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 06 March, 2007
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 2006
Basic earnings per share EUR 246.8c
less profit on disposal/development of property(1) EUR (42.8c)
less profit on disposal of businesses(2) EUR (21.7c)
adjust for hedge volatility under IFRS(3) EUR 0.5c
Adjusted basic earnings per share EUR 182.8c up 25%(4)
Divisional operating profit performance(5)
- AIB Bank ROI up 23%
- Capital Markets up 29%
- AIB Bank UK up 18%
- Poland up 52%
Income/cost gap +4%
Cost income ratio down 1.7% to 53.5%
Bad debt provision charge 0.12%, down from 0.15% in 2005
Return on equity 29.0%
Tier 1 capital ratio 8.2%
Total dividend of EUR 71.8c, up 10%
M&T reported 10% US GAAP EPS growth(6)
AIB Group Chief Executive Eugene Sheehy said:
'2006 was a year when AIB enjoyed outstanding growth across all its divisions. I
am pleased about the consistency of this performance - and that customer demand
remains strong for our range of innovative and competitive products and
services. AIB has the top-class people needed to deliver these products and
services through its comprehensive suite of channels. That is why I'm confident
that the prospects remain bright for sustaining AIB's level of high-quality
growth into 2007 and beyond.'
(1) Includes profit on new Bankcentre development (construction contract income)
and profit on the disposal of the existing Bankcentre (EUR 352 million before
tax, EUR 289 million after tax), profit on disposal of Donnybrook House (EUR 29
million before tax, EUR 25 million after tax) and profit on sale of 11 branches
in the Republic of Ireland (EUR 73 million before tax, EUR 58 million after
tax).
(2) Profit on disposal of Ark Life discontinued operation (EUR 112 million after
tax), profit from the sale of 50% stake of AIB/BNY Securities Services (Ireland)
Limited to the Bank of New York Company (EUR 51 million after tax) and the
transfer by Ark Life of the management of certain investment contracts to Aviva
as part of the disposal of Ark Life (EUR 26 million after tax).
(3) The impact of interest rate hedge volatility (hedging ineffectiveness and
derivative volatility) under IFRS was a decrease of EUR 4 million to profit
before taxation for the year (EUR 4 million after tax).
(4) A 25% increase compared with EUR 145.9c for 2005. The EUR 145.9c in 2005
includes the earnings from Ark Life which is a discontinued operation since 30
January 2006 and excludes profit on the new Bankcentre development and interest
rate hedge volatility in 2005.
(5) Operating profit excludes profit from disposal of property/businesses and
associated undertakings. The percentage increase excludes the impact of exchange
rate movements on the translation of foreign locations' profit.
(6) AIB's share of M&T's profit on a local currency basis was down 4%. This
decrease reflects the conversion of M&T's contribution from US GAAP to IFRS. The
bank's application of IFRS to M&T's US GAAP numbers gave a lower result due to
the movement of previously unallocated credit provisions to specific provisions
in M&T's books (which now classifies as specific provisions under IFRS and
reduces the M&T profit reported in AIB's books by EUR 15 million).
Allied Irish Banks, p.l.c.
Dividend
The Board is recommending a final dividend of EUR 46.5c per share payable on 10
May 2007 to shareholders on the Company's register of members at the close of
business on 16 March 2007. The final dividend, together with the interim
dividend of EUR 25.3c per share, amounts to a total dividend of EUR 71.8c per
share, an increase of 10% on 2005.
For further information please contact:
John O'Donnell Alan Kelly Catherine Burke
Group Finance Director General Manager, Group Finance 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 2006
31 December 31 December
2006 2005
EUR m EUR m
Results
Total operating income 4,326 3,647
Operating profit 1,908 1,493
Profit before taxation - continuing operations 2,615 1,706
Profit attributable to equity holders of the parent 2,185 1,343
Per EUR 0.32 ordinary share
Earnings - basic (note 13(a)) 246.8c 151.0c
Earnings - diluted (note 13(b)) 244.6c 149.8c
Dividend 71.8c 65.3c
Dividend payout 29% 44%
Net assets 928c 773c
Performance measures
Return on average total assets 1.63% 1.20%
Return on average ordinary shareholders' equity 29.0% 20.6%
Balance sheet
Total assets 158,526 133,214
Ordinary shareholders' equity 8,108 6,672
Loans etc 120,015 92,361
Deposits etc 136,839 109,520
Capital ratios(1)
Tier 1 capital 8.2% 7.2%
Total capital 11.1% 10.7%
(1) The final dividend of EUR 407m has not been taken into account in the
calculation of the Tier 1 and Total capital ratios. The Financial Regulator has
issued a requirement that a Prudential Filter be applied to proposed final
dividends with effect from July 2007. If applied at 31 December 2006, the Tier 1
and Total capital ratios would be 7.9% and 10.8% respectively.
Allied Irish Banks, p.l.c.
Group Headquarters &
Registered Office
Bankcentre, Ballsbridge
Dublin 4, Ireland
Telephone (01) 6600311
Registered number 24173
Consolidated income statement
for the year ended 31 December 2006
2006 2005
Notes EUR m EURm
Interest and similar income 3 6,928 5,151
Interest expense and similar charges 4 3,929 2,621
Net interest income 2,999 2,530
Dividend income 5 23 17
Fee and commission income 1,235 1,061
Fee and commission expense (161) (145)
Net trading income 6 173 112
Other operating income 7 57 72
Other income 1,327 1,117
Total operating income 4,326 3,647
Administrative expenses 8 2,174 1,881
Amortisation/impairment of intangible assets and goodwill 53 47
Depreciation of property, plant and equipment 87 83
Total operating expenses 2,314 2,011
Operating profit before provisions 2,012 1,636
Provisions for impairment of loans and receivables 17 118 115
Provisions for liabilities and commitments (15) 20
Amounts written off financial investments available for sale 1 8
Operating profit 1,908 1,493
Associated undertakings 167 149
Profit on disposal of property 9 365 14
Construction contract income 10 96 45
Profit on disposal of businesses 11 79 5
Profit before taxation - continuing operations 2,615 1,706
Income tax expense - continuing operations 12 433 319
Profit after taxation - continuing operations 2,182 1,387
Discontinued operation, net of taxation 1 & 19 116 46
Profit for the period 2,298 1,433
Attributable to:
Equity holders of the parent 2,185 1,343
Minority interests in subsidiaries 113 90
2,298 1,433
Basic earnings per share - continuing operations 13(c) 233.5c 145.7c
Basic earnings per share - discontinued operations 13.3c 5.3c
Total 13(a) 246.8c 151.0c
Diluted earnings per share - continuing operations 13(d) 231.4c 144.6c
Diluted earnings per share - discontinued operations 13.2c 5.2c
Total 13(b) 244.6c 149.8c
Consolidated balance sheet
as at 31 December 2006
31 December 31 December
2006 2005
Notes EURm EURm
Assets
Cash and balances at central banks 989 742
Treasury bills and other eligible bills 196 201
Items in course of collection 527 402
Trading portfolio financial assets 15 8,953 10,113
Derivative financial instruments 2,890 2,439
Loans and receivables to banks 12,900 7,129
Loans and receivables to customers 16 107,115 85,232
Financial investments available for sale 18 19,665 16,864
Interests in associated undertakings 1,792 1,656
Intangible assets and goodwill 550 517
Property, plant and equipment 593 706
Other assets 1,117 778
Current taxation 17 18
Deferred taxation 256 253
Prepayments and accrued income 927 801
Disposal group and assets classified as held for sale 39 5,363
Total assets 158,526 133,214
Liabilities
Deposits by banks 33,433 29,329
Customer accounts 74,875 62,580
Trading portfolio financial liabilities 191 240
Derivative financial instruments 2,531 1,967
Debt securities in issue 28,531 17,611
Current taxation 112 133
Other liabilities 1,757 1,599
Accruals and deferred income 1,410 1,092
Retirement benefit liabilities 937 1,227
Provisions for liabilities and commitments 93 140
Deferred taxation - 32
Subordinated liabilities and other capital instruments 4,744 3,756
Disposal group classified as held for sale - 5,091
Total liabilities 148,614 124,797
Shareholders' equity
Share capital 294 294
Share premium account 1,693 1,693
Other equity interests 497 497
Reserves 543 1,152
Profit and loss account 5,578 3,533
Shareholders' equity 8,605 7,169
Minority interests in subsidiaries 1,307 1,248
Total shareholders' equity including minority interests 9,912 8,417
Total liabilities, shareholders' equity and minority interests 158,526 133,214
Condensed statement of cash flows
for the year ended 31 December 2006
31 December 31 December
2006 2005
Consolidated statement of cash flows EUR m EUR m
Net cash flows from operating activities 8,645 4,561
Investing activities
Net increase in financial investments available for sale (2,477) (264)
Additions to property, plant and equipment (144) (100)
Disposal of property, plant and equipment 489 89
Additions to intangible assets (87) (36)
Investment in associated undertaking - (3)
Disposal of investment in subsidiaries and businesses 268 11
Dividends received from associated undertakings 44 41
Cash flows from investing activities (1,907) (262)
Financing activities
Re-issue of treasury shares 48 47
Redemption of subordinated liabilities - (630)
Issue of subordinated liabilities - 1,813
Issue of perpetual preferred securities 1,008 -
Interest paid on subordinated liabilities (196) (90)
Equity dividends paid on ordinary shares (587) (532)
Dividends on other equity interests (38) (38)
Dividends paid to minority interests (82) (62)
Cash flows from financing activities 153 508
Net increase in cash and cash equivalents 6,891 4,807
Analysis of changes in cash
At 1 January 7,670 2,773
Net cash inflow before the effect of exchange translation 6,891 4,807
adjustments
Effect of exchange translation adjustments (206) 90
At 31 December 14,355 7,670
Consolidated statement of recognised income and expense
2006 2005
EURm EUR m
Foreign exchange translation differences (149) 301
Net change in cash flow hedges, net of tax (283) (76)
Net change in fair value of available for sale securities, net of (13) (6)
tax
Net actuarial gains/(losses) in retirement benefit schemes, net of 200 (285)
tax Net other losses relating to the period (47) (72)
Income and expense recognised (292) (138)
Profit for the period 2,298 1,433
Total recognised income and expense for the period 2,006 1,295
Attributable to:
Equity holders of the parent 1,859 1,191
Minority interests in subsidiaries 147 104
Total recognised income and expense for the period 2,006 1,295
Condensed consolidated reconciliation of movements in shareholders' equity
2006 2005
EUR m EUR m
Profit attributable to equity holders of the parent 2,185 1,343
Dividends on ordinary shares (587) (532)
Dividends on other equity interests (38) (38)
Share based payments 30 16
Actuarial gains/(losses) recognised in retirement benefit schemes 200 (285)
Other recognised (losses)/gains relating to the period (471) 198
Other recognised losses in associated undertakings (47) (65)
Ordinary shares reissued 87 66
Net movement in own shares 77 (6)
Net additions to shareholders' equity 1,436 697
Opening shareholders' equity 7,169 6,472
Closing shareholders' equity 8,605 7,169
Shareholders' equity:
Ordinary shareholders' equity 8,108 6,672
Other equity interests 497 497
8,605 7,169
Commentary on results
Earnings per share
The table below shows the basic earnings per share excluding profit on disposal/
development of property(1), profit on disposal of businesses(2) and adjusting
for hedge volatility(3).
