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 01 August, 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 interim results 2007
Basic earnings per share EUR 114.7c
less profit on disposal/development of property(1) EUR (8.3c)
adjust for hedge volatility(2) EUR 2.4c
Adjusted basic earnings per share EUR 108.8c up 16%(3)
Divisional operating profit performance (4)
-AIB Bank ROI up 17%
-Capital Markets up 12%
-AIB Bank UK up 19%
-Poland up 37%
-M&T contribution up 1%
Income/cost gap +4%
Cost income ratio down 1.2% to 51.2%
Bad debt provision charge of 0.04%
Return on equity 23.8%
Tier 1 capital ratio 7.6%
Interim dividend of EUR 27.8c, up 10%
AIB Group Chief Executive Eugene Sheehy said:
'Our business has performed strongly in the first half of 2007. Customer demand
continues to drive high quality growth and this demand is well spread across our
Irish and international franchises. I am confident that we will continue to grow
our business and achieve excellent returns for our stakeholders. My confidence
is based on our top class people operating in attractive economies and markets
where we are delivering a compelling combination of good value products and
services through our customers' chosen channels.'
(1) Includes profit on new Bankcentre development (construction contract income;
EUR 44 million before tax, EUR 38 million after tax) and profit on sale of 16
branches in the Republic of Ireland (EUR 41 million before tax, EUR 35 million
after tax).
(2) The impact of interest rate hedge volatility (hedging ineffectiveness and
derivative volatility) was a decrease of EUR 25 million to profit before
taxation for the half-year (EUR 21 million after tax).
(3) A 16% increase compared with EUR 94.2c for the half-year to June 2006. The
EUR 94.2c in 2006 excludes the profit on disposal of Ark Life discontinued
operation (EUR128 million after tax), 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), the profit on the new Bankcentre development (EUR 34
million before tax, EUR 29 million after tax), part of the profit on the
disposal of the existing Bankcentre (EUR 89 million before tax, EUR 66 million
after tax) and the impact of interest rate hedge volatility (hedging
ineffectiveness and derivative volatility) in the half-year to June 2006 (a
decrease of EUR 19 million to profit before tax, EUR 15 million after tax).
(4) Operating profit excludes profit from disposal of property/businesses,
construction contract income and associated undertakings. The percentage
increase excludes the impact of exchange rate movements on the translation of
foreign locations' profit.
Allied Irish Banks, p.l.c.
Dividend
The Board has declared an interim dividend of EUR 27.8c per share, an increase
of 10% on the half-year ended 30 June 2006. The dividend will be paid on 25
September 2007 to shareholders on the Company's register of members at the close
of business on 10 August 2007.
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 (unaudited)
for the half-year ended 30 June 2007
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Results
Total operating income 2,417 2,076 4,326
Operating profit 1,150 976 1,908
Profit before taxation - continuing operations 1,318 1,214 2,615
Profit attributable to equity holders of the parent 1,041 1,089 2,185
Per EUR 0.32 ordinary share
Earnings - basic (note 12(a)) 114.7c 121.2c 246.8c
Earnings - diluted (note 12(b)) 113.8c 120.1c 244.6c
Dividend 27.8c 25.3c 71.8c
Dividend payout 24% 21% 29%
Net assets D10.12 Y8.51 Y9.28
Performance measures
Return on average total assets 1.34% 1.67% 1.63%
Return on average ordinary shareholders' equity 23.8% 30.4% 29.0%
Balance sheet
Total assets 177,216 144,073 158,526
Ordinary shareholders' equity 8,889 7,413 8,108
Loans and receivables to banks and customers 135,038 105,594 120,015
Deposits(2) 154,001 123,349 136,839
Capital ratios(1)
Tier 1 capital 7.6% 8.0% 8.2%
Total capital 10.4% 11.1% 11.1%
(1) The interim dividend has been deducted in arriving at the capital ratios for
June 2007 and June 2006. The final dividend was not taken into account in the
calculation of the Tier 1 and Total capital ratios at 31 December 2006. 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.
(2) Deposits by banks, customer accounts and debt securities in issue.
Allied Irish Banks, p.l.c.
Group Headquarters &
Registered Office
Bankcentre, Ballsbridge
Dublin 4, Ireland
Telephone (01) 6600311
Registered number 24173
Consolidated interim income statement (unaudited)
for the half-year ended 30 June 2007
Notes Half-year Half-year Year
30 June 2007 30 June 2006 31 December 2006
EUR m EUR m EURm
Interest and similar income 2 4,354 3,130 6,928
Interest expense and similar charges 3 2,687 1,701 3,929
Net interest income 1,667 1,429 2,999
Dividend income 4 22 19 23
Fee and commission income 713 598 1,235
Fee and commission expense (94) (76) (161)
Net trading income 5 75 79 173
Other operating income 6 34 27 57
Other income 750 647 1,327
Total operating income 2,417 2,076 4,326
Administrative expenses 7 1,167 1,018 2,174
Amortisation/impairment of intangible assets 28 27 53
Depreciation of property, plant and equipment 42 43 87
Total operating expenses 1,237 1,088 2,314
Operating profit before provisions 1,180 988 2,012
Provisions for impairment of loans and 16 25 12 118
receivables
Provisions for liabilities and commitments 4 - (15)
Amounts written off financial investments 1 - 1
available for sale
Operating profit 1,150 976 1,908
Associated undertakings 81 88 167
Profit on disposal of property 8 41 90 365
Construction contract income 9 44 34 96
Profit on disposal of businesses 10 2 26 79
Profit before taxation - continuing operations 1,318 1,214 2,615
Income tax expense - continuing operations 11 239 221 433
Profit after taxation - continuing operations 1,079 993 2,182
Discontinued operation, net of taxation - 132 116
Profit for the period 1,079 1,125 2,298
Attributable to:
Equity holders of the parent 1,041 1,089 2,185
Minority interests in subsidiaries 38 36 113
1,079 1,125 2,298
Basic earnings per share - continuing 12(c) 114.7c 105.9c 233.5c
operations
Basic earnings per share - discontinued - 15.3c 13.3c
operations
Total 12(a) 114.7c 121.2c 246.8c
Diluted earnings per share - continuing 12(d) 113.8c 105.0c 231.4c
operations
Diluted earnings per share - discontinued 15.1c 13.2c
operations
Total 12(b) 113.8c 120.1c 244.6c
Consolidated interim balance sheet (unaudited)
30 June 2007
Notes 30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
Assets
Cash and balances at central banks 613 989 618
Treasury bills and other eligible bills 370 196 129
Items in course of collection 855 527 927
Trading portfolio financial assets 14 9,470 8,953 10,820
Derivative financial instruments 22 3,023 2,890 2,239
Loans and receivables to banks 14,821 12,900 9,932
Loans and receivables to customers 15 120,217 107,115 95,662
Financial investments available for sale 18 22,233 19,665 18,664
Interests in associated undertakings 1,772 1,792 1,846
Intangible assets and goodwill 578 550 516
Property, plant and equipment 587 593 625
Other assets 1,428 1,117 1,005
Current taxation 15 17 8
Deferred taxation 181 256 224
Prepayments and accrued income 1,031 927 807
Assets classified as held for sale 22 39 51
Total assets 177,216 158,526 144,073
Liabilities
Deposits by banks 39,797 33,433 34,318
Customer accounts 19 79,023 74,875 66,564
Trading portfolio financial liabilities 493 191 255
Derivative financial instruments 22 3,151 2,531 1,992
Debt securities in issue 35,181 28,531 22,467
Current taxation 220 112 242
Other liabilities 2,123 1,757 2,590
Accruals and deferred income 1,343 1,410 1,020
Retirement benefit liabilities 252 937 644
Provisions for liabilities and commitments 98 93 133
Deferred taxation - - 9
Subordinated liabilities and other capital instruments 21 4,841 4,744 4,693
Total liabilities 166,522 148,614 134,927
Shareholders' equity
Share capital 294 294 294
Share premium account 1,693 1,693 1,693
Other equity interests 497 497 497
Reserves 152 543 519
Profit and loss account 6,750 5,578 4,907
Shareholders' equity 9,386 8,605 7,910
Minority interests in subsidiaries 1,308 1,307 1,236
Total shareholders' equity including minority interests 10,694 9,912 9,146
Total liabilities, shareholders' equity and minority 177,216 158,526 144,073
