this to increase business capability, improve efficiency and further enable compliance. Personnel expenses were up 13%, or 12% excluding the above mentioned decline in other finance income. The increase reflected a higher level of variable costs arising from performance related remuneration resulting from strong revenue growth, the cost of additional resources to respond to business growth demands and ensure compliance with a range of regulatory initiatives such as Sarbanes Oxley and Basel II and higher pension costs. General and administrative expenses were down 1%,or up 2% excluding investigation related costs in 2004. The 2% increase includes the effects of inflation and consultancy and systems costs relating to the aforementioned strengthening of internal structures to ensure compliance with new regulatory initiatives. Depreciation/amortisation decreased by 13% reflecting the benefit of some business rationalisations. Productivity improved with the cost income ratio reducing to 55.2% from 57.7% in 2004. (1) Depreciation of property, plant and equipment. (2) Amortisation / impairment of intangible assets and impairment of goodwill. Commentary on results "Provision charge lower at 15 basis points" "Impaired loans as a percentage of loans decreases to 1.0%" Provisions Total provisions were EUR 143 million, up from EUR 133 million in 2004. IFRS IFRS Year Year 2005 2004 Provisions EUR m EUR m Provisions for impairment of loans and receivables(1) 115 114 Provisions for liabilities and commitments 20 20 Amounts written off/(written back) financial investments 8 (1) Total provisions 143 133 The provision for impairment of loans and receivables was EUR 115 million compared with EUR 114 million in 2004, representing a charge of 0.15% of average loans compared with 0.20% in 2004. The lower charge reflects strong asset quality, good recoveries and a particularly benign economic environment. Impaired loans as a percentage of total loans decreased from 1.3% at 31 December 2004 to 1.0% at 31 December 2005 with the total provision cover for impaired loans increasing to 78%. Strong asset quality in AIB Bank Republic of Ireland was reflected in a reduction in impaired loans as a percentage of total loans to 0.7% at 31 December 2005 from 0.8% in 2004. The provision charge reduced to 0.11% of average loans compared with 0.14% in 2004. The quality across all sectors of the retail and commercial portfolios remains very good. In AIB Bank GB & NI, the provision charge was 0.13% of average loans, increasing marginally from 0.11% in 2004 but continuing to reflect very strong provision recoveries in both periods. Impaired loans at 0.9% of total loans were down from 1.1% at 31 December 2004. Asset quality in Capital Markets remained strong. The provision charge was 0.22% compared with 0.27% in 2004 and impaired loans reduced to 0.7% from 0.8% of total loans at 31 December 2004. The provision charge in Poland decreased to 0.40% of loans from 0.91% in 2004. Asset quality continued to improve with the ratio of impaired loans as a percentage of loans declining to 6.8% from 8.4% at 31 December 2004. The provision for liabilities and commitments was EUR 20 million in 2005,the same level as 2004 while provisions for amounts written off financial investments were EUR 8 million compared with a net credit of EUR 1 million in 2004. Share of results of associated undertakings The profit in 2005 was EUR 149 million compared to EUR 132 million in 2004 and mainly reflects AIB's 23.5% average share of the income after taxes of M&T Bank Corporation on an IFRS basis for the year to December 2005. (1) As noted on page 9, the pro-forma accounts for the year to December 2004 do not reflect the impact of loan impairment under IFRS. The provision for impairment of loans and receivables in 2005 reflects the change in the financial reporting requirements from FRS 12 to IAS 39. Commentary on results The following commentary is in respect of the total Group. "Loans up 27%; deposits up 16%" "Effective tax rate at 18.7%" Balance sheet Total assets amounted to EUR 133 billion at 31 December 2005 compared to EUR 103 billion at 1 January 2005. Adjusting for the impact of currency, total assets were up 26% and loans to customers were up 27% since 1 January 2005 while customer accounts increased by 16%. Risk weighted assets excluding currency factors increased by 24% to EUR 102 billion. Risk weighted assets, loans to customers and customer accounts (excluding currency factors) Risk weighted Loans to Customer assets customers accounts(1) % change 31 December 2005 v 1 January 2005 % change % change % change AIB Bank Republic of Ireland 25 28 20 AIB Bank GB & NI 32 29 17 Capital Markets 23 29 4 Poland 4 4 8 AIB Group 24 27 16 (1) Excludes money market funds. Assets under management/administration and custody Assets under management in the Group amounted to EUR 16 billion at 31 December 2005 compared with EUR 13 billion in 2004. Assets under administration and custody increased to EUR 220 billion at 31 December 2005 from EUR 183 billion in 2004. Taxation The taxation charge was EUR 319 million compared with EUR 267 million in the year to December 2004 (EUR 260 million on a pro-forma basis for the year to December 2004). The effective tax rate was 18.7% compared with 19.5% in the year to December 2004 (or 18.9% on a pro-forma basis). The taxation charge excludes taxation on share of results of associated undertakings. Share of results of associated undertakings is reported net of taxation in the Group profit before taxation. The effective tax rate is influenced by the geographic mix of profits, which are taxed at the rates applicable in the jurisdictions where we operate. Commentary on results "Return on equity 20.6%" "Business expected to continue to perform strongly" "Outlook - low double-digit EPS growth expected in 2006" Return on equity and return on assets The return on equity was 20.6%, compared to 20.7% in 2004. The return on assets was 1.20%, down from 1.22% in 2004. Capital ratios A strong capital position was reflected in a Tier 1 ratio at 7.2% and a total capital ratio of 10.7%. Outlook The business is expected to continue to perform strongly in 2006 in line with our strong positions in the high growth markets where we operate. Very good loan and deposit growth and strong asset quality is expected again this year. The resourcing and restructuring of our enterprise wide approach to operations is in implementation and we expect this to further bolster our business capability. Based on these factors our guidance is for low double-digit earnings per share growth in 2006 compared with the adjusted basic earnings per share of EUR 145.9c in 2005 (as outlined on page 8 of this release). This guidance excludes the one-time gain to be recognised from the Ark Life joint venture with Hibernian Life & Pensions and income from the development of the Bankcentre complex. Divisional commentary On a divisional basis, profit is measured in euro and consequently includes the impact of currency movements. The underlying percentage change is reported in the divisional income statements adjusting for the impact of exchange rate movements on the translation of foreign locations' profit. The AIB Bank Republic of Ireland income statement for 2004 and 2005 has been restated to reflect Ark Life as a discontinued operation, which is now reported below profit after taxation at Group level, arising from its disposal in 2005. The profit on disposal will be accounted for in 2006. AIB Bank Republic of Ireland profit of EUR 779 million was up 24% or 15% excluding the EUR 50 million of investigation related charges incurred in 2004 "Loans up 28%;deposits up 20%" "Income/cost gap at +3%" "Customer relationship management is key performance driver" "Strong asset quality" AIB Bank Republic of Ireland Retail and commercial banking operations in Republic of Ireland, Channel Islands and Isle of Man; AIB Finance and Leasing and Card Services. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v AIB Bank Republic of Ireland income statement EUR m EUR m EUR m Pro-forma 2004 Net interest income 1,314 1,144 1,145 15 Other income 376 340 337 12 Total operating income 1,690 1,484 1,482 14 Total operating expenses 867 813 814 7 Operating profit before provisions 823 671 668 23 Provisions 55 44 44 25 Operating profit 768 627 624 23 Share of results of associated undertakings (1) (1) (1) - Profit on disposal of property 12 7 7 68 Profit before taxation 779 633 630 24 Pre-tax profit increased by 24% or 15% excluding the EUR 50 million of investigation related charges incurred in the year to December 2004.Operating income was up 14% and operating expenses were up 7%. Excluding the investigation related charges these growth rates were 11% and 8% respectively, with the operating income/cost gap at +3%. The strong profit growth was generated through higher business volumes and the focus on customer relationship management. Loans and deposits increased by 28% and 20% respectively since 31 December 2004. Operating expenses were up 7% (or 8% excluding investigation related costs in 2004). Increased business activity, annual salary inflation, performance costs related to strong revenue growth and costs associated with a number of mandatory and regulatory driven projects were the key drivers of the 7% increase. A decrease in other finance income (income associated with the pension fund now included in operating expenses under IFRS), which fell from EUR 20 million to EUR 13 million, accounted for 1% of the operating expenses growth. The cost income ratio was 51.3% compared with 54.9% in 2004 (52.7% excluding the EUR 50 million of investigation related charges incurred in 2004). Asset quality remained very good with the provision charge as a percentage of average loans reducing to 0.11% from 0.14% in 2004. Retail banking reported another very strong year reflecting good growth in income on the back of a significant increase in business volumes on both sides of the balance sheet. Business lending, home mortgages, personal lending and private banking activities all experienced excellent growth, with strong growth in customer deposits also reflecting buoyant customer demand. Profit growth in AIB Card Services was also notable, resulting from strong revenue due to higher consumer spending, a strong increase in merchant turnover, lower costs and a lower bad debt charge. In AIB Finance and Leasing there was good profit growth due to a 14% increase in loan volumes since December 2004 and tight cost management. New business was particularly strong in the motor, plant and equipment sectors. Divisional commentary AIB Bank GB & NI profit was up 18% "Strong profit growth" "Loans up 29%;deposits up 17%" "Cost income ratio now at 48.7%" "Robust asset quality" AIB Bank GB & NI Retail and commercial banking operations in Great Britain and Northern Ireland. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v AIB Bank GB & NI income statement EUR m EUR m EUR m Pro-forma 2004 Net interest income 516 416 447 16 Other income 148 189 142 5 Total operating income 664 605 589 13 Total operating expenses 323 305 303 7 Operating profit before provisions 341 300 286 20 Provisions 21 13 13 61 Operating profit 320 287 273 18 Profit on disposal of property 2 1 1 - Profit before taxation 322 288 274 18 AIB Bank GB&NI reported a strong performance in the year to 31 December 2005, with profit before taxation increasing by 18%. Loan and deposit balances increased by 29% and 17% respectively in 2005 with volume growth reflecting buoyant business momentum. Lending margins were well managed in a very competitive environment. Operating expenses were up 7% mainly due to staff cost increases relating to ongoing investment in the business. The cost income ratio improved to 48.7% from 51.5% last year. The bad debt charge represented 0.13% of average loans, compared with 0.11% of average loans in 2004. Credit quality remains robust in a relatively benign economic climate. Allied Irish Bank (GB), with its primary focus on chosen business sectors, achieved a profit increase of 25% to EUR 169 million, a very strong performance, with growth in balances of 31% in loans and 21% in deposits. The bank continues to grow its business customer base as a key provider of banking to mid-corporate businesses through its relationship-banking model and continued expansion. In 2005, the opening of a corporate office in the regenerated Birmingham city centre demonstrated the increasing profile of Allied Irish Bank (GB). First Trust Bank, a retail bank in Northern Ireland, also reported double-digit growth, with an 11% increase in profit before taxation to EUR 153 million, compared with 2004. Loan balances showed strong growth of 25% and solid deposit growth of 12% was achieved. First Trust continues to develop both its business and personal customer bases. Divisional commentary Capital Markets profit of EUR 403 million, up 27% "Another exceptionally strong Corporate Banking performance" "Good Treasury performance with strong customer business and low risk utilisation" "Profit substantially higher in Investment Banking" Capital Markets Corporate Banking, Global Treasury and Investment Banking. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v Capital Markets income statement EUR m EUR m EUR m Pro-forma 2004 Net interest income 435 360 396 10 Other income 407 390 345 18 Total operating income 842 750 741 14 Total operating expenses 400 403 403 -1 Operating profit before provisions 442 347 338 31 Provisions 46 29 29 59 Operating profit 396 318 309 28 Share of results of associated undertakings 2 4 4 -44 Profit on disposal of business 5 4 4 12 Profit before taxation 403 326 317 27 Profit before taxation increased by 27% to EUR 403 million, reflecting a very strong performance across each business area. The performance in Corporate Banking was particularly strong with pre-tax profit up 33% on the comparative out-turn for 2004. We experienced significant loan growth in both the domestic and international businesses with loans increasing by 29% since December 2004. We continue to invest heavily in expanding our international and specialised loan businesses which are experiencing very strong growth. We retain a rigorous and conservative approach to credit risk management and continually seek to optimise value in a quality loan portfolio. Global Treasury performed strongly in 2005 following the outstanding performance in its markets business in 2004. Despite difficult interest rate and foreign exchange markets experienced in 2005, Global Treasury closed the year with profit marginally ahead (up 2%) of 2004. Our customer business performed robustly, showing strong growth over the comparative period and underpinning our leading position in the Republic of Ireland. We also experienced strong