Earnings per share Year Year 2005 % change
2006 2006 v 2005
Basic - continuing operations(4) 233.5c 145.7c 60
Basic - discontinued operations 13.3c 5.3c -
Basic - total 246.8c 151.0c 63
less profit on disposal/development of property(1) (42.8c) (4.4c) -
less profit on disposal of businesses(2) (21.7c) - -
adjust for hedge volatility under IFRS(3) 0.5c (0.7c) -
Adjusted basic earnings per share 182.8c 145.9c 25
Rates of exchange
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 accounting effective rates effective
rates rates rates
2006 2005 2006 2005
US dollar 1.26 1.25 1.21 1.29
Sterling 0.68 0.69 0.69 0.69
Polish zloty 3.90 4.03 3.85 4.02
(1) Includes profit on new Bankcentre development (construction contract income)
and profit on the disposal of the existing Bankcentre (EUR 352 million before tax,
EUR 289 million after tax), profit on disposal of Donnybrook House (EUR 29 million
before tax, EUR 25 million after tax) and profit on sale of 11 branchesin the
Republic of Ireland (EUR 73 million before tax, EUR 58 million after tax).
(2) Profit on disposal of Ark Life discontinued operation (EUR 112 million after
tax), profit from the sale of 50% stake of AIB/BNY Securities Services (Ireland)
Limited to the Bank of New York Company (EUR 51 million after tax) and the
transfer by Ark Life of the management of certain investment contracts to Aviva
as part of the disposal of Ark Life (EUR 26 million after tax).
(3) The impact of interest rate hedge volatility (hedging ineffectiveness and
derivative volatility) under IFRS was a decrease of EUR 4 million to profit before
taxation for the year (EUR 4 million after tax).
(4) Continuing operations exclude Ark Life, which is reported as a discontinued
operation following its disposal, which was announced in 2005 (transaction
completed 30 January 2006).
Commentary on results
Basis of presentation
The following commentary is on a continuing operations basis. The growth
percentages are shown on an underlying basis, adjusted for the impact of
exchange rate movements on the translation of foreign locations' profit and
excluding interest rate hedge volatility (hedging ineffectiveness and derivative
volatility) under IFRS.
Very strong growth in operating income, up 18%
Total operating income
Total income increased by 18% to EUR 4,326 million.
Year Year Underlying
2006 2005 % change
Total operating income EUR m EUR m 2006 v 2005
Net interest income 2,999 2,530 18
Other income 1,327 1,117 17
Total operating income 4,326 3,647 18
Commentary on results
Net interest income
Net interest income increased by 18% to EUR 2,999 million in the year to December
2006. The key drivers of the increase were strong loan and deposit growth in
Republic of Ireland, UK and Poland. Loans to customers increased by 26% and
customer accounts increased by 19% on a constant currency basis since 31
December 2005 (details of loan and deposit growth by division are contained on
page 14 of this release).
Year Year %
Average interest earning assets 2006 2005 change(1)
EURm EUR m 2006 v 2005
Average interest earning assets 132,542 106,380 25
(1) This particular analysis is not adjusted for the impact of exchange rate
movements.
Year Year Basis
Net interest margin 2006 2005 Point
% % change
Group net interest margin 2.26 2.38 -12
The domestic and foreign margins for 2006 are reported on page 38 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 amounted to 2.26%, a decrease of 12 basis points
compared with 2005. The margin attrition between 2005 and 2006 was reduced by a
lower level of growth in Treasury assets compared with the growth in retail and
commercial assets. This mix impact reduced the margin attrition to 12 basis
points from an underlying attrition of 16 basis points. The underlying margin
reduction of 16 basis points was due to a combination of the following factors:
(a) loans increasing at a faster rate than deposits.
(b) lower yields on the re-investment of deposit and current account funds as
they mature.
(c) a changing mix of products where stronger volume growth has been achieved in
lower margin products; corporate loans, home loans and prime rate advances on
the lending side and term deposits and other lower margin products on the
deposit side.
(d) competitive pressures on loan and deposit pricing.
The margin reduction continues to be impacted by average loans increasing at a
greater rate than average deposits compared with 2005.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 and current account funds
particularly affected AIB Bank Republic of Ireland and Poland divisions. As
interest rates increase and more of the funds reinvest, over time the impact of
this factor is expected to reduce.
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.
Commentary on results
Investment banking and asset management fees up 57%
Banking fees and commissions up 6%
Other income
Other income was up 17% to EUR 1,327 million since the year to December 2005.
Year Year Underlying
2006 2005 % change
Other income EUR m EUR m 2006 v 2005
Dividend income 23 17 35
Banking fees and commissions 921 863 6
Investment banking and asset management fees 314 198 57
Fee and commission income 1,235 1,061 16
Fee and commission expense (161) (145) 10
Trading income 167 119 37
Currency hedging profits/(losses) 10 (13) -
Interest rate hedge volatility (4) 6 -
Net trading income 173 112 37
Other operating income 57 72 -23
Total other income 1,327 1,117 17
Dividend income increased by 35% mainly reflecting growth in dividends from
investments held by the Polish business.
Banking fees and commissions increased by 6%, reflecting increased business and
transaction volumes in AIB Bank Republic of Ireland and Corporate Banking and
good growth in credit card revenue in Ireland.
Investment banking and asset management fees increased by 57% driven by
particularly strong performances in Asset Management in Poland and BZWBK's
brokerage operation and very good growth in Goodbody stockbrokers. Total fee and
commission income was up 16%, driven by the 57% increase in investment banking
and asset management fees and the 6% increase in banking fees and commissions.
Trading income increased, with strong growth in foreign exchange and interest
rate management activities. Trading income excludes interest payable and
receivable arising from these activities, which is included in net interest
income. Accordingly the above trading income does not give the full picture in
terms of trading activities, largely in Global Treasury. Interest income in
Global Treasury decreased and total income was broadly flat relative to 2005.
Other income as a percentage of total income remained the same as 2005 at 31%.
Commentary on results
Investment to sustain the long term health of the business
Higher productivity - cost income ratio decreases by 1.7% to 53.5%
Income/cost gap +4%
Total operating expenses
Operating expenses increased by 14% compared with 2005.
Year Year Underlying
Operating expenses 2006 2005 % change
EUR m EUR m 2006 v 2005
Personnel expenses 1,502 1,298 15
General and administrative expenses 672 583 14
Depreciation(1)/amortisation(2) 140 130 6
Total operating expenses 2,314 2,011 14
Operating expenses increased by 14%, in a period of substantially increased
business volumes and strong growth on the revenue line. As a consequence of the
continuing growth opportunities available to the business and in order to
develop capabilities to exploit them, the Group is investing in various
programmes to sustain the long-term health and development of the business. This
has included investment in appropriate skills, in enhanced reward systems, the
ongoing building of common operating systems in line with our single enterprise
agenda and in developing a resilient risk, compliance and corporate governance
framework (including Sarbanes Oxley and Basel II).
Excluding regulatory driven costs, performance related remuneration resulting
from very strong revenue growth and investment in our risk, compliance and
corporate governance framework, the increase in costs was 9%. Personnel expenses
increased by 15% reflecting a higher level of variable performance related
remuneration linked to the strong revenue outperformance and salary increases.
General and administrative expenses were up 14% mainly due to consultancy,
systems and infrastructure costs to ensure compliance with the changing
regulatory requirements and to sustain the long-term development of the
business. Depreciation/amortisation increased by 6%, reflecting the commencement
of depreciation on the aforementioned recent investment initiatives.
Productivity improved with the cost income ratio reducing by 1.7% to 53.5% from
55.2% in 2005.
(1) Depreciation of property, plant and equipment.
(2) Amortisation/impairment of intangible assets and goodwill.
Commentary on results
Provision charge lower at 12 basis points reflecting strong asset quality
Reduction in impaired loans as a percentage of loans to 0.9%
High level of provision recoveries in the period
Provisions
Total provisions were EUR 104 million, down from EUR 143 million in 2005.
Year Year
2006 2005
Provisions EUR m EUR m
Provisions for impairment of loans and receivables 118 115
Provisions for liabilities and commitments (15) 20
Amounts written off financial investments available for sale 1 8
Total provisions 104 143
The provision for impairment of loans and receivables was EUR 118 million compared
with EUR 115 million in 2005, representing a charge of 0.12% of average loans
compared with 0.15% in 2005. The lower charge reflects strong asset quality,
good recoveries and a benign credit environment. Impaired loans as a percentage
of total customer loans decreased from 1.0% at 31 December 2005 to 0.9% at 31
December 2006 with the total provision coverage for impaired loans at 76%.
In AIB Bank Republic of Ireland asset quality continued to be strong. Impaired
loans as a percentage of total customer loans reduced to 0.6% at 31 December
2006 from 0.7% in 2005. The provision charge was 0.15% of average loans compared
with 0.11% in 2005. The quality across all sectors of the retail and commercial
portfolios remains very good.