interests
Condensed interim statement of cash flows (unaudited)
for the half-year ended 30 June 2007
Consolidated statement of cash flows Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Net cash flows from operating activities 5,066 4,731 8,645
Investing activities
Net increase in financial investments available for sale (2,420) (2,041) (2,477)
Additions to property, plant and equipment (40) (66) (144)
Additions to intangible assets (52) (28) (87)
Disposal of property, plant and equipment 57 142 489
Investment in associated undertakings (3) - -
Disposal of investment in subsidiaries and businesses 2 189 268
Dividends received from associated undertakings 27 29 44
Cash flows from investing activities (2,429) (1,775) (1,907)
Financing activities
Re-issue of treasury shares 45 35 48
Issue of perpetual preferred securities - 1,004 1,008
Issue of subordinated liabilities 128 - -
Interest paid on subordinated liabilities (121) (70) (196)
Equity dividends paid on ordinary shares (406) (368) (587)
Dividends paid on other equity interests (38) (38) (38)
Dividends paid to minority interests (34) (35) (82)
Cash flows from financing activities (426) 528 153
Net increase in cash and cash equivalents 2,211 3,484 6,891
Analysis of changes in cash
At beginning of period 14,355 7,670 7,670
Net cash inflow before the effect of exchange translation 2,211 3,484 6,891
adjustments
Effect of exchange translation adjustments (39) (180) (206)
At end of period 16,527 10,974 14,355
Consolidated interim statement of recognised income and expense (unaudited)
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Foreign exchange translation differences (24) (168) (149)
Net change in cash flow hedges, net of tax (258) (259) (283)
Net change in fair value of available for sale securities, net (138) (136) (13)
of tax
Net actuarial gains in retirement benefit schemes, net of tax 565 492 200
Other recognised losses in associated undertakings (55) (35) (47)
Income and expense recognised 90 (106) (292)
Profit for the period 1,079 1,125 2,298
Total recognised income and expense for the period 1,169 1,019 2,006
Attributable to:
Equity holders of the parent 1,134 983 1,859
Minority interests in subsidiaries 35 36 147
Total recognised income and expense for the period 1,169 1,019 2,006
Condensed consolidated interim reconciliation of movements in shareholders'
equity (unaudited)
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Profit attributable to equity holders of the parent 1,041 1,089 2,185
Dividends on ordinary shares (406) (368) (587)
Dividends on other equity interests (38) (38) (38)
Share based payments 15 17 30
Net actuarial gains recognised in retirement benefit schemes 565 492 200
Other recognised losses relating to the period (417) (559) (471)
Other recognised losses in associated undertakings (55) (35) (47)
Ordinary shares reissued 78 60 87
Net movement in own shares (2) 83 77
Net additions to shareholders' equity 781 741 1,436
Opening shareholders' equity 8,605 7,169 7,169
Closing shareholders' equity 9,386 7,910 8,605
Shareholders' equity:
Ordinary shareholders' equity 8,889 7,413 8,108
Other equity interests 497 497 497
9,386 7,910 8,605
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 business(2) and adjusting for
hedge volatility(3).
Earnings per share Half-year Half-year % change
June 2007 June 2006 2007 v 2006
Basic - continuing operations 114.7c 105.9c 8
Basic - discontinued operations - 15.3c -
Basic - total 114.7c 121.2c -5
less profit on disposal/development of property(1) (8.3c) (11.0c) -
less profit on disposal of business(2) - (17.7c) -
adjust for hedge volatility(3) 2.4c 1.7c -
Adjusted basic earnings per share 108.8c 94.2c 16
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 rates accounting rates effective effective
rates rates
half-year half-year half-year half-year
June 2007 June 2006 June 2007 June 2006
US dollar 1.33 1.23 1.32 1.20
Sterling 0.67 0.69 0.67 0.69
Polish zloty 3.84 3.90 3.87 3.86
(1) Half-year to June 2007 includes profit on new Bankcentre development
(construction contract income; EUR 44 million before tax, EUR 38 million after
tax) and profit on sale of 16 branches in the Republic of Ireland (EUR 41
million before tax, EUR 35 million after tax). Half-year to June 2006 includes
the profit on the new Bankcentre development (EUR 34 million before tax, EUR 29
million after tax) and part of the profit on the disposal of the existing
Bankcentre (EUR 89 million before tax, EUR 66 million after tax).
(2) Profit on disposal of Ark Life discontinued operation (EUR 128 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) was a decrease of EUR 25 million to profit before
taxation (EUR 21 million after tax) in the half-year to June 2007. The impact of
interest rate hedge volatility (hedging ineffectiveness and derivative
volatility) was a decrease of EUR 19 million to profit before taxation (EUR 15
million after tax) in the half-year to June 2006.
Commentary on results
Basis of preparation
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).
Continued strong growth in operating income, up 17%
Total operating income
Total income increased by 17% to EUR 2,417 million.
Half-year Half-year Underlying
Total operating income June 2007 June 2006 % change
EUR m EUR m 2007 v 2006
Net interest income 1,667 1,429 16
Other income 750 647 19
Total operating income 2,417 2,076 17
Commentary on results
Net interest income
Net interest income increased by 16% to EUR 1,667 million in the half-year to
June 2007. The key drivers of the increase were strong loan growth in the
Republic of Ireland and Poland and strong loan and deposit growth in the UK.
Loans to customers increased by 12% and customer accounts increased by 3% on a
constant currency basis since 31 December 2006 (details of loan and deposit
growth by division are contained on page 14 of this release).
Average interest earning assets Half-year Half-year %
June 2007 June 2006 EUR change(1)
EUR m EUR m 2007 v 2006
Average interest earning assets 152,738 126,030 21
(1) This particular analysis is not adjusted for the impact of exchange rate movements.
Net interest margin Half-year Half-year Basis
June 2007 June 2006 point
% % change
Group net interest margin 2.20 2.29 -9
The domestic and foreign margins for the half-year to June 2007 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 2.20%, a decrease of 9 basis points
compared with the half-year to June 2006. The underlying business margin
decreased by 9 basis points while the level of growth in treasury assets had a
neutral impact.
The margin reduction was due to a combination of the following factors:
(a) loans increasing at a faster rate than deposits.
(b) a changing mix of products where stronger volume growth has been achieved in
lower margin products; corporate loans, home loans and prime rate advances on
the lending side and term deposits and other lower margin products on the
deposit side.
(c) 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 2006.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.
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 is priced to meet the required return on
capital.
Commentary on results
Investment banking and asset management fees up 47%
Banking fees and commissions up 10%
Other income
Other income was up 19% to EUR 750 million compared with the half-year to
June 2006.
Half-year Half-year Underlying
June 2007 June 2006 % change
Other income EUR m EUR EUR m 2007 v 2006
Dividend income 22 19 16
Banking fees and commissions 503 457 10
Investment banking and asset management 210 141 47
fees
Fee and commission income 713 598 19
Less: Fee and commission expense (94) (76) 23
Trading income 98 81 17
Currency hedging profits 2 17 -
Interest rate hedge volatility (25) (19) -
Net trading income 75 79 17
Other operating income 34 27 18
Total other income 750 647 19
Dividend income increased by 16% mainly reflecting growth in dividends from
investments held by the Polish business.
Total fee and commission income increased by 19%, 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 47% driven by
particularly strong performances in Asset Management in Poland and BZWBK's
brokerage operation and very good growth in Goodbody Stockbrokers.