growth in our investment books and bond activities with our short term trading activities performing behind the very strong prior year. Investment Banking profit was up 22%, substantially ahead of 2004. The strong profit growth and activity experienced in stockbroking services, equity trading, corporate advisory and structured investments were once again underpinned by the market share positions held by each of these businesses. The approximate profit split by business unit in 2005 was Corporate Banking 55%, Global Treasury 29% with Investment Banking and Allied Irish America comprising the remainder. The divisional cost income ratio decreased to 47.5% from 54.4% in 2004. Strong cost management control coupled with selective business rationalisation enabled the division to retain costs at the 2004 levels. The bad debt provision charge decreased to 0.22% of average loans from 0.27% in 2004. Total provisions increased due to a higher nominal bad debt charge, higher investment provisions and some onerous lease charges on premises. Divisional commentary Poland profit was EUR 132 million, up 13% "Strong profit growth momentum" "Very strong growth in mutual funds" "Provision charge continues to reduce" 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. IFRS IFRS IFRS Year Year Pro-forma Underlying % 2005 2004 2004 change 2005 v Poland income statement EUR m EUR m EUR m Pro-forma 2004 Net interest income 205 174 180 1 Other income 222 188 180 10 Total operating income 427 362 360 6 Total operating expenses 280 245 245 3 Operating profit before provisions 147 117 115 11 Provisions 15 29 29 -54 Operating profit 132 88 86 33 Share of results of associated undertakings - 1 1 - Profit on disposal of property - 1 1 - Profit on disposal of business(1) - 13 13 - Profit before taxation 132 103 101 13 Profit before taxation was EUR 132 million in 2005 compared with EUR 101 million in 2004. On a local currency basis pre-tax profit increased by 13% and adjusting for the disposal of a business in 2004 the increase was 29%. Total operating income increased by 6% with net interest income increasing by 1% and other income increasing by 10%. Average interest rates were lower in 2005 following a 2.00% reduction in the reference rate during the year to 4.50% at 31 December 2005. Performing loans to customers increased by 5% since December 2004 with total loans to customers up 4%. Overall the business lending market in Poland was subdued with higher liquidity levels and increased competition resulting in stagnant business lending year on year. Personal lending grew strongly where cash loans in particular were in demand by our customers. Lending margins increased as a result of improved mix in the portfolio. Customer deposits increased by 8% with margins decreasing as a result of lower interest rates, changing mix and increased competition. Other income grew by 10%. The main area of growth was asset management fees with mutual funds income increasing by 115% and a continued favourable mix in funds managed with market share increasing from 7.5% to 12.6%. The brokerage business enjoyed an excellent year with substantial increases in turnover, buoyed by the performance of the Warsaw Stock Exchange in 2005. E-business and payment fees and foreign exchange income contributed to a strong growth level. Operating expenses were up 3% reflecting higher staff costs due to increased performance related pay, while savings were realised in operating expenses. Provisioning has reduced further compared with 2004. The charge as a percentage of average loans declined from 0.91% to 0.40% in 2005. The downward trend in impaired loans as a percentage of total loans continued from 8.4% at 31 December 2004 to 6.8% at the end of December 2005. (1) The profit on disposal of business in 2004 relates to the sale in April 2004 of CardPoint S.A., a merchant acquiring business responsible for card payment processing. Divisional commentary Group Group includes interest income earned on capital not allocated to divisions, the funding cost of certain acquisitions, economic hedging of the translation of foreign locations' profit, unallocated costs of enterprise technology and central services and the contribution from AIB's share of approximately 23.5% in M&T Bank Corporation ('M&T'). IFRS IFRS IFRS Year Year Pro-forma 2005 2004 2004 Group income statement EUR m EUR m EUR m Net interest income 60 (22) 10 Other income (36) 37 38 Total operating income 24 15 48 Total operating expenses 141 103 103 Operating loss before provisions (117) (88) (55) Provisions 6 18 18 Operating loss (123) (106) (73) Share of results of associated undertaking - M&T 148 128 128 Construction contract income 45 - - Profit before taxation 70 22 55 Group reported profit before taxation of EUR 70 million for the year to December 2005 compared with a profit of EUR 55 million in 2004. Net interest income was up due to higher capital income resulting from increased capital balances (strong retained earnings) and the income generated from investment of the funds raised on a EUR 1 billion perpetual preferred securities issue in December 2004. Other income was lower due to gains of EUR 36 million in relation to closing out capital invested positions in 2004. Other income in 2005 includes economic hedging losses in relation to foreign currency translation exposure and capital management, and hedge volatility under IFRS. Significant additional investment in resources to facilitate AIB's preparation for Basel II and Sarbanes Oxley were the main drivers of higher operating expenses. In addition, there was investment to further strengthen compliance and internal audit structures with performance related costs higher in line with strong revenue and profit growth. AIB's share of M&T after-tax profit in 2005 amounted to EUR 148 million. On a local currency basis M&T's contribution of US$ 185 million increased by 16% relative to the year to December 2004 of US$ 159 million. AIB benefited from a 23.5% share of profit compared to a 22.7% share in the year to December 2004. M& T reported its annual results on 11 January 2006, showing net income up 8% to US$ 782 million. US GAAP-basis diluted earnings per share was up 12% to US$ 6.73 from US$ 6.00 in the year to December 2004. Diluted net operating earnings per share, which excludes the amortisation of core deposit and other intangibles, was US$ 7.03, up 10% from US$ 6.38. Pro-forma IFRS information Reconciliation of statutory IFRS accounts to pro-forma IFRS accounts for 2004 IFRS EIR(1) Insurance(2) Financial(3) IFRS Year instruments Pro-forma 2004 2004 EUR m EUR m EUR m EUR m EUR m Net interest income 2,072 73 - 33 2,178 Other income 1,144 (102) - - 1,042 Total operating income 3,216 (29) - 33 3,220 Total operating expenses 1,869 (1) - - 1,868 Provisions 133 - - - 133 Operating profit 1,214 (28) - 33 1,219 Share of results of associated undertaking 132 - - - 132 Profit on disposal of property 9 - - - 9 Profit on disposal of business 17 - - - 17 Profit before taxation 1,372 (28) - 33 1,377 Earnings per share - continuing operations 125.8c (2.5c) - - 123.3c Earnings per share - discontinued operations 6.2c - (2.4c) - 3.8c Basic earnings per share 132.0c (2.5c) (2.4c) - 127.1c (1) (EIR) Effective interest rate (IAS 39). On transition, certain fees receivable and fees and commissions payable that had previously been taken to the profit and loss account were treated