In Capital Markets the provision charge was 0.02% compared with 0.22% in 2005
reflecting a strong level of provision recoveries, through realisation of
exposures during the period as a result of the benign credit environment and
strong liquidity in the corporate market. Impaired loans reduced to 0.6% from
0.7% of total customer loans at 31 December 2005.
In the UK division, the provision charge remained at 0.13% of average loans and
impaired loans remained at 0.9% of total customer loans compared with 31
December 2005.
The provision charge in Poland decreased to 0.23% of loans from 0.40% in 2005.
Asset quality continued to improve with the ratio of impaired loans as a
percentage of customer loans declining to 4.9% from 6.8% at 31 December 2005.
There was a net credit in provisions for liabilities and commitments of c 15
million in 2006 compared with a provision of EUR 20 million in 2005, while
provisions for amounts written off financial investments were EUR 1 million
compared to EUR 8 million in 2005.
Associated undertakings
The profit in 2006 was EUR 167 million compared to EUR 149 million in 2005 and
mainly reflects AIB's 24.0% average share of the income after taxation of M&T
Bank Corporation and income after taxation from the joint venture in Life and
Pensions with Hibernian. M&T's contribution of US$ 177 million was down 4%
relative to the year to December 2005 contribution of US$ 185 million. This
decrease reflects the conversion of M&T's contribution from US GAAP to IFRS. The
bank's application of IFRS to M&T's US GAAP numbers gave a lower result due to
the movement of previously unallocated credit provisions to specific provisions
in M&T's books (which are now classified as specific provisions under IFRS and
reduce the M&T profit reported in AIB's books by EUR 15 million).
The profit in 2006 also included EUR 8 million from the disposal of investments in
associated undertakings.
Commentary on results
The following commentary is in respect of the total Group.
Loans up 26%; deposits up 19%
Effective tax rate at 16.6%
Balance sheet
Total assets amounted to EUR 159 billion at 31 December 2006 compared to EUR 133
billion at 31 December 2005. Adjusting for the impact of currency, total assets
were up 20% and loans to customers were up 26% since 31 December 2005 while
customer accounts increased by 19%. Risk weighted assets excluding currency
factors increased by 22% to EUR 123 billion.
Risk weighted assets, loans to customers and customer accounts (excluding
currency factors)
Risk weighted Loans to Customer
assets customers accounts(1)
% change December 2006 v December 2005 % change % change % change
AIB Bank Republic of Ireland 36 32 20
Capital Markets 8 17 9
AIB Bank UK 19 19 22
Poland 26 23 16
AIB Group 22 26 19
(1) Excludes money market funds.
Assets under management/administration and custody
Assets under management in the Group amounted to EUR 17 billion at 31 December
2006 compared with EUR 16 billion at 31 December 2005. AIB sold its 50% stake in
AIB/BNY Securities Services (Ireland) Limited to its joint venture partner, Bank
of New York during 2006. Assets under administration and custody relating to the
AIB/BNY joint venture at 31 December 2005 were EUR 220 billion.
Income tax expense
The taxation charge was EUR 433 million compared with EUR 319 million in the
year to December 2005. The effective tax rate was 16.6% compared with 18.7% (or
17.0% excluding the bank levy) in the year to December 2005. 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 29.0%
Business expected to continue to perform strongly
Outlook - low double-digit EPS growth expected in 2007
Return on equity and return on assets
The return on equity was 29.0%, compared to 20.6% in 2005. The return on assets
was 1.63%, compared to 1.20% in 2005.
Capital ratios
A strong capital position was reflected in a Tier 1 ratio at 8.2% and a total
capital ratio of 11.1%.
Outlook
We operate in strong high growth economies and sectors which serve as firm
foundations for our business. In 2007, income is again expected to grow at a
faster rate than costs, driven by the strength of the customer business pipeline
and focus on further productivity gains. Asset quality is expected to remain
solid with the provision for bad debts anticipated to show only a moderate
increase on the exceptionally low level in 2006. Based on these factors, we are
targeting low double-digit growth in 2007 adjusted basic earnings per share
compared to the adjusted basic earnings per share of EUR 182.8c in 2006.
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 following
commentary is on a continuing operations basis.
AIB Bank Republic of Ireland profit of EUR 966 million was up 24%
Very strong product volume and revenue growth
Income/cost gap at +4%
Cost income ratio decreases to 49.6%
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 Hibernian Life Holdings Limited, AIB's joint venture with
Aviva Group p.l.c. in the life and pensions
Year Year Underlying
2006 2005 % change
AIB Bank Republic of Ireland income statement EUREUR m EUREUR m 2006 v 2005
Net interest income 1,581 1,314 20
Other income 434 376 15
Total operating income 2,015 1,690 19
Personnel expenses 675 568 19
General and administrative expenses 270 250 8
Depreciation / amortisation 55 49 12
Total operating expenses 1,000 867 15
Operating profit before provisions 1,015 823 23
Provisions for impairment of loans and receivables 78 45 75
Provisions for liabilities and commitments (4) 10 -
Amounts written back financial investments available for sale (1) - -
Total provisions 73 55 33
Operating profit 942 768 23
Associated undertakings 18 (1) -
Profit on disposal of property 6 12 -47
Profit before taxation - continuing operations 966 779 24
AIB Bank Republic of Ireland generated growth in profit before tax of 24% from
its continuing operations underpinned by a buoyant Irish economy and a refined
and dynamic business model. Operating income was up 19% and operating expenses
were up 15% with the operating income/cost gap at +4%.
The strong profit growth reflects increased customer demand for a competitively
priced product range driven by a strong customer relationship management ethos
in both front-line and back-office activities.
Loans and deposits increased by 32% and 20% respectively since 31 December 2005.
AIB benefited from a pricing strategy to retain maturing SSIAs and deposit
growth exceeded that of the overall market. Similarly total loan growth was
ahead of the market and was well spread across business, personal and mortgage
sectors. Operating expenses were up 15%. Key drivers were growth in staff
numbers reflecting the increased levels of business activity, annual salary
inflation, the impact of a new career framework pay structure, performance
related costs, a higher advertising spend and increased costs associated with a
number of mandatory/regulatory driven project costs. The strong operating
performance is reflected in a further improvement in the cost income ratio to
49.6% compared with 51.3% in 2005. Asset quality remains good and the provision
charge for the year to 31 December 2006, was 0.15% of average loans, up 0.04%
compared with the year to 31 December 2005.
Retail Banking reported a very strong out-turn for the year where business
lending growth continued to be exceptionally strong and personal lending, home
mortgages and private banking also experienced excellent growth. Profit growth
in AIB Card Services also increased significantly benefiting from strong growth
in revenue. AIB Finance & Leasing saw solid operating profit growth reflecting
increased new business levels across all key sectors.
In early 2006, AIB completed its joint venture with Hibernian Life Holdings
Limited of which AIB owns 24.99%. This represents an important part of the AIB
wealth management platform in the distribution of life and pension products. The
share of operating profit of associated undertakings from Hibernian Life
Holdings Limited was EUR 11 million in 2006.
Divisional commentary
Capital Markets division profit of EUR 589 million was up 46%. Operating profit up
29%.
Excellent performance and continued momentum in Corporate Banking
Particularly strong growth in customer treasury business and solid performance
in wholesale trading
Exceptional profit growth across key investment banking products
Capital Markets Corporate Banking, Global Treasury, and Investment Banking.
Year Year Underlying
2006 2005 % change
Capital Markets income statement EUREUR m EUREUR m 2006 v 2005
Net interest income 490 435 13
Other income 464 407 14
Total operating income 954 842 13
Personnel expenses 302 280 8
General and administrative expenses 123 103 19
Depreciation / amortisation 13 17 -21
Total operating expenses 438 400 10
Operating profit before provisions 516 442 17
Provisions for impairment of loans and receivables 5 34 -86
Provisions for liabilities and commitments 1 4 -72
Amounts written off financial investments available for sale 2 8 -78
Total provisions 8 46 -84
Operating profit 508 396 29
Associated undertakings 2 2 -26
Profit on disposal of businesses 79 5 1,615
Profit before taxation 589 403 46
Profit before taxation of EUR 589 million, including profit on disposal of
businesses, grew by 46% on 2005 or 29% on an operating profit basis driven by
strong revenue growth, an exceptionally low level of bad debt provisions and
good core cost management in each of the key business areas.
Corporate Banking performed exceptionally well, with profit before provisions up
26% and profit before taxation up 42%. Loans were up by 17%, driven by continued
focus on customer relationships and new product development. Growth in
established international businesses, new structured product initiatives and the
opening of new overseas offices contributed to the underlying performance.
Overall Global Treasury profit before tax declined marginally (2%) on 2005,
against a backdrop of significant challenges in money markets impacted by
increased interest rates and inflationary pressures. This belied particularly
strong growth in the customer treasury business in Ireland, Britain and Poland
and a robust performance in bond management activities.
Investment Banking experienced exceptional growth with profit before tax up 62%,
reflecting quality product development and strong customer relationships,
particularly in Polish asset management and stockbroking services. In Ireland
stockbroking reflected strong growth in equity trading, corporate advisory
services and structured investments.
Costs continued to be managed closely with higher performance related costs
partly offset by the impact of selective business rationalisation in 2005 and
notwithstanding the impact of once-off technology, compliance and marketing
costs, the division's cost income ratio decreased to 45.9% from 47.5% in 2005.
Strong recoveries of credit provisions arising from realisation of exposures,
was a factor during the year and a conservative approach to credit management
continued to prevail in a benign global credit environment.
Profit on disposal of businesses arose from the transfer by Ark Life of the
management of certain investment contracts to Aviva, as part of the Ark Life
disposal (EUR 26 million after tax), and from the sale of our 50% share of
AIB/BNY Security Services (Ireland) Limited to the Bank of New York Company (EUR
51 million after tax).
The division's growth continues to be underpinned by its ability to identify and
bring to market new quality product initiatives within profitable sectors and
niches.
Divisional commentary
AIB Bank UK division profit was up 17% to EUR 379 million
Well managed growth in profit before taxation of 17%
Income/cost gap at +6%
Cost income ratio improves by 2.8% to 45.9%
AIB Bank UK Retail and commercial banking operations in Great Britain and
Northern Ireland.