Trading income increased reflecting profits from trading portfolio financial
assets. 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 reflect the full extent of trading activities,
which are largely in Global Treasury. Interest income in Global Treasury
decreased relative to 2006.
Other income as a percentage of total income was 31.0% compared with 31.2% for
the half-year to June 2006.
Commentary on results
Investment for long-term growth and development
Declining cost income ratio trend continues - cost income ratio down 1.2% to
51.2%
Income/cost gap +4%
Total operating expenses
Operating expenses increased by 13% compared with half-year to June 2006.
Half-year Half-year Underlying
Operating expenses June 2007 June 2006 % change
EUR m EUR m 2007 v 2006
Personnel expenses 799 699 14
General and administrative expenses 368 319 15
Depreciation(1)/amortisation(2) 70 70 1
Total operating expenses 1,237 1,088 13
Operating expenses increased by 13% reflecting increases in business activity
and volumes. The increase in costs reflects normal inflationary increases and
continuing investment in various programmes to develop capabilities to benefit
from the ongoing business opportunities and to position the business for
long-term growth and development. This has included investment in people,
locations and the continuation of our programme to build common operating
systems in line with our single enterprise agenda which will support a resilient
risk, compliance and corporate governance framework. Excluding costs arising to
meet expanding regulatory demands and costs relating to investment in our risk,
compliance and corporate governance framework, and performance related
remuneration resulting from very strong revenue growth, the increase in costs
was 10%.
Personnel expenses were up 14% due to a higher level of variable performance
related remuneration linked to the strong profit performance, normal salary
increases and investment in developing our operating systems.
General and administrative expenses were up 15% including costs associated with
preparation for AIB's Basel II application to the Financial Regulator (IFSRA),
costs relating to the building of common operating systems, rental costs arising
from the sale and leaseback arrangements for the Bankcentre and Branch network
and normal inflationary increases. Depreciation/amortisation increased by 1%.
Productivity improved with the cost income ratio reducing by 1.2% to 51.2% from
52.4% in the half-year to June 2006.
Cost growth is expected to moderate in the second half-year due to the non
recurrence of the step up in regulatory driven and performance related
remuneration costs incurred in the second half of 2006.
(1) Depreciation of property, plant and equipment.
(2) Amortisation/impairment of intangible assets.
Commentary on results
Provision charge low at 4 basis points reflecting strong asset quality
Reduction in impaired loans as a percentage of loans to 0.7%
Provisions
Total provisions were EUR 30 million, up from EUR 12 million in the half-year to
June 2006.
Half-year Half-year
June 2007 June 2006
Provisions EUR m EUR EUR m
Provisions for impairment of loans and receivables 25 12
Provisions for liabilities and commitments 4 -
Amounts written off financial investments available 1 -
for sale
Total provisions 30 12
In the period, credit provision experience was particularly positive reflecting
a continued benign credit environment and a strong level of provision
write-backs.
The provision for impairment of loans and receivables was EUR 25 million
compared with EUR 12 million in half-year to June 2006, representing a charge of
0.04% of average loans compared with 0.03% in June 2006. The 0.04% charge
represents EUR 27 million in the incurred but not reported (IBNR) category and a
net specific write-back of EUR 2 million. Impaired loans as a percentage of
total customer loans decreased from 0.9% at 31 December 2006 to 0.7% at 30 June
2007 with the total provision coverage for impaired loans at 80%.
In AIB Bank Republic of Ireland asset quality continued to be strong. Impaired
loans remained at 0.6% of total customer loans compared with 31 December 2006.
The provision charge was 0.15% of average loans compared with 0.14% in June
2006. The quality across all sectors of the retail and commercial portfolios
remains very good.
In Capital Markets there were net credit provision write-backs of EUR 22 million
during the period, compared with net credit provision write-backs of EUR 37
million in the half-year to June 2006. The provision write-backs equated to
0.19% of average loans compared to write-backs of 0.39% in the half-year to June
2006. Impaired loans reduced to 0.3% from 0.6% of total customer loans at 31
December 2006.
In the UK division, the provision charge was 0.06% of average loans compared to
0.08% in June 2006. Impaired loans remained at 0.9% of total customer loans at
30 June 2007.
There were net credit provision write-backs in Poland in the half-year to June
2007. The provision charge decreased from 0.31% of average loans in the
half-year to June 2006 to a write-back of 0.24% of average loans in the current
half-year. Asset quality continued to improve with the ratio of impaired loans
as a percentage of customer loans declining to 3.9% from 4.9% at 31 December
2006.
There were provisions for liabilities and commitments of EUR 4 million in the
half-year to June 2007 and provisions for amounts written off financial
investments of EUR 1 million during the period.
Associated undertakings
The profit in the half-year to June 2007 was EUR 81 million compared to EUR 88
million in the half-year to June 2006 and mainly reflects AIB's 24.5% 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$ 99 million was up 1% compared with the half-year to June
2006 contribution of US$ 98 million.
Commentary on results
The following commentary is in respect of the total Group.
Loans up 12%; deposits up 3%
Effective tax rate at 18.1%
Balance sheet
Total assets amounted to EUR 177 billion at 30 June 2007 compared to EUR 159
billion at 31 December 2006. Adjusting for the impact of currency, total assets
were up 12% and loans to customers were up 12% since 31 December 2006 while
customer accounts increased by 3%. Risk weighted assets excluding currency
factors increased by 10% to EUR 135 billion.
Risk weighted assets, loans to customers and customer accounts (excluding
currency factors)
Risk weighted Loans to Customer
assets customers accounts(1)
% change 30 June 2007 v 31 December % change % change % change
2006
AIB Bank Republic of Ireland 10 10 -
Capital Markets 7(2) 18 -
AIB Bank UK 11 13 15
Poland 13 17 5
AIB Group 10 12 3
(1) Excludes money market funds.
(2) The risk weighted asset growth of 7% is lower than the growth in
loans to customers of 18% due to a lower capital requirement
relating to trading book risks.
Assets under management
Assets under management in the Group amounted to EUR 19 billion at 30 June 2007
compared with EUR 17 billion at 31 December 2006.
Income tax expense
The taxation charge was EUR 239 million compared with EUR 221 million in the
half-year to June 2006. The effective tax rate was 18.1% compared with 18.2% in
the half-year to June 2006. 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 in which we operate.
Commentary on results
Return on equity 23.8%
Continued strong customer demand
Outlook - now expect low teen EPS growth in 2007
Return on equity and return on assets
The return on average equity was 23.8% in the half-year to June 2007. The return
on average assets was 1.34% in the half-year to June 2007. The return on equity
and return on assets included the profit on the development of Bankcentre and
from the sale of branches.
Capital ratios
A strong capital position was reflected in a Tier 1 ratio at 7.6% and a total
capital ratio of 10.4%.
Recent developments
On 29 June 2007, AIB entered into an agreement to acquire AmCredit, the mortgage
finance business of the Baltic-American Enterprise Fund ("BalAEF"). The
business, which has a strong track record in mortgage lending, operates in
Latvia, Lithuania and Estonia. It was established in 1997. BalAEF is a Delaware
corporation chartered in 1994, pursuant to legislation enacted by the US
Congress to promote private sector development in the Baltic States. The
International Finance Corporation (the private sector arm of the World Bank
Group) has played an important role in its development over the years. AmCredit,
which has 13 outlets and 145 staff, will give AIB entry to three high growth
markets underpinned by an experienced workforce, robust systems and processes
and an established brand.
On 19 July 2007 M&T Bank and Partners Trust Financial Group announced that they
have entered into a definitive agreement under which Partners Trust will merge
into M&T in a transaction valued at approximately US$ 555 million. M&T has US$
57.9 billion in assets, while Partners Trust has US$ 3.7 billion in assets. M&T
will acquire 33 branch locations in Upstate New York and approximately US$ 2.3
billion in loans from Partners Trust.