as deferred income and deferred costs and shown within loans and receivables. These deferred fees and costs are amortised on an effective interest basis to the profit and loss account over the expected residual lives of the financial instruments. The change in policy gives rise to a reclassification from fee income / fee expense and administrative expenses to interest income with an impact on the net interest margin. On a pro-forma basis the effective interest rate adjustment reduced profit before taxation by EUR 28 million in 2004. (2) Insurance business (IFRS 4 / IAS 39). Accounting for contracts meeting the IFRS definition of insurance business is not impacted by IFRS 4. Accounting for investment products under IAS 39 serves to delay the recognition of income for a number of reasons. There is a narrower definition of costs that can be deferred on the sale of investment products. Initial charges on sale of investment products are deferred and accrued over the expected life of the product. There is no opportunity to account for the future surpluses on an embedded value basis. As a consequence, there was a reduction in equity on transition as the valuation of the discounted future earnings expected to emerge from the business currently in force in the balance sheet will decrease. Income will be recognised on these contracts in later periods due to the change in the valuation basis. On a pro-forma basis the insurance business adjustment reduced earnings per share by 2.4c in 2004. (3) Financial instruments (IAS 32 / IAS 39). Under IAS 32 and IAS 39,all debt securities are classified and disclosed within one of the following four categories: held-to-maturity; available-for-sale; trading; or designated as fair value through the profit and loss account. Some of AIB's financial instruments, which were previously held as financial fixed assets, are classified as available-for-sale on transition to IFRS. On a pro-forma basis, classification of financial instruments increased profit before taxation by EUR 33 million in 2004. Pro-forma IFRS information IFRS segmental pro-forma information (continuing operations) Year 31 December 2004 AIB Bank AIB Bank Capital Poland Group Total ROI GB&NI Markets EUR m EUR m EUR m EUR m EUR m EUR m Operations by business segments Net interest income 1,145 447 396 180 10 2,178 Other income 337 142 345 180 38 1,042 Total operating income 1,482 589 741 360 48 3,220 Total operating expenses 814 303 403 245 103 1,868 Provisions 44 13 29 29 18 133 Operating profit/(loss) 624 273 309 86 (73) 1,219 Share of results of associated undertakings (1) - 4 1 128 132 Profit on disposal of property 7 1 - 1 - 9 Profit on disposal of businesses - - 4 13 - 17 Group profit before taxation 630 274 317 101 55 1,377 Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) AIB Group Annual Results 2005 Part 2 Basis of preparation First time adoption of International Financial Reporting Standards ('IFRS') Up to and including the year ended 31 December 2004, AIB's primary financial statements were prepared in accordance with Irish Generally Accepted Accounting Principles ('IR GAAP'). On 1 January 2005, AIB Group implemented the requirements of International Financial Reporting Standards and International Accounting Standards and other interpretations as adopted by the European Union ('EU') (collectively, 'IFRS') for the first time and these are used for the purpose of preparing the financial statements for the year ended 31 December 2005. These financial statements have been prepared based on the requirements of IFRS issued by the International Accounting Standards Board ('IASB') as adopted by the EU. In accordance with IFRS 1 'First-time Adoption of International Financial Reporting Standards' ('IFRS 1'), there have been no adjustments to the estimates made at the time of the approval of the IR GAAP financial statements for the year ended 31 December 2004. IFRS 1 provides first time adopters of IFRS with certain exemptions. IFRS 1 also allows or requires a number of other exceptions to its general principle that the standards in force at the reporting date should be applied retrospectively. AIB has availed of certain exemptions as set out below:- First time application relating to financial instruments and insurance contracts AIB has availed of transitional provisions for IAS 32 'Financial Instruments: Disclosure and Presentation' ('IAS 32'), IAS 39 'Financial Instruments: Recognition and Measurement' ('IAS 39') and IFRS 4 'Insurance Contracts' ('IFRS 4') and has not presented comparative information in accordance with these standards in its 2005 financial statements. Accordingly, comparative information for 2004 in respect of financial instruments and insurance contracts has been prepared on the basis of the Group's accounting policies under IR GAAP. Share based payments AIB has implemented the requirements of IFRS 2 'Share Based Payment' ('IFRS 2') to all equity settled share based payments granted after 7 November 2002 that had not vested by 1 January 2005. Property, plant & equipment AIB has retained its existing carrying value of occupied properties, plant and equipment at 1 January 2004 as deemed cost, rather than either reverting to historical cost or carrying out a valuation at the date of transition as permitted by IFRS 1. Cumulative exchange differences AIB has elected to deem cumulative exchange differences on the net investments in foreign branches and subsidiaries to be zero at 1 January 2004, as permitted by IFRS 1. Employee benefits AlB has recognised the cumulative actuarial gains and losses of defined benefit pension schemes and other post retirement benefits upon transition at 1 January 2004. Business combinations AIB has elected not to apply IFRS 3 'Business Combinations' to business combinations that arose prior to 1 January 2004. Derecognition of financial instruments Financial instruments derecognised prior to 1 January 2004 have not been subsequently recognised by the Group under IFRS. Effects of the transition to IFRS A summary reconciliation from previously reported Irish GAAP information to IFRS for profit before taxation and shareholders' equity for December 2004 and the reconciliation to shareholders' equity at 1 January 2005 after the application of IAS 32, IAS 39 and IFRS 4 is presented in Note 2 'Transition to IFRS'. Notes 1 Accounting policies and presentation of financial information The accounting policies that the Group applied in the preparation of the financial statements for the year ended 31 December 2005 are set out in the June 2005 Interim Report on pages 22 to 33. There has been no amendments to these provisional IFRS accounting policies with the following exceptions: (a) Construction contracts Revenue from construction contracts is recognised when it is probable that the economic benefits of the transaction will flow to the Group and when the revenue, the costs, (both incurred and in the future), the outcome of the contract and its stage of completion can all be measured reliably. Once the above criteria are met, both contract revenue and contract costs are recognised by reference to the stage of completion of the contract. When the outcome of a construction contract cannot be estimated reliably, no profit is recognised, but revenue is recognised to the extent of costs incurred that are probable of recovery. Costs are recognised as an expense in the income statement in the