Year Year Underlying
2006 2005 % change
AIB Bank UK income statement EUREUR m EUREUR m 2006 v 2005
Net interest income 593 516 14
Other income 154 148 4
Total operating income 747 664 12
Personnel expenses 238 224 6
General and administrative expenses 94 89 4
Depreciation / amortisation 11 10 12
Total operating expenses 343 323 6
Operating profit before provisions 404 341 18
Total provisions 26 21 26
Operating profit 378 320 18
Profit on disposal of property 1 2 -
Profit before taxation 379 322 17
AIB Bank UK division reported another strong business performance in 2006 with
profit before taxation increasing by 17%, continuing the trend of strong
double-digit growth in recent periods. Loans and deposits increased by 19% and
22% respectively during 2006, with the growth well spread across both the
business and personal sectors. Customer deposit and current account balances
grew very strongly, with excellent growth in personal and business current
accounts. Net interest income increased by 14%.
Other income increased by 4%, with an increased focus on diversifying income
away from traditional sources of fee income towards alternative income streams.
Operating expenses increased by 6%, due to normal salary increases and
investment in customer and corporate marketing activity. Overall, the cost
income ratio improved significantly from 48.7% to 45.9%, reflecting a
combination of the strong revenue growth and management action taken to manage
cost growth. The bad debt charge of 0.13% of average loans, is consistent with
2005 and reflects the good credit quality in the portfolio.
Allied Irish Bank (GB), which focuses on business banking, reported strong
profit growth of 23% to EUR 209 million in 2006. This growth was primarily driven
by a combination of strong lending and deposit volume growth and by good
management of lending margins in a competitive environment. Loan and deposit
balances increased by 16% and 24% respectively since 31 December 2005, with
growth in lending balances increasing to 24% when measured on an average balance
basis. Costs increased by 4% when compared with last year, reflecting good cost
management, with a resultant improvement in the cost income ratio from 48.7% to
44.1%.
In Northern Ireland, First Trust Bank increased profit before tax to EUR 170
million representing 11% growth on last year. Loan and deposit balances were up
26% and 19% respectively when compared with 31 December 2005, with strong growth
in business and mortgage lending activity combining with significant growth in
current account balances. Costs increased by 8% impacted by normal salary
increases and by increased operating costs, the latter reflecting additional
investment in the personal market and improvements to the branch network
technology platform. The cost income ratio improved marginally from 48.6% to
48.2%.
Divisional commentary
Poland division profit was EUR 207 million, up 56%
Significant profit increase
Very strong loan growth momentum in second half-year
Exceptional growth in mutual funds
Income/cost gap +10%
Poland Bank Zachodni WBK ('BZWBK'), in which AIB has a 70.5% shareholding,
together with its subsidiaries and associates.
BZWBK Wholesale Treasury and Capital Markets share of certain Investment Banking
subsidiaries results are reported in Capital Markets division.
Year Year Underlying
2006 2005 % change
Poland income statement EUREUR m EUREUR m 2006 v 2005
Net interest income 236 205 11
Other income 302 222 32
Total operating income 538 427 22
Personnel expenses 170 137 18
General and administrative expenses 120 99 16
Depreciation / amortisation 40 44 -14
Total operating expenses 330 280 12
Operating profit before provisions 208 147 41
Provisions for impairment of loans and receivables 9 14 -36
Provisions for liabilities and commitments (2) 1 -
Total provisions 7 15 -53
Operating profit 201 132 52
Associated undertakings 6 - -
Profit before taxation 207 132 56
Profit before taxation grew by an exceptional 56% on a local currency basis.
This reflected the very strong momentum across the business lines of the
division in a favourable economic climate, resulting in significantly higher
business activity and volumes.
Total operating income increased by 22% with net interest income up by 11%.
There was a substantial pick up in the demand for credit in 2006, with momentum
particularly noted in the second half-year. Total loans increased by 23% from
December 2005 due to strong business lending growth, which was ahead of the
market growth, and the ongoing pick up in retail lending. Mortgage growth at 26%
benefited in the second half-year from the reduced market preference for foreign
exchange denominated lending and growing customer demand for zloty mortgages,
the sector in which the bank actively participates. Overall lending margins were
largely flat reflecting improved product mix, offsetting increasing competition
in business and mortgage lending. Customer deposits increased by 16% from
December 2005, with growth primarily in current accounts and foreign exchange
deposits. Business deposits increased by 26%. Personal deposits were higher by
8% which is a strong performance given customer preference for mutual funds in
the market. Lower interest rates and increased competition reduced deposit
margins, which was somewhat compensated for by a better product mix.
Other income growth of 32% was driven by a variety of positive factors,
primarily by the exceptional growth in the mutual fund business where balances
increased by 123% since December 2005 and market share increased to 17.4% at 31
December 2006 from 12.6% at 31 December 2005. A high level of sales and
favourable portfolio mix resulted in asset management net income growth of 202%.
The brokerage business enjoyed a tremendous year, buoyed by the performance of
the Warsaw Stock Exchange in 2006 with substantial increases in turnover and
resultant fee income. In addition, dividends, equity investment disposals,
foreign exchange income and e-business and payment fees all contributed to the
strong growth recorded in other income.
Operating expenses increased by 12% reflecting increased business activity and
investment in developing the franchise in Poland. Staff costs increased by 18%
reflecting higher staff numbers, substantial increase in performance related
costs, including a once-off year end payment to staff related to the very strong
revenue growth. Operating costs continue to be carefully managed. Better
business generation opportunities have resulted in increased spend on marketing
and IT in particular. The cost income ratio fell to 60.3% from 65.7%.
Impaired loans as a percentage of total loans have continued to improve with the
ratio at 4.9% at 31 December 2006 compared with 6.8% at 31 December 2005,
reflecting strong asset quality as the loan book increased. The credit provision
charge as a percentage of average loans was 0.23%, compared with 0.40% in 2005.
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 central services, the
contribution from AIB's share of approximately 24.0% in M&T Bank Corporation
('M&T') and profit on disposal of property.
Year Year
2006 2005
Group income statement EUREUR m EUREUR m
Net interest income 99 60
Other income/(loss) (27) (36)
Total operating income 72 24
Personnel expenses 117 89
General and administrative expenses 65 42
Depreciation / amortisation 21 10
Total operating expenses 203 141
Operating loss before provisions (131) (117)
Provisions for impairment of loans and receivables - 1
Provisions for liabilities and commitments (10) 5
Total provisions (10) 6
Operating loss (121) (123)
Associated undertaking 141 148
Profit on disposal of property 358 -
Construction contract income 96 45
Profit before taxation - continuing operations 474 70
Group reported profit before taxation of EUR 474 million for the year to
December 2006 compared with a profit of EUR 70 million in 2005. The increase
includes profit on disposal of property and construction contract income (total
EUR 454 million - see below for detail).
Net interest income increased due to higher capital income resulting from higher
capital balances (strong retained earnings and the return on the funds generated
from the disposal of property and the sale of businesses). Other income/(loss)
includes hedging profits/(losses) in relation to foreign currency translation
hedging and interest rate hedge volatility (hedging ineffectiveness and
derivative volatility).
Total operating expenses were higher due to increased compliance related spend,
mainly Sarbanes Oxley and Basel II and investment in systems and infrastructure
to sustain the long-term development of the business in line with our single
enterprise agenda. Performance related costs were higher in line with strong
profit growth.
M&T reported its annual results on 11 January 2007, showing net income up 7% to
US$ 839 million. US GAAP-basis diluted earnings per share was up 10% to US$ 7.37
from US$ 6.73 in the year to December 2005. Diluted net operating earnings per
share, which excludes the amortisation of core deposit and other intangible
assets and merger-related expenses, was US$ 7.73 in 2006, up 10% from US$ 7.03
in 2005. AIB's share of M&T after-tax profit in 2006 amounted to m 141 million.
On a local currency basis M&T's contribution of US$ 177 million was down 4%
relative to the year to December 2005 contribution of US$ 185 million. This
decrease reflects the conversion of M&T's contribution from US GAAP to IFRS. The
bank's application of IFRS to M&T's US GAAP numbers gave a lower result due to
the movement of previously unallocated credit provisions to specific provisions
in M&T's books (which are now classified as specific provisions under IFRS and
reduce the M&T profit reported in AIB's books by EUR 15 million).
Profit on disposal of property includes profit on the disposal of the existing
Bankcentre building (EUR 256 million before tax), profit on the sale of 11
branches in the Republic of Ireland (EUR 73 million before tax) and profit on
disposal of Donnybrook House (EUR 29 million before tax). Construction contract
income of EUR 96 million reflects the profit earned from the new development at
Bankcentre, based on the stage of completion.
Basis of preparation
There have been no significant changes to the accounting policies described on
pages 49 to 62 in the 2005 annual report.
Prospective accounting changes
The following standards/amendments to standards have been approved by the
International Accounting Standards Board (IASB), and were adopted by the EU in
January 2006 but not early adopted by the Group. These will be adopted in 2007
and thereafter:-
Amendment to IAS 1 - Presentation of Financial Statements - Capital disclosures
(effective 1 January 2007). This amendment requires disclosure, both
quantitative and qualitative, of an entity's objectives, policies and processes
for managing capital. The impact is not expected to be material in terms of
Group reporting.
IFRS 7 - Financial Instruments: Disclosures (effective 1 January 2007). This
standard updates and augments the disclosure requirements of IAS 30 'Disclosures
on the Financial Statements of Banks and Similar Financial Institutions', and
IAS 32 'Financial Instruments: Disclosure and Presentation' and IFRS 4 '
Insurance Contracts' and requires the additional qualitative and quantitative
disclosures set out below.
Qualitative disclosures
Further information regarding each type of financial instrument risk including
the exposures to risk and how they arise, the Group's objectives, policies and
processes for managing the risk, the methods used to measure the risk, and any
changes from the previous period.
Quantitative disclosures
Further information regarding each type of the Group's financial instrument risk
including a summary of quantitative data about exposure to that risk at the
reporting date including any concentrations of credit risk, financial assets
that are either past due or impaired, any collateral and other credit
enhancements obtained, liquidity risk, market risk, and capital objectives and
policies. The impact of IFRS 7 is not expected to be material in terms of Group
reporting.