Outlook to December 2007
Growth continues to be underpinned by strong customer demand that is well spread
across all our principal franchises. Productivity is good and asset quality
remains robust although the high level of net specific write-backs of provisions
in the first half is not expected to recur in the second half of the year. Based
on these factors we are now increasing our target for the full year 2007 to low
teen percentage growth (previously low double-digit) in adjusted basic earnings
per share compared with the 2006 base of EUR 182.8c.
Divisional commentary
AIB Bank Republic of Ireland profit of EUR 534 million was up 18%
Strong business momentum, revenue growth of 16%
Income/cost gap at +4%
Cost income ratio decreases to 48.0%
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; Wealth Management and share of Hibernian Life Holdings Limited,
AIB's venture with Hibernian Life & Pensions Limited.
Half-year Half-year Underlying
June 2007 June 2006 % change
AIB Bank Republic of Ireland income statement EUR m EUR m 2007 v 2006
Net interest income 868 745 17
Other income 238 212 12
Total operating income 1,106 957 16
Personnel expenses 353 317 11
General and administrative expenses 152 128 19
Depreciation / amortisation 26 28 -7
Total operating expenses 531 473 12
Operating profit before provisions 575 484 19
Provisions for impairment of loans and receivables 46 35 31
Provisions for liabilities and commitments 2 - -
Total provisions 48 35 36
Operating profit 527 449 17
Associated undertakings 7 4 103
Profit before taxation - continuing operations 534 453 18
AIB Bank Republic of Ireland reported growth in profit before tax of 18%
benefiting from the ongoing business opportunities afforded by a supportive
economic environment. Operating income was up 16% and operating expenses were up
12% with the operating income/cost gap at +4%.
The strong profit growth reflects our commitment to developing our business and
to competing aggressively to increase and protect market share across the
franchise. AIB Bank continues to invest heavily in both front-line and
back-office activities, whilst maintaining good operating leverage.
Loans increased by 10% and deposits were flat since 31 December 2006 (up 26% and
12% respectively since 30 June 2006). Loan demand remains good, with growth in
business lending particularly strong. AIB also benefited from attractive pricing
within our deposit product suite in the post-SSIA savings market.
Operating expenses increased by 12%. The key cost drivers were higher staff
numbers reflecting growth in business activity, development of a refined
business operating model, annual salary inflation, performance related costs,
impact of the career framework pay structure introduced during 2006 and higher
advertising spend. The strong operating performance resulted in a further
reduction in the cost income ratio from 49.4% to 48.0%.
Asset quality remains strong with the provision charge for the half-year to June
2007 at 0.15% of average loans compared with 0.14% in the half-year to June
2006.
Retail Banking had another strong half-year with strong growth in business and
personal lending. There was good growth in the mortgage book, against a backdrop
of slowing demand in the mortgage market generally. Deposit income benefited
from the higher interest rate environment and our strong market position. Wealth
management continues to experience excellent growth. Private Banking is
investing heavily in its business and has enjoyed significant growth in its
assets under management. Sales of life and pensions through the bank channel has
produced Annual Premium Equivalent ("APE") growth of 74% since the half-year to
June 2006, whilst our investment in Hibernian Life Holdings has also produced
good growth. Profit growth in AIB Card Services was also strong benefiting from
buoyant growth in revenue and tight cost control. AIB Finance & Leasing reported
good lending growth spread across all key market segments.
Divisional commentary
Capital Markets operating profit was up 12%. Profit before taxation of EUR 333
million was up 3%(1).
Strong performance and continued business momentum in Corporate Banking
Robust performance in customer treasury business but weaker wholesale trading
Exceptional profit growth across key investment banking units
Income/cost gap at +4%
Capital Markets Corporate Banking, Global Treasury, and Investment Banking.
Half-year Half-year Underlying
June 2007 June 2006 % change
Capital Markets income statement EUR m EUR m 2007 v 2006
Net interest income 285 239 20
Other income 254 227 13
Total operating income 539 466 17
Personnel expenses 165 140 19
General and administrative expenses 55 56 -
Depreciation / amortisation 7 6 13
Total operating expenses 227 202 19
Operating profit before provisions 312 264 -41
Provisions for impairment of loans and receivables (22) (37) -4
Provisions for liabilities and commitments 2 3 -
Amounts written off financial investments available for 1 - -44
sale
Total provisions (19) (34) 12
Operating profit 331 298 12
Associated undertakings - 2 -
Profit on disposal of businesses 2 26 -93
Profit before taxation 333 326 3
Capital Markets profit before taxation of EUR 333 million was up 3%(1).
Operating profit before provisions of EUR312 million grew by 19% on the
half-year to June 2006, underpinned by continued growth in business volumes,
strong customer relationships and the success of new product initiatives in key
business areas. Operating profit was ahead by 12% since the half-year to June
2006, impacted by a lower level of credit provision write-backs than the
comparative period in 2006.
Corporate Banking continued its strong growth momentum with operating profit
before provisions up 24% and profit before taxation up 12%. Key contributors to
revenue growth were increased loan volumes in established markets, the
introduction of significant new product initiatives in Ireland and overseas,
additional income streams from new overseas markets and continued focus on
customer relationship management. Corporate Banking continues to align
specialist resources in new markets to the skills and experience of other
business units in developing new structured product initiatives in line with
customer demand. Loans grew by 18% while asset quality and margins continued to
be actively managed against a backdrop of maintaining asset quality in an
environment of increased competition and market volatility. Credit quality
remains strong, reflected in continued write-backs of provisions for impairment
of loans and receivables and in line with management's active approach to credit
management.
Overall Global Treasury profit before taxation declined by 19% on 2006,
positively impacted by robust customer treasury business in Ireland, Britain and
Poland, and adversely offset by a weaker performance in wholesale treasury
business. Customer treasury income benefited from increased customer numbers and
generated strong income growth, particularly from foreign exchange and cash
management. The performance of the wholesale treasury investment book was
negatively impacted by increasing interest rates.
Investment Banking experienced exceptional growth, with profit before taxation
up 48%. Strong growth in the asset management business continued, benefiting
from increased volumes of new funds. In Ireland, stockbroking activities,
structured product initiatives, corporate advisory services and financial
outsourcing activities all contributed strongly to the exceptional level of
growth.
Operating expenses increased by 13%, principally impacted by higher performance
related costs, while the cost income ratio improved from 43.5% in 2006 to 42.2%.
General and administrative costs were held at 2006 levels, reflecting
management's continued focus on cost containment.
(1) The half-year to June 2006 included EUR 26 million profit on disposal of
business arising from the transfer by Ark Life of the management of certain
investment contracts to Aviva, as part of the Ark Life disposal.
Divisional commentary
AIB Bank UK division profit was up 19% to EUR 223 million
Well managed growth in profit before taxation of 19%
Income/cost gap at +5%
Cost income ratio improves by 2.3% to 45.0%
AIB Bank UK Retail and commercial banking operations in Great Britain and
Northern Ireland.
Half-year Half-year Underlying
June 2007 June 2006 % change
AIB Bank UK income statement EUR m EUR m 2007 v 2006
Net interest income 339 287 16
Other income 78 75 1
Total operating income 417 362 13
Personnel expenses 129 118 7
General and administrative expenses 53 48 9
Depreciation / amortisation 5 5 9
Total operating expenses 187 171 8
Operating profit before provisions 230 191 18
Provisions for impairment of loans and receivables 7 7 -16
Provisions for liabilities and commitments - - -
Amounts written off financial investments available for - - -
sale
Total provisions 7 7 -16
Operating profit 223 184 19
Profit on disposal of property - - -
Profit before taxation 223 184 19
AIB Bank UK reported strong business performance in the first half of 2007 with
profit before taxation increasing by 19%, driven by well managed growth of loans
and deposits. These increased by 13% and 15% respectively since 31 December 2006
(23% and 24% respectively since 30 June 2006), driving an increase of 16% in net
interest income, with customer deposits continuing to grow strongly across both
personal and business current accounts. Other income grew by 1%. The cost income
ratio improved significantly from 47.3% to 45.0%, reflecting a balanced
performance between strong revenue growth and controlled cost growth in an
environment of increasing inflation. The provision charge decreased when
compared against 2006, with the charge representing 0.06% of average loans,
reflecting good credit quality within the lending portfolio.