accounting period in which the work is performed. (b) Non-current assets held for sale and discontinued operations A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year. On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to gains and losses on subsequent remeasurement. No reclassifications are made in respect of prior periods. A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale. Discontinued operations are presented on the income statement (including comparatives) as a separate amount, comprising the total of the post tax profit or loss of the discontinued operations for the period together with any post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on disposal of the assets/disposal groups constituting discontinued operations. The currency used in these accounts is the euro which is denoted by 'EUR' or the symbol EUR. Notes 2 Transition to IFRS As set out in the basis of preparation, the financial statements have been prepared based on the requirements of IFRS as adopted by the European Union. AIB has availed of transitional provisions for IAS 32 'Financial Instruments: Disclosure and Presentation' ('IAS 32'), IAS 39 'Financial Instruments: Recognition and Measurement' ('IAS 39') and IFRS 4 'Insurance Contracts' ('IFRS 4') and has not presented comparative information in accordance with these standards. Accordingly, comparative information for 2004 in respect of financial instruments and insurance contracts is prepared on the basis of the Group's accounting policies under IR GAAP. The following table sets out the reconciliation from previously reported Irish GAAP information for profit after taxation and shareholders' equity for December 2004, and the reconciliation to shareholders' equity at 1 January 2005 after the application of IAS 32, IAS 39 and IFRS 4. Profit after taxation Shareholders' equity 31 December 31 December 2004 2004 EUR m EUR m As reported under Irish GAAP 1,082 5,581 Reconciliation adjustments to IFRS excluding IAS 32, IAS 39 and IFRS 4: Associated undertakings 1 12 Finance leases 2 1 Software 6 20 Taxation (4) (47) Intangible assets & goodwill 79 79 Dividends - 336 Share based payments (9) 10 Employee benefits & other 1 (65) IFRS excluding IAS 32, IAS 39 and IFRS 1,158 5,927 4 Reconciliation adjustments to IAS 32,IAS 39 and IFRS 4: Loans origination (65) Loan impairment 139 Financial instruments 273 Derivatives 38 Long-term assurance business (185) Financial liabilities 345 Shareholders' equity under IFRS 6,472 including IAS 32, IAS 39 and IFRS 4 3 Disposal of Ark Life Assurance Company Limited ('Ark Life'). Acquisition of an interest of 24.99% in Hibernian Life Holdings Limited. On 22 November 2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group p.l.c for the manufacture and distribution of life and pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life & Pensions Limited and Ark Life. Under the terms of the agreement, AIB will own an interest of 24.99% in the joint venture company Hibernian Life Holdings Limited and will enter into an exclusive agreement to distribute the life and pensions products of the joint venture. As part of the transaction, AIB will receive a cash payment of up to EUR 205.4m. The transaction was completed on 30 January 2006. Notes 3 Disposal of Ark Life Assurance Company Limited ('Ark Life'). Acquisition of an interest of 24.99% in Hibernian Life Holdings Limited (continued) Under IFRS 5, 'Non-current assets held for sale and discontinued operations', the income and expenses of Ark Life for December 2005 and December 2004 of the operations deemed to be disposed of have been reported net of taxation as a discontinued operation below profit after taxation. The impact of the December 2004 restatement on the previously reported figures is outlined below on the Income Statement captions impacted. The assets and liabilities of Ark Life (note 19) as at 31 December 2005 have been classified as held for sale and are separate from other assets and liabilities on the balance sheet. There has been no restatement of prior year balance sheet figures as the assets and liabilities were not held for sale at that date. 31 December 2004 As previously Discontinued Continuing reported operations operations EUR m EUR m EUR m Net interest income 2,134 62 2,072 Other income 1,474 330 1,144 Total operating income 3,608 392 3,216 Insurance and investment contract 309 309 - liabilities and claims Total operating expenses 1,894 25 1,869 Provisions 133 - 133 Operating profit 1,272 58 1,214 Share of results of associated 132 - 132 undertakings Profit on disposal of property and 26 - 26 businesses Profit before taxation 1,430 58 1,372 Taxation 272 5 267 Profit after taxation 1,158 53 1,105 Year 31 December 2005 AIB Bank AIB Bank Capital Poland Group Total ROI GB&NI Markets 4 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m Operations by business segments(1) Net interest income 1,314 516 435 205 60 2,530 Other income 376 148 407 222 (36) 1,117 Total operating income 1,690 664 842 427 24 3,647 Total operating expenses 867 323 400 280 141 2,011 Provisions 55 21 46 15 6 143 Operating profit/(loss) 768 320 396 132 (123) 1,493 Share of results of associated - 2 - 148 149 undertakings (1) Profit on disposal of 12 2 - - - 14 property Construction contract - - - - 45 45 income Profit on disposal of - - 5 - - 5 businesses Profit before taxation - continuing operations 779 322 403 132 70 1,706 Balance sheet Total loans 45,523 18,346 23,794 4,487 211 92,361 Total deposits 34,172 10,958 58,038 6,229 123 109,520 Total assets 55,224 20,031 44,371 7,813 5,775 133,214 Total risk weighted 39,073 18,335 38,974 4,640 634 101,656 assets Net assets(2) 2,564 1,203 2,558 305 42 6,672 Capital expenditure 71 16 13 19 17 136 Notes Year 31 December 2004 AIB Bank AIB Bank Capital Poland Group Total ROI GB & NI Markets 4 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m (continued) Operations by business segments(1) Net interest income 1,144 416 360 174 (22) 2,072 Other income 340 189 390 188 37 1,144 Total operating income 1,484 605 750 362 15 3,216 Total operating 813 305 403 245 103 1,869 expenses Provisions 44 13 29 29 18 133 Operating profit/(loss) 627 287 318 88 (106) 1,214 Share of results of (1) - 4 1 128 132 associated undertakings Profit on disposal of 7 1 - 1 - 9 property Profit on disposal of - - 4 13 - 17 businesses Profit before taxation - continuing operations 633 288 326 103 22 1,372 Balance sheet (at 1 January 2005) Total loans 35,794 13,740 14,668 3,748 280 68,230 Total deposits 27,178 9,084 40,537 5,452 133 82,384 Total assets 42,137 15,175 33,550 6,703 5,254 102,819 Total risk weighted 31,183 13,510 30,098 4,232 568 79,591 assets Net assets(2) 2,341 1,014 2,259 318 43 5,975 Capital expenditure 82 12 16 24 - 134 Year 31 December 2005 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(3) Net interest income 1,564 45 689 225 7 2,530 Other income 537 68 252 251 9 1,117 Total operating 2,101 113 941 476 16 3,647 income Total operating 1,239 62 413 290 7 2,011 expenses Provisions 70 1 54 15 3 143 Operating profit 792 50 474 171 6 1,493 Share of results of 1 148 - - - 149 associated undertakings Profit on disposal of 12 - 2 - - 14 property Construction contract 45 - - - - 45 income Profit on disposal of - 4 1 - - 5 businesses Profit before taxation - continuing operations 850 202 477 171 6 1,706 Balance sheet Total loans 58,831 3,863 24,888 4,487 292 92,361 Total