IFRIC 7 - Applying the restatement approach under IAS 29 'Financial Reporting in
Hyperinflationary Economies'. This interpretation, (effective 1 January 2007)
provides guidance on applying the requirements of IAS 29 which deals with
financial reporting in hyperinflationary economies. This will not have any
impact for Group reporting purposes.
IFRIC 8 - Scope of IFRS 2 (effective 1 January 2007). This Interpretation
clarifies that the accounting standard IFRS 2 'Sharebased Payment' applies to
arrangements where an entity makes share-based payments for apparently nil or
inadequate consideration. If the identifiable consideration given appears to be
less that the fair value of the equity instruments granted or liability
incurred, this situation typically indicates that other consideration has been
or will be received. IFRS 2 therefore applies. This IFRIC is not expected to
have a material impact on the Group.
IFRIC 9 - Reassessment of Embedded Derivatives (effective 1 January 2007). This
Interpretation clarifies whether an entity should reassess whether an embedded
derivative needs to be separated from the host contract after the initial hybrid
contract is recognised. IFRIC 9 concludes that reassessment is prohibited,
unless there is a change in the terms of the contract that significantly
modifies the cash flows that otherwise would be required under the contract, in
which case reassessment is required. This IFRIC is not expected to have a
material impact on the Group.
The EU Transparency Directive is due for transposition into Irish law in 2007.
Accordingly, it will impact Group reporting from 1 January 2008. The Directive
seeks to enhance transparency in EU capital markets in order to improve investor
protection and market efficiency. The Directive sets out publication deadlines
and content requirements in relation to annual financial reports and half yearly
financial reports. In addition, there is a new requirement for issuers with
shares listed on the Irish Stock Exchange to publish management statements
during the financial year. This directive is not expected to have a significant
impact on Group reporting.
The IASB announced on 1 July 2006 that it will not require the application of
new IFRSs under development or major amendments to existing IFRSs before 1
January 2009. Delaying implementation of new standards until 2009 provides four
years of stability in the IFRS platform of standards for those companies that
adopted IFRSs in 2005. Companies will however, be permitted to adopt a new
standard on a voluntary basis before its effective date. Interpretations and
minor amendments to correct problems identified in practice are not subject to
this 2009 delay.
Allied Irish Banks, p.l.c. ("AIB") (NYSE:AIB) Part 2
2006 Annual Results
Notes to the accounts
1 Disposal of Ark Life Assurance Company Limited ('Ark Life'). Acquisition of an
interest of 24.99% in Hibernian Life
Holdings Limited
On 30 January 2006, the previously announced venture with Aviva Group p.l.c. for
the manufacture and distribution of life and pensions products in the Republic
of Ireland was completed. The transaction brought together Hibernian Life &
Pensions Limited ('HLP') and Ark Life under a holding company Hibernian Life
Holdings Limited of which AIB owns 24.99%. AIB has entered into an exclusive
agreement to distribute the life and pensions products of the venture.
Under IFRS 5,'Non-current assets held for sale and discontinued operations', the
income and expenses for 2005 and for the period up to 30 January 2006, the date
of disposal of Ark Life, of the operations deemed to be disposed of have been
reported net of taxation as a discontinued operation below profit after
taxation. The assets and liabilities of Ark Life (note 19) as at 31 December
2005 were classified as held for sale, separate from other assets and
liabilities on the balance sheet.
The transaction is accounted for as an exchange of 75.01% of Ark Life for 24.99%
of HLP and a cash payment of EUR 165m. Under this approach, the 24.99% of Ark
Life that is owned by AIB, both directly before the transaction and indirectly
thereafter, is treated as being owned throughout the transaction.
The transaction gave rise to a profit before and after taxation of EUR 138m of
which EUR 26m (relating to the transfer by Ark Life of the management contracts
of the Ark funds from AIB to Aviva) is treated as a profit on disposal of
business and EUR 112m as a profit on disposal of a discontinued operation.
The profit after taxation for Ark Life for the period to date of disposal of d
4m (2005: EUR 46m) is included within discontinued operations. The contribution
of the venture for the 11 months ended December 2006 is included in the income
statement within share of results of associated undertakings. The carrying value
of the investment is shown in the balance sheet within interests in associated
undertakings.
Accounting for the acquisition of the 24.99% interest in Hibernian Life and
Pensions Limited
The Group's share of the assets and liabilities of HLP as at 30 January 2006 has
been recorded at fair value in accordance with the accounting policies of the
Group. The fair value of the consideration given represents the value of the
75.01% of Ark Life that is deemed to be transferred to Hibernian Life Holdings
Limited. Acquisition accounting has been adopted in respect of the transaction
and the acquisition of the 24.99% interest in HLP comprised:
EUR m
Book value of assets acquired 520
Adjustments 146
Intangible assets recognised 67
Net assets 733
Group's share of net assets - 24.99% 183
Goodwill arising on the acquisition of HLP 12
Fair value of consideration given 195
The adjustments reflect bringing HLP's accounting policies in line with AIB's,
primarily in respect of accounting for insurance contracts. AIB accounts for
insurance contracts using the embedded value basis and the adjustments of EUR
146m primarily reflect the recognition of embedded value on the insurance
contracts in force on HLP's books, offset by other adjustments to bring HLP's
accounting policies in line with AIB's and fair value adjustments. The
intangible assets recognised relate to the value of management contracts not
recognised within HLP's books. Goodwill arising has been capitalised on the
balance sheet within the caption 'Interests in associated undertakings'.
The Group's share of profits of Hibernian Life Holdings Limited is set out in
Note 19.
Notes to the accounts
2006
AIB Bank Capital AIB Bank Poland Group Total
ROI Markets UK
2 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m
Operations by business segments(1)
Net interest income 1,581 490 593 236 99 2,999
Other income 434 464 154 302 (27) 1,327
Total operating income 2,015 954 747 538 72 4,326
Administrative expenses 945 425 332 290 182 2,174
Amortisation of intangible assets and goodwill 17 4 - 21 11 53
Depreciation of property, plant and equipment 38 9 11 19 10 87
Total operating expenses 1,000 438 343 330 203 2,314
Operating profit/(loss) before provisions 1,015 516 404 208 (131) 2,012
Provisions for impairment of loans and 78 5 26 9 - 118
receivables
Provisions for liabilities and commitments (4) 1 - (2) (10) (15)
Amounts (written back) / written off financial
investments for sale (1) 2 - - - 1
Operating profit / (loss) 942 508 378 201 (121) 1,908
Associated undertakings 18 2 - 6 141 167
Profit on disposal of property 6 - 1 - 358 365
Construction contract income - - - - 96 96
Profit on disposal of businesses - 79 - - - 79
Profit before taxation - continuing
operations 966 589 379 207 474 2,615
Discontinued operation - net of taxation 116 - - - - 116
Balance sheet
Total loans 60,083 33,040 22,117 4,573 202 120,015
Interests in associated undertakings 268 5 - 3 1,516 1,792
Total assets 66,200 54,093 24,580 7,195 6,458 158,526
Total deposits 46,503 70,067 13,624 6,614 31 136,839
Total liabilities(2) 46,217 71,656 14,551 6,941 9,249 148,614
Total risk weighted assets 53,307 40,538 22,334 5,826 1,029 123,034
Ordinary shareholders' equity(2) 3,549 2,629 1,476 374 80 8,108
Capital expenditure 104 24 15 24 64 231
Notes to the accounts
2 Segmental information (continued)
2005
AIB Bank Capital AIB Bank Poland Group Total
ROI Markets UK
EUR m EUR m EUR m EUR m EUR m EUR m
Operations by business segments(1)
Net interest income 1,314 435 516 205 60 2,530
Other income 376 407 148 222 (36) 1,117
Total operating income 1,690 842 664 427 24 3,647
Administrative expenses 818 383 313 236 131 1,881
Amortisation/impairment of intangible assets
and goodwill 16 7 1 21 2 47
Depreciation of property, plant and equipment 33 10 9 23 8 83
Total operating expenses 867 400 323 280 141 2,011
Operating profit/(loss) before provisions 823 442 341 147 (117) 1,636
Provisions for impairment of loans and 45 34 21 14 1 115
receivables
Provisions for liabilities and commitments 10 4 - 1 5) 20)
Amounts (written back) / written off financial
investments for sale - 8 - - - 8
Operating profit / (loss) 768 396 320 132 (123) 1,493
Associated undertakings (1) 2 - - 148 149
Profit on disposal of property 12 - 2 - - 14
Construction contract income - - - - 45 45
Profit on disposal of businesses - 5 - - - 5
Profit before taxation - continuing
operations 779 403 322 132 70 1,706
Discontinued operation - net of taxation 46 - - - - 46
Balance sheet
Total loans 45,523 23,794 18,346 4,487 211 92,361
Interests in associated undertakings 6 14 - 19 1,617 1,656
Total assets 55,224 44,371 20,031 7,981 5,775 133,214
Total deposits 34,172 58,038 10,958 6,229 123 109,520
Total liabilities(2) 39,137 59,014 11,888 6,658 8,100 124,797
Total risk weighted assets 39,073 38,974 18,335 4,640 634 101,656
Ordinary shareholders' equity(2) 2,564 2,558 1,203 305 42 6,672
Capital expenditure 71 13 16 19 17 136
Notes to the accounts
2 Segmental information (continued)
2006
Republic of United Poland United Rest of Total
Ireland Kingdom States of the world
America
EUR m EUR m EUR m EUR m EUR m EUR m
Operations by geographical segments(3)
Net interest income 1,899 769 264 54 13 2,999
Other income 665 240 351 61 10 1,327
Total operating income 2,564 1,009 615 115 23 4,326
Administrative expenses 1,401 425 297 42 9 2,174
Amortisation of intangible assets and 32 1 20 - - 53
goodwill
Depreciation of property, plant and equipment 54 12 20 1 - 87
Total operating expenses 1,487 438 337 43 9 2,314
Operating profit before provisions 1,077 571 278 72 14 2,012
Provisions for impairment of loans and 70 41 9 - (2) 118
receivables
Provisions for liabilities and commitments (14) 1 (2) - - (15)
Amounts written off financial investments
available for sale 1 - - - - 1
Operating profit 1,020 529 271 72 16 1,908
Associated undertakings 20 - 6 141 - 167
Profit on disposal of property 364 1 - - - 365
Construction contract income 96 - - - - 96
Profit on disposal of businesses 77 1 - 1 - 79
Profit before taxation - continuing
operations 1,577 531 277 214 16 2,615
Discontinued operation - net of taxation 116 - - - - 116
Balance sheet
Total loans 80,853 29,880 5,315 3,315 652 120,015
Interests in associated undertakings 266 - 10 1,516 - 1,792
Total assets 109,272 33,908 9,109 5,578 659 158,526
Total deposits 96,773 29,020 7,072 3,920 54 136,839
Total liabilities(2) 104,609 31,932 7,812 4,202 59 148,614
Ordinary shareholders' equity(2) 5,164 2,022 398 478 46 8,108
Capital expenditure 192 15 24 - - 231
Notes to the accounts
2 Segmental information (continued)
2005
Republic of United Poland United Rest of Total
Ireland Kingdom States of the world
America
EUR m EUR m EUR m EUR m EUR m EUR m
Operations by geographical segments(3)
Net interest income 1,564 689 225 45 7 2,530
Other income 537 252 251 68 9 1,117
Total operating income 2,101 941 476 113 16 3,647
Administrative expenses 1,169 401 245 59 7 1,881
Amortisation/impairment of intangible assets
and goodwill 23 1 21 2 - 47
Depreciation of property, plant and equipment 47 11 24 1 - 83
Total operating expenses 1,239 413 290 62 7 2,011
Operating profit before provisions 862 528 186 51 9 1,636
Provisions for impairment of loans and 46 53 14 (1) 3 115
receivables
Provisions for liabilities and commitments 18 1 1 - - 20
Amounts written off financial investments
available for sale 6 - - 2 - 8
Operating profit 792 474 171 50 6 1,493
Associated undertakings 1 - - 148 - 149
Profit on disposal of property 12 2 - - - 14
Construction contract income 45 - - - - 45
Profit on disposal of businesses - 1 - 4 - 5
Profit before taxation - continuing
operations 850 477 171 22 6 1,706
Discontinued operation - net of taxation 46 - - - - 46
Balance sheet
Total loans 58,831 24,888 4,487 3,863 292 92,361
Interests in associated undertakings 20 - 19 1,617 - 1,656
Total assets 90,731 28,411 7,815 5,962 295 133,214
Total deposits 77,971 21,291 6,229 4,021 8 109,520
Total liabilities(2) 90653 23,046 6,730 4,359 9 124,797
Ordinary shareholders' equity(2) 4,039 1,810 320 477 26 6,672
Capital expenditure 100 16 19 1 - 136
(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 ordinary shareholders' equity or
liabilities.