Allied Irish Bank (GB), which focuses on business banking, reported strong
profit growth of 17% to EUR 122 million in the first half of 2007. This was
primarily driven by strong growth in net interest income and in particular
growth in deposit volumes. Loans and deposits increased by 10% and 18% since 31
December 2006 (17% and 29% respectively since 30 June 2006). Costs increased by
9%, reflecting a combination of increasing investment in front line staff and
the development of our operating systems, with the cost income ratio improving
from 46.0% to 44.2%.
In Northern Ireland, First Trust Bank increased profit before tax to EUR101
million representing 21% growth on the same period last year. Loans and deposits
increased by 17% and 10% respectively since 31 December 2006 (32% and 17%
respectively since 30 June 2006), with strong growth in business lending
activity combined with significant growth in business and personal deposits.
Costs increased by 6% reflecting the impact of increased investment in the
development of our operating systems, with the cost income ratio improving
significantly from 48.7% to 46.0%. First Trust Bank also launched a new personal
current account " The Plus account", which can offer customers both credit
interest and the opportunity of transaction free banking, which will strengthen
the current account proposition in our target markets.
Divisional commentary
Poland division profit was EUR 155 million, up 35% on the half-year to June 2006
Continued significant profit growth
Very strong demand for credit
Growth in mutual funds balances and income
Income/cost gap +5%
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.
Half-year Half-year Underlying
June 2007 June 2006 % change
Poland income statement EUR m EUR m 2007 v 2006
Net interest income 139 112 22
Other income 192 160 19
Total operating income 331 272 20
Personnel expenses 101 79 25
General and administrative expenses 64 55 15
Depreciation / amortisation 17 22 -22
Total operating expenses 182 156 15
Operating profit before provisions 149 116 26
Provisions for impairment of loans and receivables (6) 7 -
Provisions for liabilities and commitments - (3) -
Total provisions (6) 4 -
Operating profit 155 112 37
Associated undertakings - 2 -
Profit before taxation 155 114 35
AIB Poland Division had an excellent performance in the first half-year with
profit before taxation increasing by 35%. This reflects the strong growth
momentum, increased business activity and diversification of income streams now
evident in the division.
Total operating income increased by 20% with net interest income up by 22%.
Demand for credit has been very strong with total loans increasing by 17% from
31 December 2006 (34% since 30 June 2006). Business lending growth of 16% since
31 December 2006 (30% since 30 June 2006) continues to be ahead of the market,
while personal lending at 18% since 31 December 2006 (36% since 30 June 2006)
continues to grow substantially. Mortgage demand in the market remains strong
with the majority of the business being foreign exchange denominated facilities,
a product sector in which BZWBK does not actively participate. Against this
background, mortgage lending grew by a very satisfactory 16% since 31 December
2006 (33% since 30 June 2006). Customer deposits increased by 5% since 31
December 2006 (18% since 30 June 2006), with growth primarily in current
accounts and in the business sector.
Other income increased by 19%. Success continued in the mutual funds business,
where balances increased by 30% since 31 December 2006 (77% since 30 June 2006)
in a more dynamic and competitive market. Asset management income increased by
69% supported primarily by management fees. The brokerage business continued to
record increased turnover and related income, helped by the strong performance
of the Warsaw Stock Exchange in the first half-year. Business momentum continued
to increase income from foreign exchange, debit cards, dividends and fees, which
together now comprise approximately 60% of other income.
Operating expenses increased by 15% reflecting increased business opportunity
and the roll out of the expansion of the branch network. The staff costs
increase was driven by increased employment levels, higher basic salaries and
enhanced performance related pay. General and administrative expenses increased
mainly due to increased IT maintenance and marketing expenditure.
Impaired loans as a percentage of total loans continued to decline with the
ratio at 3.9% at 30 June 2007 compared with 4.9% at 31 December 2006.
Exceptional recoveries, in a benign environment have led to overall net
provision write-backs in the period. The credit provision write-back as a
percentage of average loans was 0.24%, compared with a charge of 0.31% in the
half-year to June 2006.
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 24.5% in M&T Bank Corporation ('M
&T') and profit on disposal of property.
Half-year Half-year
June 2007 June 2006
Group income statement EUR m EUR m
Net interest income 36 46
Other income / (loss) (12) (27)
Total operating income 24 19
Personnel expenses 51 45
General and administrative expenses 44 32
Depreciation / amortisation 15 9
Total operating expenses 110 86
Operating loss (86) (67)
Associated undertaking - M&T 74 80
Profit on disposal of property 41 90
Construction contract income 44 34
Profit before taxation - continuing operations 73 137
Group reported profit before taxation of EUR 73 million for the half-year to
June 2007 compared with a profit of EUR 137 million in the half-year to June
2006. The profit reported includes profit on disposal of property and
construction contract income of EUR 85 million compared with EUR 124 million
from these activities in 2006.
Total income increased from EUR 19 million in the half-year to 30 June 2006 to
EUR 24 million in the half-year to 30 June 2007.
Other income/(loss) includes hedging profits in relation to foreign currency
translation hedging (EUR 2 million in the half-year to June 2007 compared with
EUR 17 million in the half-year to June 2006) and interest rate hedge
volatility(1) (a decrease in other income of EUR 25 million in the half-year to
June 2007 compared with a decrease of EUR 19 million in 2006).
Total operating expenses were higher due to increased compliance related spend,
mainly on the preparation of AIB's Basel II application to the Financial
Regulator 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.
AIB's share of M&T after-tax profit in the half-year to June 2007 amounted to
EUR 74 million. On a local currency basis M&T's contribution of US$ 99 million
was up 1% relative to the half-year to June 2006 contribution of US$ 98 million.
M&T reported its half-year results on 12 July 2007, showing net income (profit
after tax) down 6% to US$ 390 million. US GAAP-basis diluted earnings per share
was down 4% to US$ 3.51 from US$ 3.64 in the half-year to June 2006. Diluted net
operating earnings per share, which excludes the amortisation of core deposit
and other intangible assets and banking office acquisition-related expenses, was
US$ 3.70, down 2% from US$ 3.79 in the half-year to June 2006.
Profit on disposal of property reflects profit on the sale of 16 branches in the
Republic of Ireland (EUR 41 million before tax, EUR 35 million after tax).
Construction contract income of EUR 44 million (EUR 38 million after tax)
reflects the profit earned from the new development at Bankcentre, based on the
stage of completion.
(1) Hedging ineffectiveness and derivative volatility.
Basis of preparation
Accounting policies
There have been no significant changes to the accounting policies described on
pages 47 to 61 in the 2006 annual report.
Change in pension scheme assumptions
As described on page 50 of the 2006 annual report, pension scheme liabilities
are discounted at the current rate of return on a high quality corporate bond of
equivalent term and currency. The discount rates used in the preparation of the
accounts as at 30 June 2007 were 5.3% for the Irish scheme (31 December 2006:
4.7%) and 5.5% for the UK scheme (31 December 2006: 5.0%). The change in the
discount rates, together with actuarial gains on assets, gave rise to an
actuarial gain of d 565 million, net of tax, in the current period.
Prospective accounting changes
The prospective accounting changes setting out accounting standards/amendments
that apply with effect from 1 January 2007 to companies that report under IFRS,
and their expected impact on the Group, are set out on page 62 of the 2006
annual report. These are updated below for recent developments.