deposits 77,971 4,021 21,291 6,229 8 109,520 Total assets 91,622 5,071 28,411 7,815 295 133,214 Net assets(2) 4,039 477 1,810 320 26 6,672 Capital expenditure 100 1 16 19 - 136 Notes Year 31 December 2004 Republic of United United Poland Rest of Total Ireland States of Kingdom the world America 4 Segmental EUR m EUR m EUR m EUR m EUR m EUR m information (continued) Operations by geographical segments(3) Net interest income 1,314 23 543 190 2 2,072 Other income 572 102 259 205 6 1,144 Total operating 1,886 125 802 395 8 3,216 income Total operating 1,126 81 392 266 4 1,869 expenses Provisions 70 (4) 38 29 - 133 Operating profit 690 48 372 100 4 1,214 Share of results of 5 126 - 1 - 132 associated undertakings Profit on disposal of 7 - 1 1 - 9 property Profit on disposal of - - 4 13 - 17 businesses Profit before taxation - continuing operations 702 174 377 115 4 1,372 Balance sheet (at 1 January 2005) Total loans 43,854 1,464 19,044 3,748 120 68,230 Total deposits 55,289 2,691 18,952 5,452 - 82,384 Total assets 70,484 2,568 22,885 6,761 121 102,819 Net assets(2) 2,342 942 2,299 322 70 5,975 Capital expenditure 97 1 12 24 - 134 (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 geographical distribution of profit before taxation is based primarily on the location of the office recording the transaction. Notes 2005 2004 5 Interest and similar income EUR m EUR m Interest on loans and receivables to banks 167 98 Interest on loans and receivables to customers 4,032 3,044 Interest on trading portfolio financial assets 305 232 Interest on financial investments available for sale 647 644 5,151 4,018 2005 2004 6 Interest expense and similar charges EUR m EUR m Interest on amounts due to banks and customers 1,944 1,582 Interest on debt securities in issue 545 255 Interest on subordinated liabilities and other capital instruments 132 109 2,621 1,946 2005 2004 7 Trading income EUR m EUR m Foreign exchange contracts 59 66 Profits less losses from trading portfolio assets 84 55 Interest rate contracts (32) (30) Equity index contracts 1 5 112 96 2005 2004 8 Other operating income EUR m EUR m Profit on disposal of available for sale debt securities 17 15 Profit on disposal of available for sale equity shares 2 2 Profit on disposal of off-balance sheet instruments - 36 Profit on disposal of investments in associated undertakings - 1 Miscellaneous operating income 53 55 72 109 2005 2004 9 Administrative expenses EUR m EUR m Personnel expenses 1,298 1,136 General and administrative expenses 583 579 Restructuring costs - 9 1,881 1,724 10 Construction contract income In 2004, Blogram Limited a property development company and subsidiary of Allied Irish Banks p.l.c., contracted with the Serpentine Consortium to construct on a fixed price contract basis, a new development at Bankcentre, Ballsbridge, Dublin on their behalf. At 31 December 2005, contract revenue of EUR 81m less contract expenses of EUR 36m have been reported as construction contract income. At 31 December 2005, EUR 26m was due from the consortium in respect of construction contracts in progress. Notes 11 Profit on disposal of businesses 2005 The profit on disposal of businesses in 2005 of EUR 5m relates to the sale of Community Counselling Services of EUR 4m (tax charge EUR 1m), and the accrual of EUR 1m (tax charge EUR 0.3m), arising from the sale of the Govett business in 2003. 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. 2005 2004 12 Taxation 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) 160 133 Adjustments in respect of prior periods 1 (5) 161 128 Double taxation relief (10) (13) 151 115 Foreign tax Current tax on income for the period 163 181 Adjustments in respect of prior periods (11) (11) 152 170 Deferred taxation 303 285 Origination and reversal of timing differences 16 (10) Other - (8) 16 (18) Total income tax expense - continuing operations 319 267 Effective income tax rate - continuing operations 18.7% 19.5% (1)The December 2005 figure includes a charge of EUR 29.5m (2004: EUR 29.5m) in relation to the Irish Government bank levy. 2005 2004 13 Earnings per share EUR m EUR m (a) Basic Profit attributable to equity holders of the parent 1,343 1,129 Distributions to other equity holders (38) (4) Profit attributable to the ordinary shareholders 1,305 1,125 Weighted average number of shares in issue during the 864.5m 852.0m period Earnings per share EUR 151.0c EUR 132.0c Notes 2005 2004 13 Earnings per share (continued) EUR m EUR m (b) Diluted Profit attributable to ordinary shareholders 1,305 1,125 Dilutive impact of potential ordinary shares in (1) - associated company Adjusted profit attributable 1,304 1,125 Number of shares (millions) Weighted average number of shares in issue during 864.5 852.0 the period Dilutive effect of options outstanding 5.7 3.1 Potential weighted average number of shares 870.2 855.1 Earnings per share - diluted EUR 149.8c EUR 131.5c Basic Diluted 2005 2004 2005 2004 14 Adjusted earnings per share cent cent cent cent (a) Earnings per share As reported 151.0 132.0 149.8 131.5 Adjustments: Construction contract income (4.4) - (4.4) - Hedge volatility (0.7) - (0.7) - Effective interest rate - (2.5) - (2.5) Insurance business - (2.4) - (2.4) 145.9 127.1 144.7 126.6 Basic Diluted 2005 2004 2005 2004 cent cent cent cent (b) Earnings per share - continuing operations As reported 145.7 125.8 144.6 125.3 Adjustments: Construction contract income (4.4) - (4.4) - Hedge volatility (0.7) - (0.7) - Effective interest rate - (2.5) - (2.5) 140.6 123.3 139.5 122.8 Adjusted earnings per share is presented to help understand the underlying performance of the Group. The adjustments in 2005 are items that do not reflect the underlying business performance. As IAS 39 and IFRS 4 have been implemented with effect from 1 January 2005, the adjustments in 2004 reflect the impact that these standards would have had on the effective interest rate and insurance business had they been applied from 1 January 2004. 31 December 1 January 2005 2005 15 Trading portfolio financial assets EUR m EUR m Loans and receivables to banks 3 2 Loans and receivables to customers 72 45 Debt securities: Governments securities 922 1,048 Other public sector securities 19 73 Other debt securities 9,008 6,705 9,949 7,826 Equity shares 89 84 10,113 7,957 Notes 2005 2004 16 Loans and receivables to customers EUR m EUR m Loans and receivables to customers 81,171 62,243 Amounts receivable under finance leases 1,620 1,527 Amounts receivable under hire purchase contracts 1,154 968 Unquoted securities 1,287 - 85,232 64,738 2005 2004 EUR m EUR m Impaired loans by division AIB Bank ROI 308 295 AIB Bank GB & NI 166 154 Capital Markets 132 100 Poland 262 297 868 846 2005 2004 17 Provisions for impairment of loans and receivables EUR m EUR m At beginning of period 760 766 IFRS transition adjustment (146) - Exchange translation adjustments 16 25 Transfer to provisions for liabilities and commitments - (15) Charge against income statement 115 114 Amounts written off (72) (151) Recoveries of amounts written off in previous years 3 21 At end of period 676 760 At end of period: Specific 514 478 IBNR/General 162 282 676 760 Amounts include: Loans and receivables to banks 2 2 Loans and receivables to customers 674 758 676 760 31 December 1 January 2005 2005 18 Financial investments available for sale EUR m EUR m Debt securities: Government securities 8,522 7,227 Other public sector