(3) The geographical distribution of profit before taxation is based primarily
on the location of the office recording the transaction.
Notes to the accounts
2 Segmental information (continued)
Gross revenue by business segment
2006
AIB Bank Capital AIB Bank Poland Group Eliminations Total
ROI Markets UK
EUR m EUR m EUR m EUR m EUR m EUR m EUR m
External customers 3,080 2,764 1,497 641 974 - 8,956
Inter-segment revenue 1,335 2,057 616 1 80 (4,089) -
Total gross revenue 4,415 4,821 2,113 642 1,054 (4,089) 8,956
2005
External customers 2,232 2,260 1,246 700 39 - 6,477
Inter-segment revenue 903 1,260 333 8 286 (2,790) -
Total gross revenue 3,135 3,520 1,579 708 325 (2,790) 6,477
Gross revenue from external customers equates to: interest and similar income;
dividend income; fee and commissions income; net trading income; other operating
income; profit on disposal of property; construction contract income and profit
on disposal of businesses.
The amounts relate to continuing operations only.
2006 2005
3 Interest and similar income EUR m EUR m
Interest on loans and receivables to banks 307 167
Interest on loans and receivables to customers 5,444 4,032
Interest on trading portfolio financial assets 380 305
Interest on financial investments available for sale 797 647
6,928 5,151
Interest income in 2006 includes EUR 69m removed from equity in respect of cash
flow hedges.
2006 2005
4 Interest expense and similar charges EUR m EUR m
Interest on deposits by banks 1,163 775
Interest on customer accounts 1,597 1,169
Interest on debt securities in issue 955 545
Interest on subordinated liabilities and other capital 214 132
instruments
3,929 2,621
Interest expense in 2006 includes EUR 18m removed from equity in respect of cash
flow hedges.
5 Dividend income
The dividend income relates to income from equity shares held as financial
investments available for sale.
2006 2005
6 Net trading income EUR m EUR m
Foreign exchange contracts 101 59
Profits less losses from trading portfolio financial assets 60 84
Interest rate contracts 4 (32)
Equity index contracts 8 1
173 112
2006 2005
7 Other operating income EUR m EUR m
(Loss)/profit on disposal of available for sale debt (4) 17
securities
Profit on disposal of available for sale equity shares 15 2
Miscellaneous operating income 46 53
57 72
Notes to the accounts
2006 2005
8 Administrative expenses EUR m EUR m
Personnel expenses
Wages & salaries 1,074 948
Share-based payment schemes 57 34
Retirement benefits 144 133
Social security costs 119 104
Other personnel expenses 108 79
1,502 1,298
General and administrative expenses 672 583
2,174 1,881
9 Profit on disposal of property
In addition to the sale of properties which were excess to business
requirements, giving rise to profit on disposal of EUR 7m (2005: EUR 14m) the Group
undertook a significant property sale and leaseback programme during 2006. The
leases qualify as operating leases and the profit arising on these transactions
is included in profit on disposal of property. Details of the more significant
of these transactions are set out below:
Profit Tax Initial rent Minimum
recognised charge payable lease
EURm EUR m EUR m term
Bankcentre Headquarters Building - Blocks A to D 167 32 4.5 4 yrs, 11 mths, 3 weeks
Bankcentre Headquarters Building - Blocks E to H 89 17 7.1 20 years
Donnybrook House 29 4 1.2 1 year
11 Branches 73 15 3.1 15 years
358 68 15.9
10 Construction contract income 2006 2005
EUR m EUR m
Construction revenue 171 81
Construction expense (75) (36)
96 45
In 2005, AIB sold land at its Bankcentre headquarters to a syndicate of
investors, the Serpentine Consortium. The consortium has outsourced the
construction of a new development on the above land to Blogram Limited, a
subsidiary of Allied Irish Banks, p.l.c. on a fixed price contract basis. The
total consideration amounts to EUR 367.8m of which EUR 55.0m has been received. At
31 December 2006, EUR196.5m was due from the consortium in respect of construction
contracts in progress.
Dohcar Limited, a subsidiary of Allied Irish Banks, p.l.c., has contracted with
the Serpentine Consortium to lease the property on completion at an initial rent
of EUR 16.1m per annum for a period of 30 years with a break clause at year 23.
Future lease rental commitments in respect of this transaction have been
reported in the accounts.
The nature of this transaction, which includes the sale of land, an agreement to
construct a building and an agreement to lease the building represents a linked
transaction and meets the definition under IFRS of a sale and leaseback. Because
the significant income from the transaction arises from the construction
contracts, the income is recognised in accordance with IAS 11,'Construction
Contracts'.
11 Profit on disposal of businesses
2006
The profit on disposal of businesses in 2006 of EUR 79m includes profit relating
to the transfer by Ark Life of investment management contracts in conjunction
with the sale of Ark Life of EUR 26m (tax charge C nil) (note 1); AIB's 50% stake
in AIB/BNY Securities Services (Ireland) Ltd of EUR 51m (tax charge EUR nil);
Ketchum Canada Inc. of C 1m (tax charge EUR nil), and the accrual of EUR 1m (tax
charge EUR 0.3m) arising from the sale of the Govett business in 2003.
Notes to the accounts
11 Profit on disposal of businesses (continued)
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
2006 2005
12 Income tax expense - continuing operations 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) 252 160
Adjustments in respect of prior periods 3 1
255 161
Double taxation relief (23) (10)
232 151
Foreign tax
Current tax on income for the period 220 163
Adjustments in respect of prior periods (14) (11)
206 152
438 303
Deferred taxation
Origination and reversal of temporary differences (5) 16
Total income tax expense - continuing operations 433 319
Effective income tax rate - continuing operations 16.6% 18.7%
(1)Includes a charge of EUR 29.5m in the year ended 31 December 2005 in relation
to the Irish Government bank levy.