IFRIC 10 - Interim Financial Reporting and Impairment. This interpretation,
which was endorsed by the EU on 1 June 2007, clarifies that any impairment
losses on goodwill and equity instruments in an interim period may not be
reversed in subsequent interim periods. This IFRIC does not have a material
impact on the Group.
The following accounting developments will impact companies that report under
IFRS in future periods:-
IFRIC 11 - Group and Treasury Share Transactions (effective 1 January 2008).
This interpretation deals with accounting for share based payments at subsidiary
level hence it will not have an impact on AIB's consolidated accounts.
The EU Transparency Directive was transposed into Irish law on 13 June 2007 and
will impact AIB's external 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.
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
Notes to the accounts
Half-year 30 June 2007
AIB Bank Capital AIB Bank Poland Group Total
ROI Markets UK
1 Segmental information EUR m EUR m EUR m EUR m EUR m EUR m
Operations by business segments(1)
Net interest income 868 285 339 139 36 1,667
Other income 238 254 78 192 (12) 750
Total operating income 1,106 539 417 331 24 2,417
Administrative expenses 505 220 182 165 95 1,167
Amortisation/impairment of
intangible assets 9 3 - 9 7 28
Depreciation of property, plant
and equipment 17 4 5 8 8 42
Total operating expenses 531 227 187 182 110 1,237
Operating profit/(loss) before 575 312 230 149 (86) 1,180
provisions
Provisions for impairment of loans
and receivables 46 (22) 7 (6) - 25
Provisions for liabilities and 2 2 - - - 4
commitments
Amounts (written back)/written off
financial investments available - 1 - - - 1
for sale
Operating profit/(loss) 527 331 223 155 (86) 1,150
Associated undertakings 7 - - - 74 81
Profit on disposal of property - - - - 41 41
Construction contract income - - - - 44 44
Profit on disposal of businesses - 2 - - - 2
Profit before taxation -
continuing operations 534 333 223 155 73 1,318
Balance sheet
Loans and receivables to customers 66,160 24,206 24,269 5,457 125 120,217
Total assets 72,322 61,977 27,963 8,279 6,675 177,216
Customer accounts 40,680 16,279 15,466 6,598 - 79,023
Total liabilities(2) 48,224 83,573 16,563 7,565 10,597 166,522
Total risk weighted assets 58,592 42,248 24,720 6,527 3,209 135,296
Ordinary shareholders' equity(2) 3,849 2,776 1,624 429 211 8,889
Capital expenditure 40 13 4 8 27 92
Notes to the accounts
1 Segmental information (continued) Half-year 30 June 2006
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 745 239 287 112 46 1,429
Other income 212 227 75 160 (27) 647
Total operating income 957 466 362 272 19 2,076
Administrative expenses 445 196 166 134 77 1,018
Amortisation/impairment of
intangible assets 9 2 - 11 5 27
Depreciation of property, plant
and equipment 19 4 5 11 4 43
Total operating expenses 473 202 171 156 86 1,088
Operating profit/(loss) before 484 264 191 116 (67) 988
provisions
Provisions for impairment of loans
and receivables 35 (37) 7 7 - 12
Provisions for liabilities and - 3 - (3) - -
commitments
Amounts (written back)/written off
financial investments available for - - - - - -
sale
Operating profit/(loss) 449 298 184 112 (67) 976
Associated undertakings 4 2 - 2 80 88
Profit on disposal of property - - - - 90 90
Construction contract income - - - - 34 34
Profit on disposal of businesses - 26 - - - 26
Profit before taxation -
continuing operations 453 326 184 114 137 1,214
Discontinued operation -
net of taxation 132 - - - - 132
Balance sheet
Loans and receivables to customers 52,691 19,830 19,234 3,804 103 95,662
Total assets 58,261 50,134 21,851 7,702 6,125 144,073
Customer accounts 36,264 12,919 12,163 5,218 - 66,564
Total liabilities(2) 40,350 65,269 13,056 6,790 9,462 134,927
Total risk weighted assets 45,997 39,106 19,874 4,478 1,612 111,067
Ordinary shareholders' equity(2) 3,070 2,610 1,326 299 108 7,413
Capital expenditure 48 14 6 5 21 94
Notes to the accounts
1 Segmental information (continued) Year 31 December 2006
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 1,581 490 593 236 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/impairment of
intangible assets 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 1,015 516 404 208 (131) 2,012
provisions
Provisions for impairment of loans
and receivables 78 5 26 9 - 118
Provisions for liabilities and (4) 1 - (2) (10) (15)
commitments
Amounts (written back)/written off
financial investments available (1) 2 - - - 1
for sale
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
Loans and receivables to customers 60,018 20,808 21,606 4,573 110 107,115
Total assets 66,200 54,093 24,580 7,195 6,458 158,526
Customer accounts 40,841 14,285 13,546 6,203 - 74,875
Total liabilities(2) 46,253 71,666 14,555 6,939 9,201 148,614
Total risk weighted assets 53,307 39,764 22,334 5,698 1,931 123,034
Ordinary shareholders' equity(2) 3,513 2,620 1,472 376 127 8,108
Capital expenditure 104 24 15 24 64 231
Notes to the accounts
1 Segmental information Half-year 30 June 2007
(continued) United
Republic of United States of Rest of
Ireland Kingdom Poland America the world Total
EUR m EUR m EUR m EUR m EUR m EUR m
Operations by geographical segments(3)
Net interest income 1,037 440 155 27 8 1,667
Other income 461 38 217 28 6 750
Total operating income 1,498 478 372 55 14 2,417
Administrative expenses 752 223 167 19 6 1,167
Amortisation/impairment of
intangible assets 18 - 10 - - 28
Depreciation of property, plant
and equipment 28 6 8 - - 42
Total operating expenses 798 229 185 19 6 1,237
Operating profit before 700 249 187 36 8 1,180
provisions
Provisions for impairment of
loans
and receivables 47 (16) (6) - - 25
Provisions for liabilities and 6 (2) - - - 4
commitments
Amounts written off financial investments
available for sale 1 - - - - 1
Operating profit 646 267 193 36 8 1,150
Associated undertakings 7 - - 74 - 81
Profit on disposal of property 41 - - - - 41
Construction contract income 44 - - - - 44
Profit on disposal of businesses - 2 - - - 2
Profit before taxation -
continuing operations 738 269 193 110 8 1,318
Balance sheet
Loans and receivables to 80,350 31,255 5,457 2,433 722 120,217
customers
Total assets 124,227 37,052 9,771 5,404 762 177,216
Customer accounts 48,331 22,736 6,612 1,344 - 79,023
Total liabilities(2) 119,170 34,503 8,363 4,388 98 166,522
Ordinary shareholders' equity(2) 5,576 2,241 505 515 52 8,889
Capital expenditure 77 5 8 - 2 92
Notes to the accounts
1 Segmental information Half-year 30 June 2006
(continued) 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 891 381 126 26 5 1,429
Other income 310 113 188 31 5 647
Total operating income 1,201 494 314 57 10 2,076
Administrative expenses 642 213 137 21 5 1,018
Amortisation/impairment of
intangible assets 15 1 11 - - 27
Depreciation of property, plant
and equipment 25 6 12 - - 43
Total operating expenses 682 220 160 21 5 1,088
Operating profit before 519 274 154 36 5 988
provisions
Provisions for impairment of
loans
and receivables 28 (19) 4 (1) - 12
Provisions for liabilities and commitments - - - - - -
Amounts written off financial investments
available for sale - - - - - -
Operating profit 491 293 150 37 5 976
Associated undertakings 6 - 2 80 - 88
Profit on disposal of property 90 - - - - 90
Construction contract income 34 - - - - 34
Profit on disposal of businesses 26 - - - - 26
Profit before taxation -
continuing operations 647 293 152 117 5 1,214
Discontinued operation -
net of taxation 132 - - - - 132
Balance sheet
Loans and receivables to 63,329 25,538 3,804 2,557 434 95,662
customers
Total assets 99,707 30,907 7,721 5,299 439 144,073
Customer accounts 43,091 16,879 5,218 1,372 4 66,564
Total liabilities(2) 97,003 26,369 6,798 4,741 16 134,927
Ordinary shareholders' equity(2) 4,593 1,909 338 538 35 7,413
Capital expenditure 82 6 5 1 - 94
Notes to the accounts
1 Segmental information Year 31 December 2006
(continued) Republic of United Poland United Rest of Total
Kingdom States of the world
Ireland 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/impairment of
intangible assets 32 1 20 - - 53
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 1,077 571 278 72 14 2,012
provisions
Provisions for impairment of
loans
and receivables 70 41 9 - (2) 118
Provisions for liabilities and (14) 1 (2) - - (15)
commitments
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
Loans and receivables to 70,886 28,546 4,578 2,454 651 107,115
customers
Total assets 109,272 33,908 9,109 5,578 659 158,526
Customer accounts 47,559 20,072 6,214 1,026 4 74,875
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
(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 Interest and similar income Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Interest on loans and receivables to banks 243 140 307
Interest on loans and receivables to customers 3,449 2,460 5,444
Interest on trading portfolio financial assets 180 181 380
Interest on financial investments available for sale 482 349 797
4,354 3,130 6,928
3 Interest expense and similar charges Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Interest on deposits by banks 741 495 1,163
Interest on customer accounts 1,082 692 1,597
Interest on debt securities in issue 739 424 955
Interest on subordinated liabilities and other capital 125 90 214
instruments
2,687 1,701 3,929
4 Dividend income
The dividend income relates to income from equity shares held as financial investments available for sale.