securities 507 854 Bank and building society certificates of deposit 643 585 Other debt securities 7,021 6,880 16,693 15,546 Equity shares 171 174 16,864 15,720 Notes 19 Long-term assurance business On 22 November 2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group p.l.c for the manufacture and distribution of life and pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life & Pensions Limited and Ark Life Assurance Company Limited ('Ark Life'). As set out in note 3, the income from Ark Life that is determined to relate to discontinued operations is shown, on an after tax basis, as a one line item on the face of the income statement. Prior year numbers have been restated. Ark Life assets and liabilities have been included in the balance sheet at 31 December 2005 as a disposal group classified as held for sale. Comparatives have not been restated. Income and expense from long-term assurance business included in the income statement is set out below: 2005 2004 Income and expense from Ark Life's long-term assurance business EUR m EUR m Net interest income 113 62 Other income 740 342 Total operating income 853 404 Increase in insurance and investment contract liabilities, and claims 762 309 Total operating expenses 27 26 Income before taxation 64 69 Taxation 4 6 Income after taxation 60 63 Analysed as to: Continuing operations 14 10 Discontinued operations 46 53 Some elements of the Ark Life business are being retained within the Group and this gives rise to the difference between the amounts recognised above and those disclosed as discontinued activities. The assets and liabilities of Ark Life included in the consolidated balance sheet of the Group are as follows: 31 December 1 January 31 December 2005 2005 2004 EUR m EUR m EUR m Assets Loans and receivables to banks 191 220 220 Financial assets held at fair value through 2,638 1,871 - profit or loss Debt securities - - 425 Equity shares - - 1,446 Property, plant and equipment 52 51 51 Reinsurance assets 748 601 - Placings with group companies 1,428 1,246 1,246 Other assets 371 255 440 Total assets 5,428 4,244 3,828 Liabilities Investment contract liabilities 2,953 2,422 2,422 Insurance contract liabilities 1,923 1,465 864 Other liabilities 215 75 75 Total liabilities 5,091 3,962 3,361 Shareholders' equity 337 282 467 Total liabilities and shareholders' equity 5,428 4,244 3,828 Notes 19 Long-term assurance business (continued) Presentation in the Group balance sheet 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' equity. At 31 December 2005, shares in AIB with a value of EUR 77m (2004: EUR 74m) 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. 2005 2004 20 Customer accounts EUR m EUR m Current accounts 20,909 17,099 Demand deposits 8,013 7,321 Time deposits 28,118 22,736 57,040 47,156 Securities sold under agreements to repurchase 6 77 Other short-term borrowings 5,534 2,918 5,540 2,995 62,580 50,151 Contract amount 2005 2004 21 Memorandum items: contingent liabilities and commitments EUR m EUR m Contingent liabilities: Endorsements(1) - 2 Guarantees and assets pledged as collateral security 7,157 5,394 Other contingent liabilities 1,396 830 8,553 6,226 Commitments: Other commitments 19,558 16,127 28,111 22,353 (1) On transition to IFRS, at 1 January 2005, IAS 39 requires the recognition of a liability for acceptances from the date of acceptance. A corresponding asset due from the originator is also recognised. Under Irish GAAP, acceptances were accounted for on a net basis and shown as a contingent liability. 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. The following table presents the notional principal amount and gross replacement cost of interest rate, exchange rate and equity contracts for 2005 and 2004. 2005 2004 Notional Gross Notional Gross principal replacement principal replacement amount cost amount cost EUR m EUR m EUR m EUR m Interest rate contracts(1) 178,326 1,146 141,067 1,059 Exchange rate contracts(1) 19,799 238 15,870 599 Equity contracts(1) 4,386 253 3,575 112 (1) Interest rate, exchange rate and equity contracts are entered into for both hedging and trading purposes. Notes 21 Memorandum items: contingent liabilities and commitments (continued) The Group uses the same credit control and risk management policies in undertaking all off-balance sheet commitments as it does for on balance sheet lending including counterparty credit approval, limit setting and monitoring procedures. In addition, in relation to derivative instruments, the Group's exposure to market risk is controlled within the risk limits in the Group's Interest Rate Risk and Foreign Exchange Risk Policies and is further constrained by the risk parameters incorporated in the Group's Derivatives Policy as approved by the Board. 22 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 2005 and 2004.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 2005 Year ended 31 December 2004 Average Interest Average Average Interest Average balance rate balance rate Assets EUR m EUR m % EUR m EUR m % Loans and receivables to banks Domestic offices 4,596 117 2.5 2,857 70 2.4 Foreign offices 1,131 50 4.4 824 28 3.4 Loans and receivables to customers Domestic offices 47,806 2,084 4.4 38,540 1,625 4.2 Foreign offices 27,664 1,768 6.4 21,397 1,260 5.9 Trading portfolio financial assets Domestic offices 7,786 257 3.3 5,890 193 3.3 Foreign offices 1,308 48 3.7 1,139 39 3.4 Financial investments Domestic offices 12,869 470 3.7 11,011 431 3.9 Foreign offices 3,220 177 5.5 2,883 213 7.4 Total interest earning assets Domestic offices 73,057 2,928 4.0 58,298 2,319 4.0 Foreign offices 33,323 2,043 6.1 26,243 1,540 5.9 Net interest on 125 48 swaps Total average 106,380 5,096 4.8 84,541 3,907 4.6 interest earning assets Non-interest 13,209 10,421 earning assets Total average 119,589 5,096 4.3 94,962 3,907 4.1 assets Percentage of assets applicable to foreign activities 31.1 31.3 Notes 22 Average balance sheets and interest rates (continued) Year ended 31 December 2005 Year ended 31 December 2004 Average Interest Average Average Interest Average balance rate balance rate Liabilities and EUR m EUR m % EUR m EUR m % shareholders' equity Due to banks Domestic offices 25,288 693 2.7 20,288 555 2.7 Foreign offices 1,963 81 4.1 2,732 91 3.3 Due to customers Domestic offices 27,820 473 1.7 23,795 363 1.5 Foreign offices 18,545 642 3.5 14,780 462 3.1 Other debt issued Domestic offices 7,001 171 2.4 3,395 77 2.3 Foreign offices 8,486 374 4.4 3,942 178 4.5 Subordinated liabilities Domestic offices 2,925 132 4.5 2,513 109 4.3 Total interest earning liabilities Domestic offices 63,034 1,469 2.3 49,991 1,104 2.2 Foreign offices 28,994 1,097 3.8 21,454 731 3.4 Total average 92,028 2,566 2.8 71,445 1,835 2.6 interest earning liabilities Non interest 21,237 18,070 earning liabilities Total average 113,265 2,566 2.3 89,515 1,835 2.0 liabilities Shareholders' 6,324 5,447 equity Total average liabilities and shareholders' 119,589 2,566 2.2 94,962 1,835 1.9 equity Percentage of liabilities applicable to foreign activities 30.7 29.1 23 Post-balance sheet events (a) Financial Statements There have been no material post-balance sheet events which would require disclosure or adjustment to the 31 December 2005 Financial Statements. (b) Dividends Final dividends are not accounted for until they have been approved at the Annual General Meeting of Shareholders to be held on 26 April 2006. It is recommended that a final dividend of Eur 42.30c per ordinary share, amounting to a total of EUR 368m,be paid on 27 April 2006. The Financial Statements for the year ended 31 December 2005 do not reflect this resolution, which will be accounted for in shareholder's equity as an appropriation of retained profits in the year ending 31 December 2006. 