13 Earnings per share 2006 2005
EUR m EUR m
(a) Basic
Profit attributable to equity holders of the parent 2,185 1,343
Distributions to other equity holders (38) (38)
Profit attributable to ordinary shareholders 2,147 1,305
Weighted average number of shares in issue during the period 870.1m 864.5m
Earnings per share EUR 246.8c EUR 151.0c
(b) Diluted 2006 2005
EUR m EUR m
Profit attributable to ordinary shareholders (note 13(a)) 2,147 1,305
Dilutive impact of potential ordinary shares in subsidiary and associated (2) (1)
companies
Adjusted profit attributable to ordinary shareholders 2,145 1,304
Number of shares (millions)
Weighted average number of shares in issue during the period 870.1 864.5
Dilutive effect of options outstanding 7.0 5.7
Potential weighted average number of shares 877.1 870.2
Earnings per share - diluted EUR 244.6c EUR 149.8c
Notes to the accounts
13 Earnings per share (continued)
(c) Continuing operations EUR m EUR m
Profit attributable to ordinary shareholders (note 13(a)) 2,147 1,305
Discontinued operations 116 46
Profit attributable to ordinary shareholders - continuing operations 2,031 1,259
Weighted average number of shares in issue during the period 870.1m 864.5m
Earnings per share EUR 233.5c EUR 145.7c
(d) Continuing operations - diluted EUR m EUR m
Profit attributable to ordinary shareholders - continuing operations (note 13(c)) 2,031 1,259
Dilutive impact of potential ordinary shares in subsidiary and associated
companies (2) (1)
Adjusted profit attributable to ordinary shareholders - continuing operations 2,029 1,258
Number of shares (millions)
Weighted average number of shares in issue during the period 870.1 864.5
Dilutive effect of options outstanding 7.0 5.7
Potential weighted average number of shares 877.1 870.2
Earnings per share continuing operations - diluted EUR 231.4c EUR 144.6c
Profit attributable Earnings per share
2006 2005 2006 2005
EUR m EUR m cent cent
(a) Basic earnings per share
As reported (note 13(a)) 2,147 1,305 246.8 151.0
Adjustments:
Construction contract income (82) (38) (9.4) (4.4)
Hedge volatility(1) 4 (6) 0.5 (0.7)
Profit on disposal of property (290) - (33.4) -
Profit on disposal of businesses* (189) - (21.7) -
1,590 1,261 182.8 145.9
Profit attributable Earnings per share
2006 2005 2006 2005
EUR m EUR m cent cent
Diluted earnings per share
As reported (note 13(b)) 2,145 1,304 244.6 149.8
Adjustments:
Construction contract income (82) (38) (9.3) (4.4)
Hedge volatility(1) 4 (6) 0.5 (0.7)
Profit on disposal of property (290) - (33.2) -
Profit on disposal of businesses* (189) - (21.5) -
1,588 1,260 181.1 144.7
* of which Ark Life amounts to EUR 112m which is included within discontinued
activities
14 Adjusted earnings per share (continued)
Profit attributable Earnings per share
2006 2005 2006 2005
EUR m EUR m cent cent
(b) Basic earnings per share - continuing operations
As reported (note 13(c)) 2,031 1,259 233.5 145.7
Adjustments:
Construction contract income (82) (38) (9.4) (4.4)
Hedge volatility(1) 4 (6) 0.5 (0.7)
Profit on disposal of property (290) - (33.4) -
Profit on disposal of businesses (77) - (8.8) -
1,586 1,215 182.4 140.6
Profit attributable Earnings per share
2006 2005 2006 2005
EUR m EUR m cent cent
Diluted earnings per share - continuing operations
As reported (note 13(d)) 2,029 1,258 231.4 144.6
Adjustments:
Construction contract income (82) (38) (9.3) (4.4)
Hedge volatility(1) 4 (6) 0.5 (0.7)
Profit on disposal of property (290) - (33.2) -
Profit on disposal of businesses (77) - (8.7) -
1,584 1,214 180.7 139.5
Although not required under IFRS, adjusted earnings per share is presented to
help understand the underlying performance of the Group. The adjustments in 2006
and 2005 are items that management believe do not reflect the underlying
business performance. The adjustment in respect of profit on sale of property
relates only to the profit on sale of properties that are subject to sale and
leaseback arrangements (note 9). The adjustments listed above are shown net of
taxation.
(1)Included in net trading income
2006 2005
15 Trading portfolio financial assets EUR m EUR m
Loans and receivables to banks 3 3
Loans and receivables to customers 25 72
Debt securities:
Governments securities 274 922
Other public sector securities - 19
Other debt securities (1) 8,527 9,008
8,801 9,949
Equity shares 124 89
8,953 10,113
(1) Other debt securities include EUR 4,832m (2005: EUR 5,770m) of bank eurobonds
and EUR 3,039m (2005: EUR 2,646m) of corporate collateralised mortgage obligations.
Notes to the accounts
2006 2005
16 Loans and receivables to customers EUR m EUR m
Loans and receivables to customers 103,651 81,845
Amounts receivable under finance leases and hire purchase contracts 3,003 2,774
Unquoted securities 1,166 1,287
Provisions for impairment of loans and receivables (note 17) (705) (674)
107,115 85,232
2006 2005
EUR m EUR m
Impaired loans by division
AIB Bank ROI 366 308
AIB Bank UK 205 166
Capital Markets 130 132
Poland 232 262
933 868
17 Provisions for impairment of loans and receivables 2006 2005
EUR m EUR m
At beginning of period 676 614
Exchange translation adjustments (1) 16
Charge against income statement 118 115
Amounts written off (96) (72)
Recoveries of amounts written off in previous years 10 3
At end of period 707 676
At end of period:
Specific 518 514
IBNR 189 162
707 676
Amounts include:
Loans and receivables to banks 2 2
Loans and receivables to customers (note 16) 705 674
707 676
2006 2005
18 Financial investments available for sale EUR m EUR m
Debt securities:
Government securities 7,490 8,522
Other public sector securities 1,855 507
Bank and building society certificates of deposit 1,591 643
Other debt securities 8,436 7,021
19,372 16,693
Equity shares 293 171
19,665 16,864
Notes to the accounts
19 Interests in Hibernian Life Holdings Limited
Ark Life Assurance Company Limited
The following table sets out the income and expense from long-term assurance
business included in the income statement for the year ended 31 December 2005.
Income and expense from Ark Life's long-term assurance business 2005
EUR m
Net interest income 113
Other income 740
Total operating income 853
Increase in insurance and investment contract liabilities, and 762
claims
Total operating expenses 27
Income before taxation 64
Taxation 4
Income after taxation 60
Analysed as to:
Continuing operations 14
Discontinued operations 46
Some elements of the Ark Life business are being retained within the Group and
this gives rise to the analysis outlined above between continuing operations and
discontinued operations. Income after taxation of Ark Life amounting to EUR 4m was
included within discontinued activities for the period to 30 January 2006.
Balance sheet
The assets and liabilities of Ark Life included in the consolidated balance
sheet as at 31 December 2005 of the Group were as follows:
2005
EUR m
Assets
Loans and receivables to banks 191
Assets held at fair value through profit or loss 2,638
Property, plant and equipment 52
Reinsurance assets 748
Placings with group companies 1,428
Other assets 371
Total assets 5,428
Liabilities
Investment contract liabilities 2,953
Insurance contract liabilities 1,923
Other liabilities 215
Total liabilities 5,091
Shareholders' equity 337
Total liabilities and shareholders' equity 5,428
Notes to the accounts
19 Interests in Hibernian Life Holdings Limited (continued)
Presentation in the Group balance sheet at 31 December 2005
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 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. As a
result the assets of Ark Life, EUR 5,351m (being total assets of EUR 5,428m net of
AIB shares of EUR 77m) were included in the Group balance sheet within the
caption, 'Disposal group and assets classified as held for sale'. Ark Life's
liabilities of EUR 5,091m were included in the liabilities caption, 'Disposal
group classified as held for sale'.
Hibernian Life Holdings Limited
The contribution of Hibernian Life Holdings Limited ('HLH') from 30 January 2006
is included within share of results of associated undertakings as follows:-
2006
EURm
Share of income of HLH 26
Amortisation of intangible assets 2
Share of income before taxation 24
Taxation attributable to policyholder returns 12
Profit attributable to shareholders before taxation 12
Taxation 1
Included within associated undertakings 11
In addition to the income described above, the Group recognised fee income on
the sale of life insurance and investment products amounting to EUR 31m for the
year ended 31 December 2006 (2005: EUR 26m).
The assets and liabilities of HLH at 31 December 2006, accounted for in
accordance with the accounting policies of the Group, and taking into account
the acquisition adjustments, are set out below:
Summary of consolidated balance sheet 2006
EUR m
Cash and placings with banks 762
Financial investments 11,648
Investment property 765
Property, plant and equipment 15
Reinsurance assets 2,145
Other assets 821
Total assets 16,156
Investment contract liabilities 6,742
Insurance contract liabilities 7,055
Other liabilities 1,253
Shareholders' equity 1,106
Total liabilities and shareholders' equity 16,156
Notes to the accounts
2006 2005
20 Customer accounts EUR m EUR m
Current accounts 25,151 20,909
Demand deposits 8,924 8,013
Time deposits 33,831 28,118
67,906 57,040
Securities sold under agreements to repurchase 1 6
Other short-term borrowings 6,968 5,534
6,969 5,540
74,875 62,580
Contract amount
2006 2005
21 Memorandum items: contingent liabilities and commitments EUR m EUR m
Contingent liabilities:
Guarantees and assets pledged as collateral security:
Guarantees and irrevocable letters of credit 5,902 7,157
Other contingent liabilities 1,191 1,396
7,093 8,553
Commitments:
Other commitments 24,056 19,558
31,149 28,111
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, equity and credit derivatives contracts
for 2006 and 2005.
2006 2005
Notional Gross Notional Gross
principal replacement principal replacement
amount cost amount cost
EUR m EUR m EUR m EUR m
Interest rate contracts(1) 217,435 1,165 178,326 1,146
Exchange rate contracts(1) 20,226 107 19,799 238
Equity contracts(1) 6,485 438 4,386 253
Credit derivatives(1) 570 - - -
Total 244,716 1,710 202,511 1,637
(1) Interest rate contracts are entered into for both hedging and trading
purposes. Exchange rate, equity and credit derivative contracts are entered into
for trading purposes only.
Notes to the accounts
21 Memorandum items: contingent liabilities and commitments (continued)
The Group uses the same credit control and risk management policies in
undertaking 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
2006 and 2005. 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 2006 Year ended 31 December 2005
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 4,930 191 3.9 4,596 117 2.5
Foreign offices 2,307 116 5.1 1,131 50 4.4
Loans and receivables to customers
Domestic offices 62,641 3,162 5.1 47,806 2,084 4.4
Foreign offices 33,133 2,177 6.6 27,664 1,768 6.4
Trading portfolio financial assets
Domestic offices 9,205 349 3.8 7,786 257 3.3
Foreign offices 1,316 31 2.3 1,308 48 3.7
Financial investments available for
sale
Domestic offices 14,671 588 4.0 12,869 470 3.7
Foreign offices 4,339 209 4.8 3,220 177 5.5
Total interest earning assets
Domestic offices 91,447 4,290 4.7 73,057 2,928 4.0
Foreign offices 41,095 2,533 6.2 33,323 2,043 6.1
Net interest on swaps 85 125
Total average interest earning assets 132,542 6,908 5.2 106,380 5,096 4.8
Non-interest earning assets 8,827 13,209
Total average assets 141,369 6,908 4.9 119,589 5,096 4.3
Percentage of assets applicable to
foreign activities 31.5 31.1
Notes to the accounts
Year ended 31 December 2006 Year ended 31 December 2005
Average Interest Average Average Interest Average
balance rate balance rate
Liabilities and shareholders' equity EUR m EUR m % EUR m EUR m %
Due to banks
Domestic offices 28,375 1,067 3.8 25,288 693 2.7
Foreign offices 2,098 96 4.6 1,963 81 4.1
Due to customers
Domestic offices 36,101 809 2.2 27,820 473 1.7
Foreign offices 21,282 768 3.6 18,545 642 3.5
Other debt issued
Domestic offices 13,615 456 3.4 7,001 171 2.4
Foreign offices 10,144 499 4.9 8,486 374 4.4
Subordinated liabilities
Domestic offices 3,542 182 5.2 2,925 132 4.5
Foreign offices 551 32 5.8 - - -
Total interest earning liabilities
Domestic offices 81,633 2,514 3.1 63,034 1,469 2.3
Foreign offices 34,075 1,395 4.1 28,994 1,097 3.8
Total average interest earning
liabilities 115,708 3,909 3.4 92,028 2,566 2.8
Non interest earning liabilities 18,263 21,237
Total liabilities 133,971 3,909 2.9 113,265 2,566 2.3
Stockholders' equity 7,398 6,324
Total average liabilities and
stockholders' equity 141,369 3,909 2.8 119,589 2,566 2.2
Percentage of liabilities applicable to
foreign operations 30.2 30.7
22 Average balance sheets and interest rates (continued)
23 Post-balance sheet events
There have been no material post-balance sheet events which would require
disclosure or adjustment to the 31 December 2006 Financial Statements. On 5
March 2007, the Board of Directors reviewed the Financial Statements and
authorised them for issue. These Financial Statements will be submitted to the
Annual General Meeting of Shareholders to be held on 9 May 2007 for approval.