5 Net trading income Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Foreign exchange contracts 37 61 101
Profits less losses from trading portfolio financial assets 40 (4) 60
Interest rate contracts (11) 18 4
Equity index contracts 9 4 8
75 79 173
6 Other operating income Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Profit/(loss) on disposal of available for sale debt 3 1 (4)
securities 1 7 15
Profit on disposal of available for sale equity shares 30 19 4
Miscellaneous operating income
34 27 57
Notes to the accounts
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
7 Administrative expenses EUR m EUR m EUR m
Personnel expenses
Wages & salaries 579 501 1,074
Share-based payment schemes 27 23 57
Retirement benefits 81 77 144
Social security costs 71 60 119
Other personnel expenses 41 38 108
799 699 1,502
General and administrative expenses 368 319 672
1,167 1,018 2,174
8 Profit on disposal of property
2007
The sale of 16 branches as part of the sale and leaseback programme announced in
2006 gave rise to a profit on disposal of EUR 41m.
The leases qualify as operating leases and the profit arising on these
transactions is included in profit on disposal of property.
2006
The following table sets out the profit recognised on the sale of properties in
2006:
Profit
Recognised
EUR m
Bankcentre Headquarters Building - Blocks A to D 167
Bankcentre Headquarters Building - Blocks E to H 89
Donnybrook House 29
11 Branches 73
358
Blocks E to H of the Bankcentre Headquarters Building were disposed of in the
first half of the year while the remaining disposals took place in the second
half of the year. The profit on sale of additional properties which are not part
of the sale and leaseback programme amounted to EUR 1m and EUR 7m respectively
for the half year ended 30 June 2006 and year ended 31 December 2006.
Half-year Half-year Year
30 June 30 June 31 December
9 Construction contract income 2007 2006 2007
EUR m EUR m EUR m
Construction revenue 82 62 171
Construction expense (38) (28) (75)
44 34 96
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 30 June 2007,
EUR 278.2m was due from the consortium in respect of construction contracts in
progress. This contract is due for completion in the last quarter of 2007.
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.
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'.
Notes to the accounts
10 Profit on disposal of businesses
2007
The profit on disposal of business in 2007 of EUR 2m (tax charge of EUR 0.6m)
relates to the final payment arising from the sale of the Govett business in
2003.
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 EUR nil); AIB's 50% stake in
AIB/ BNY Securities Services (Ireland) Ltd of EUR 51m (tax charge C nil);
Ketchum Canada Inc. of EUR 1m (tax charge EUR nil), and the accrual of EUR 1m
(tax charge EUR0.3m) arising from the sale of the Govett business in 2003. Of
the above profits, EUR 26m regarding the sale of Ark Life occurred in the first
half of the year, while the remaining profits occurred in the second half of the
year.
11 Income tax expense - continuing operations Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Allied Irish Banks, p.l.c. and subsidiaries
Corporation tax in Republic of Ireland 92
Current tax on income for the period (3) 120 252
Adjustments in respect of prior periods - 3
89 120 255
Double taxation relief (16) (14) (23)
73 106 232
Foreign tax
Current tax on income for the period 136 139 220
Adjustments in respect of prior periods 1 (6) (14)
137 133 206
210 239 438
Deferred taxation
Origination and reversal of temporary differences 28 (18) (5)
Other 1 - -
29 (18) (5)
Total income tax expense - continuing operations 239 221 433
Effective income tax rate - continuing operations 18.1% 18.2% 16.6%
Notes to the accounts
12 Earnings per EUR 0.32 ordinary share Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
(a) Basic 1,041 1,089 2,185
Profit attributable to equity holders of the parent (38) (38) (38)
Distributions to other equity holders
Profit attributable to ordinary shareholders 1,003 1,051 2,147
Weighted average number of shares in issue during the period 874.5m 868.0m 870.1m
Earnings per share - basic EUR 114.7c EUR 121.2c EUR 246.8c
(b) Diluted Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Profit attributable to ordinary shareholders (note 12(a)) 1,003 1,051 2,147
Dilutive impact of potential ordinary shares in subsidiary and - (1) (2)
associated companies
Adjusted profit attributable to ordinary shareholders 1,003 1,050 2,145
Number of shares (millions)
Weighted average number of shares in issue during the period 874.5 868.0 870.1
Dilutive effect of options outstanding 6.5 6.6 7.0
Potential weighted average number of shares 881.0 874.6 877.1
Earnings per share - diluted EUR 113.8c EUR 120.1c EUR 244.6c
(c) Continuing operations - basic
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Profit attributable to ordinary shareholders (note 12(a)) 1,003 1,051 2,147
Discontinued operations - 132 116
Profit attributable to ordinary shareholders - continuing operations 1,003 919 2,031
Weighted average number of shares in issue during the period 874.5m 868.0m 870.1m
Earnings per share - basic EUR 114.7c EUR 105.9c EUR 233.5c
(d) Continuing operations - diluted Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Profit attributable to ordinary shareholders - continuing operations 1,003 919 2,031
(note 12(c))
- (1) (2)
Dilutive impact of potential ordinary shares in subsidiary and
associated companies
Adjusted profit attributable to ordinary shareholders - continuing 1,003 918 2,029
operations
Number of shares (millions)
Weighted average number of shares in issue during the period 874.5 868.0 870.1
Dilutive effect of options outstanding 6.5 6.6 7.0
Potential weighted average number of shares 881.0 874.6 877.1
Earnings per share - diluted EUR 113.8c EUR 105.0c EUR 231.4c
Notes to the accounts
Profit attributable Earnings per share
Half-year Half year Year Half-year Half-year Year
30 June 30 June 31 December 30 June 30 June 31 December
2007 2006 2006 2007 2006 2006
13 Adjusted earnings per share EUR m EUR m EUR m cent cent cent
(a) Basic earnings per share
As reported (note 12(a)) 1,003 1,051 2,147 114.7 121.2 246.8
Adjustments:
Construction contract income (38) (29) (82) (4.3) (3.4) (9.4)
Hedge volatility(1) 21 15 4 2.4 1.7 0.5
Profit on disposal of property (35) (66) (290) (4.0) (7.6) (33.4)
Profit on disposal of businesses* - (154) (189) - (17.7) (21.7)
951 817 1,590 108.8 94.2 182.8
Profit attributable Earnings per share
Half-year Half year Year Half-year Half-year Year
30 June 30 June 31 December 30 June 30 June 31 December
2007 2006 2006 2007 2006 2006
EUR m EUR m EUR m cent cent cent
Diluted earnings per share
As reported (note 12(b)) 1,003 1,050 2,145 113.8 120.1 244.6
Adjustments:
Construction contract income (38) (29) (82) (4.3) (3.3) (9.3)
Hedge volatility(1) 21 15 4 2.4 1.7 0.5
Profit on disposal of property (35) (66) (290) (4.0) (7.6) (33.2)
Profit on disposal of businesses* - (154) (189) - (17.6) (21.5)
951 816 1,588 107.9 93.3 181.1
* The 30 June 2006 and 31 December 2006 figures included EUR 128m and EUR 112m
respectively in relation to Ark Life which is included within discontinued
activities.