24 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 published on the Company's website and will be available to shareholders on application to the Company Secretary. 25 Approval of accounts The accounts were approved by the Board of Directors on 21 February 2006. Financial and other information 2005 2004 Operating ratios Operating expenses (1) /operating income 55.2% 57.8% Other income/operating income 30.6% 35.6% Net interest margin: Group 2.38% 2.45% Domestic 2.17% 2.17% Foreign 2.83% 3.08% Rates of exchange EUR /US $ Closing 1.1797 1.3621 Average 1.2484 1.2474 EUR /Stg GBP Closing 0.6853 0.7051 Average 0.6851 0.6813 EUR /PLN Closing 3.8600 4.0845 Average 4.0276 4.5314 (1) Excludes restructuring costs of EUR8.7m in 2004. 31 December 1 January 2005 2005 Capital adequacy information EUR m EUR m Risk weighted assets Banking book: On balance sheet 79,520 62,770 Off-balance sheet 14,682 10,960 94,202 73,730 Trading book: Market risks 6,891 5,149 Counterparty and settlement risks 563 712 7,454 5,861 Total risk weighted assets 101,656 79,591 Capital Tier 1 7,275 6,510 Tier 2 4,089 2,312 11,364 8,822 Supervisory deductions 487 302 Total 10,877 8,520 Five year financial summary Year ended 31 December 2005 2004 2003 2002 2001 2005 IFRS IFRS IR GAAP IR GAAP IR GAAP US $m Summary of consolidated EUR m EUR m EUR m EUR m EUR m statement of income(1) 2,985 Net interest income 2,530 2,072 1,934 2,351 2,258 - Other finance income - - 12 62 67 1,318 Other income before 1,117 1,144 1,230 1,514 1,426 exceptional item - Exceptional foreign - - - - (789) exchange dealing losses 4,303 Total operating income 3,647 3,216 3,176 3,927 2,962 after exceptional item 2,373 Total operating expenses 2,011 1,869 1,960 2,318 2,284 1,930 Operating profit before 1,636 1,347 1,216 1,609 678 provisions 168 Provisions 143 133 177 251 204 1,762 Operating profit 1,493 1,214 1,039 1,358 474 176 Share of results of 149 132 143 9 4 associated undertakings Share of restructuring & integration costs in - associated undertaking - - (20) - - Amortisation of goodwill on acquisition of - associated undertaking - - (42) - - 16 Profit on disposal of 14 9 32 5 6 property 53 Construction contract 45 - - - - income 5 Profit/(loss) on disposal 5 17 (141) - 93 of businesses 2,012 Profit before taxation - 1,706 1,372 1,011 1,372 577 continuing operations 376 Taxation on ordinary 319 267 318 306 55 activities 1,636 Profit after taxation - 1,387 1,105 693 1,066 522 continuing operations 54 Discontinued operation, net 46 53 - - - of taxation 1,690 Profit for the period 1,433 1,158 693 1,066 522 178.1c Basic earnings per share 151.0c 132.0c 78.8c 119.1c 56.2c 176.8c Diluted earnings per share 149.8c 131.5c 78.4c 117.9c 55.9c As at 31 December 2005 2004 2003 2002 2001 2005 IFRS IFRS IR GAAP IR GAAP IR GAAP US $m Summary of consolidated EUR m EUR m EUR m EUR m EUR m balance sheet(1) 157,152 Total assets 133,214 101,109 80,960 85,821 89,061 108,959 Total loans 92,361 67,278 53,326 58,483 57,445 129,201 Total deposits 109,520 82,384 66,195 72,190 72,813 3,159 Dated capital notes 2,678 1,923 1,276 1,287 1,594 1,023 Undated capital notes 868 346 357 389 426 248 Other loan capital 210 497 497 496 496 1,473 Minority interests in 1,248 1,211 158 274 312 subsidiaries 586 Shareholders' equity: 497 182 196 235 279 non-equity interests 7,871 Shareholders' equity: equity 6,672 5,745 4,942 4,180 4,554 interests 14,360 Total capital resources 12,173 9,904 7,426 6,861 7,661 Five year financial summary (continued) Year ended 31 December 2005 2004 2003 2002 2001 IFRS IFRS IR GAAP IR GAAP IR GAAP Other financial data(1) % % % % % Return on average total assets 1.2 1.22 0.90 1.24 0.62(2) Return on average ordinary shareholders' 20.6 20.7 14.5 23.7 10.4(3) equity Dividend payout ratio 43.5 45.5 66.8 41.5 78.5 Average ordinary shareholders' equity as a percentage of average total assets 5.3 5.7 6.0 5.1 5.8 Allowance for loan losses as a percentage of total loans to customers at year end 0.8 1.2 1.3 1.6 1.9 Net interest margin 2.38 2.45 2.72 3.00 2.99 Tier 1 capital ratio 7.2 8.2 7.1 6.9 6.5 Total capital ratio 10.7 10.9 10.4 10.1 10.1 (1) The results and financial position for the year ended 31 December 2004 have been restated to represent the results of Ark Life as a discontinued operation to reflect the disposal (note 3) and the application of International Financial Reporting Standards ('IFRS'), with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from 1 January 2005 (see Basis of preparation on page 23). The historical information has not been restated for IFRS and is therefore presented as previously reported under Irish GAAP. Thus the five year trends will not be entirely comparable. (2) 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%. (3) 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 statement of STG GBP0.6853 US $1.1797 PLN 3.8600 income =EUR 1 =EUR 1 =EUR 1 for the year ended 31 December 2005 Operating profit before provisions 1,636 1,121 1,930 6,314 Provisions 143 98 168 549 Operating profit 1,493 1,023 1,762 5,765 Share of results of associated 149 102 176 577 undertakings Profit on disposal of property 14 10 16 52 Construction contract income 45 31 53 172 Profit on disposal of businesses 5 3 5 18 Profit before taxation - continuing 1,706 1,169 2,012 6,584 operations Taxation 319 219 376 1,231 Profit after taxation - continuing 1,387 950 1,636 5,353 operations Discontinued operation, net of taxation 46 32 54 176 Profit for the period 1,433 982 1,690 5,529 Minority interests in subsidiaries 90 62 106 346 Profit attributable to equity holders 1,343 920 1,584 5,183 of the parent Basic earnings per share 151.0c 103.5p 178.1c 582.9 PLN Diluted earnings per share 149.8c 102.7p 176.8c 578.2 PLN Summary of consolidated balance sheet 31 December 2005 EUR m Stg GBPm US $m PLN m Assets Trading portfolio financial assets 10,113 6,931 11,931 39,037 Derivative financial instruments 2,439 1,671 2,877 9,415 Loans and receivables to banks 7,129 4,886 8,411 27,519 Loans and receivables to customers 85,232 58,409 100,548 328,996 Financial investments available for sale 16,864 11,557 19,894 65,095 Intangible assets and goodwill 517 354 609 1,994 Property, plant and equipment 706 484 833 2,724 Disposal group and assets classified as held for 5,363 3,675 6,326 20,700 sale Other assets 4,851 3,324 5,723 18,725 133,214 91,291 157,152 514,205 Liabilities Deposits by banks 29,329 20,099 34,600 113,211 Customer accounts 62,580 42,886 73,825 241,558 Derivative financial instruments 1,967 1,348 2,320 7,591 Debt securities in issue 17,611 12,069 20,776 67,979 Other liabilities 4,463 3,058 5,265 17,227 Subordinated liabilities and other capital 3,756 2,573 4,430 14,495 instruments Disposal group classified as held for sale 5,091 3,489 6,006 19,652 Minority interests in subsidiaries 1,248 856 1,473 4,819 Shareholders' equity 7,169 4,913 8,457 27,673 133,214 91,291 157,152 514,205 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, 2006 By: ___________________ Gary Kennedy Group Director, Finance, Risk and Enterprise Technology Allied Irish Banks, p.l.c.