24 Dividends
Final dividends are not accounted for until they have been approved at the
Annual General Meeting of Shareholders to be held on 9 May 2007. It is
recommended that a final dividend of Eur 46.5c per ordinary share, amounting to
EUR 407m, be paid on 10 May 2007. The Financial Statements for the year ended 31
December 2006 do not reflect this resolution, which will be accounted for in
shareholders' equity as an appropriation of retained profits in the year ending
31 December 2007.
25 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.
26 Approval of accounts
The accounts were approved by the Board of Directors on 5 March 2007.
Financial and other information
2006 2005
Operating ratios
Operating expenses/operating income 53.5% 55.2%
Other income/operating income 30.7% 30.6%
Net interest margin:
Group 2.26% 2.38%
Domestic 2.04% 2.17%
Foreign 2.77% 2.83%
Rates of exchange
EUR /US $
Closing 1.3170 1.1797
Average 1.2566 1.2484
EUR /Stg GBP
Closing 0.6715 0.6853
Average 0.6822 0.6851
EUR /PLN
Closing 3.8310 3.8600
Average 3.8965 4.0276
2006 2005
Capital adequacy information EUR m EUR m
Risk weighted assets
Banking book:
On balance sheet 101,285 79,520
Off-balance sheet 13,033 14,682
114,318 94,202
Trading book:
Market risks 8,172 6,891
Counterparty and settlement risks 544 563
8,716 7,454
Total risk weighted assets 123,034 101,656
Capital
Tier 1 10,116 7,275
Tier 2 3,838 4,089
13,954 11,364
Supervisory deductions 310 487
Total 13,644 10,877
Capital ratios(1)
Tier 1 8.2% 7.2%
Total 11.1% 10.7%
(1) The final dividend of EUR 407m has not been taken into account in the
calculation of the Tier 1 and Total capital ratios. The Financial Regulator has
issued a requirement that a Prudential Filter be applied to proposed final
dividends with effect from July 2007. If applied at 31 December 2006, the Tier 1
and Total capital ratios would be 7.9% and 10.8% respectively.
Five year financial summary
2006 US Summary of consolidated income statement (1) 2006 Year ended 31 December
$m 2005 2004 IFRS 2003 2002
IFRS IFRS EUR m IR GAAP IR GAAP
EUR m EUR m EUR m EUR m
3,950 Net interest income 2,999 2,530 2,072 1,934 2,351
- Other finance income - - - 12 62
1,748 Other income 1,327 1,117 1,144 1,230 1,514
5,698 Total operating income 4,326 3,647 3,216 3,176 3,927
3,048 Total operating expenses 2,314 2,011 1,869 1,960 2,318
2,650 Operating profit before provisions 2,012 1,636 1,347 1,216 1,609
137 Provisions 104 143 133 177 251
2,513 Operating profit 1,908 1,493 1,214 1,039 1,358
220 Associated undertakings 167 149 132 143 9
Share of restructuring & integration costs in
associated undertaking - - - (20) -
- Amortisation of goodwill on acquisition of
associated undertaking - - - (42) -
-481 Profit on disposal of property 365 14 9 32 5
126 Construction contract income 96 45 - - -
104 Profit/(loss) on disposal of businesses 79 5 17 (141) -
3,444 Profit before taxation - continuing operations 2,615 1,706 1,372 1,011 1,372
570 Income tax expense - continuing operations 433 319 267 318 306
2,874 Profit after taxation - continuing operations 2,182 1,387 1,105 693 1,066
153 Discontinued operation, net of taxation 116 46 53 - -
3,027 Profit for the period 2,298 1,433 1,158 693 1,066
325.0c Basic earnings per share 246.8c 151.0c 132.0c 78.8c 119.1c
322.1c Diluted earnings per share 244.6c 149.8c 131.5c 78.4c 117.9c
2006 US Summary of consolidated balance sheet (1) 2006 Year ended 31 December
$m 2005 2004 IFRS 2003 2002
IFRS IFRS EUR m IR GAAP IR GAAP
EUR m EUR m EUR m EUR m
208,777 Total assets 158,526 133,214 101,109 80,960 85,821
158,059 Total loans 120,015 92,361 67,278 53,326 58,483
180,216 Total deposits 136,839 109,520 82,384 66,195 72,190
3,514 Dated capital notes 2,668 2,678 1,923 1,276 1,287
1,147 Undated loan capital 871 868 346 357 389
1,587 Other capital instruments 1,205 210 497 497 496
1,721 Minority interests in subsidiaries 1,307 1,248 1,211 158 274
655 Shareholders' equity: other interests 497 497 182 196 235
10,678 Ordinary shareholders' equity 8,108 6,672 5,745 4,942 4,180
19,302 Total capital resources 14,656 12,173 9,904 7,426 6,861
Five year financial summary (continued)
Year ended 31 December
2006 2005 2004 2003 2002
IFRS IFRS IFRS IR GAAP IR GAAP
Other financial data(1) % % % % %
Return on average total assets 1.63 1.20 1.22 0.90 1.24
Return on average ordinary shareholders' equity 29.0 20.6 20.7 14.5 23.7
Dividend ratio 29.3 43.5 45.5 66.8 41.5
Average ordinary shareholders' equity
as a percentage of average total assets 5.2 5.3 5.7 6.0 5.1
Allowance for loan losses as a percentage
of total loans to customers at year end 0.7 0.8 1.2 1.3 1.6
Net interest margin 2.26 2.38 2.45 2.72 3.00
Tier 1 ratio 8.2 7.2 8.2 7.1 6.9
Total ratio 11.1 10.7 10.9 10.4 10.1
(1) 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 ('Irish GAAP'). On 1 January 2005, AIB Group implemented the
requirements of International Financial Reporting Standards and International
Accounting Standards (collectively, 'IFRS') for the first time and these were
used for the purpose of preparing the financial statements for the years ended
31 December 2005 and 31 December 2006. These financial statements have been
prepared based on the recognition and measurement requirements of IFRS issued by
the International Accounting Standards Board ('IASB') as adopted by the European
Union ('EU').
AIB 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 did not present 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 Irish GAAP. Thus
the five year trends will not be entirely comparable.
Accounts in sterling, US dollars and Polish zloty
Summary of consolidated income statement EUR m Stg GBP m US $ m PLN m
For the year ended 31 December 2006 STGGBP 0.6715 US $ PLN 3.8310
= EUR 1 1.3170 = EUR 1
= EUR 1
Operating profit before provisions 2,012 1,351 2,650 7,708
Provisions 104 70 137 398
Operating profit 1,908 1,281 2,513 7,310
Associated undertakings 167 112 220 640
Profit on disposal of property 365 245 481 1,398
Construction contract income 96 65 126 368
Profit on disposal of businesses 79 53 104 302
Profit before taxation - continuing operations 2,615 1,756 3,444 10,018
Income tax expense - continuing operations 433 291 570 1,658
Profit after taxation - continuing operations 2,182 1,465 2,874 8,360
Discontinued operation, net of taxation 116 78 153 444
Profit for the period 2,298 1,543 3,027 8,804
Minority interests in subsidiaries 113 76 149 433
Profit attributable to equity holders of the parent 2,185 1,467 2,878 8,371
Basic earnings per share 246.8c 165.7p 325.0c 945.5PLN
Diluted earnings per share 244.6c 164.3p 322.1c 937.1PLN
Summary of consolidated balance sheet
31 December 2006 EUR m Stg GBP m US $ m PLN m
Assets
Trading portfolio financial assets 8,953 6,012 11,791 34,299
Derivative financial instruments 2,890 1,941 3,806 11,071
Loans and receivables to banks 12,900 8,662 16,989 49,420
Loans and receivables to customers 107,115 71,928 141,070 410,358
Financial investments available for sale 19,665 13,205 25,899 75,337
Intangible assets and goodwill 550 369 724 2,107
Property, plant and equipment 593 398 781 2,272
Disposal group and assets classified as held for sale 39 26 51 149
Other assets 5,821 3,908 7,666 22,300
158,526 106,449 208,777 607,313
Liabilities
Deposits by banks 33,433 22,450 44,031 128,082
Customer accounts 74,875 50,278 98,610 286,846
Derivative financial instruments 2,531 1,700 3,333 9,696
Debt securities in issue 28,531 19,159 37,575 109,302
Other liabilities 4,500 3,021 5,926 17,239
Subordinated liabilities and other capital instruments 4,744 3,185 6,248 18,175
Minority interests in subsidiaries 1,307 878 1,721 5,007
Shareholders' equity 8,605 5,778 11,333 32,966
158,526 106,449 208,777 607,313
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 06 March, 2007 By: ___________________
John O'Donnell
Group Director, Finance,
Risk and Enterprise
Technology
Allied Irish Banks, p.l.c.