Profit attributable Earnings per share
Half-year Half year Year Half-year Half-year Year
30 June 30 June 31 December 30 June 30 June 31 December
2007 2006 2006 2007 2006 2006
EUR m EUR m EUR m cent cent cent
(b) Basic earnings per share
- continuing operations
As reported (note 12(c)) 1,003 919 2,031 114.7 105.9 233.5
Adjustments:
Construction contract income (38) (29) (82) (4.3) (3.4) (9.4)
Hedge volatility(1) 21 15 4 2.4 1.7 0.5
Profit on disposal of property (35) (66) (290) (4.0) (7.6) (33.4)
Profit on disposal of businesses - (26) (77) - (2.9) (8.8)
951 813 1,586 108.8 93.7 182.4
Profit attributable Earnings per share
Half-year Half year Year Half-year Half-year Year
30 June 30 June 31 December 30 June 30 June 31 December
2007 2006 2006 2007 2006 2006
EUR m EUR m EUR m cent cent cent
Diluted earnings per share
- continuing operations
As reported (note 12(d)) 1,003 918 2,029 113.8 105.0 231.4
Adjustments:
Construction contract income (38) (29) (82) (4.3) (3.3) (9.3)
Hedge volatility(1) 21 15 4 2.4 1.7 0.5
Profit on disposal of property (35) (66) (290) (4.0) (7.6) (33.2)
Profit on disposal of businesses - (26) (77) - (2.9) (8.7)
951 812 1,584 107.9 92.9 180.7
(1) Included in net trading income.
Notes to the accounts
13 Adjusted earnings per share (continued)
Although not required under IFRS, adjusted earnings per share is presented to
help understand the underlying performance of the Group. The adjustments in 2007
and 2006 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 8). The adjustments listed on the previous page are
shown net of taxation.
30 June 31 December 30 June
2007 2006 2006
14 Trading portfolio financial assets EUR m EUR m EUR m
Loans and receivables to banks 2 3 3
Loans and receivables to customers 17 25 18
Debt securities:
Government securities 151 274 717
Other public sector securities - - 39
Other debt securities(1) 9,158 8,527 9,913
9,309 8,801 10,669
Equity shares 142 124 130
9,470 8,953 10,820
(1) Other debt securities include EUR 4,971m (December 2006: EUR 4,832m) of bank
eurobonds and EUR 3,450m (December 2006: EUR 3,039m) of corporate collateralised
mortgage obligations.
15 Loans and receivables to customers 30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
Loans and receivables 115,966 103,651 92,306
Amounts receivable under finance leases and hire purchase contracts 3,397 3,003 2,923
Unquoted securities 1,565 1,166 1,073
Provisions for impairment of loans and receivables (note 16) (711) (705) (640)
120,217 107,115 95,662
16 Provisions for impairment of loans and receivables 30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
At beginning of period 707 676 676
Exchange translation adjustments (1) (1) (14)
Charge against income statement 25 118 12
Amounts written off (25) (96) (36)
Recoveries of amounts written off in previous years 7 10 4
At end of period 713 707 642
At end of period:
Specific 497 518 468
IBNR 216 189 174
713 707 642
Amounts include:
Loans and receivables to banks 2 2 2
Loans and receivables to customers (note 15) 711 705 640
713 707 642
Notes to the accounts
17 Risk elements in lending
Management has set out below the amount of loans, without giving effect to
available security and before deduction of provisions, classified as (a)
Impaired loans and (b) Accruing loans which are contractually past due 90 days
or more as to principal or interest:
30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
Impaired loans(1) 403 396 332
Republic of Ireland 273 304 198
United Kingdom 219 232 248
Poland - 1 9
Rest of world 895 933 787
Accruing loans which are contractually past due 90 days
or more as to principal or interest(2)
Republic of Ireland 177 142 158
United Kingdom 39 73 109
216 215 267
(1) Total interest income that would have been recorded during the half-year
ended 30 June 2007, had interest on gross impaired loans been included in
income, amounted to EUR 12m for Republic of Ireland (31 December 2006:
EUR18m; 30 June 2006: EUR 9m), EUR 8m for United Kingdom (31 December 2006:
EUR 12m; 30 June 2006:EUR 4m) and EUR 8m for Poland (31 December 2006:
EUR 17m; 30 June 2006: EUR 9m). Interest on impaired loans (net of
provisions) included in income for the half-year ended 30 June 2007
totalled EUR 10m (31 December 2006: EUR 21m; 30 June 2006: EUR 10m).
(2) Overdrafts generally have no fixed repayment schedule and consequently are
not included in this category.
30 June 31 December 30 June
2007 2006 2006
18 Financial investments available for sale EUR m EUR m EUR m
Debt securities:
Government securities 6,968 7,490 8,273
Other public sector securities 1,909 1,855 915
Bank and building society certificates of deposit 2,138 1,591 1,232
Bank securities 8,822 7,008 6,465
Other debt securities 2,064 1,428 1,607
21,901 19,372 18,492
Equity shares 332 293 172
22,233 19,665 18,664
Notes to the accounts
19 Customer accounts 30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
Current accounts 26,611 25,151 22,512
Demand deposits 9,843 8,924 8,372
Time deposits 33,536 33,831 29,764
69,990 67,906 60,648
Securities sold under agreements to repurchase 1 1 3
Other short-term borrowings 9,032 6,968 5,913
9,033 6,969 5,916
79,023 74,875 66,564
Contract amount
20 Memorandum items: contingent liabilities and commitments 30 June 31 December 30 June
2007 2006 2006
EUR m EUR m EUR m
Contingent liabilities: :
Guarantees and assets pledged as collateral security
Guarantees and irrevocable letters of credit 6,008 5,902 6,526
Other contingent liabilities 1,267 1,191 1,090
7,275 7,093 7,616
Commitments:
Other commitments 24,190 24,056 22,380
31,465 31,149 29,996
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.
21 Subordinated liabilities and other capital instruments
In March 2007 and June 2007, Japanese Yen ('JPY') 15bn and JPY 5bn Callable
Subordinated Step-up Fixed/Floating Rate Notes due March 2042 were issued
respectively under the EUR 30bn Euro Medium Term Note Programme. Interest is
payable semi-annually at a rate of 2.75% per annum, up to 8 March 2037 and
thereafter at a rate of 0.78% per annum above 6 month JPY-LIBOR-BBA, payable
semi-annually. Both the JPY 15bn and JPY 5bn Callable Subordinated Step-up Fixed
/Floating Rate Notes are redeemable in whole but not in part on any interest
payment date falling on or after 8 March 2037.
22 Derivative financial instruments
The following table presents the notional principal amount and fair value of
interest rate, exchange rate, equity and credit derivative contracts for 2007
and 2006
30 June 2007 31 December 2006
Notional Fair values Notional Fair values
Amount Assets Liabilities Amount Assets Liabilities
EUR m EUR m EUR m EUR m EUR m EUR m
Interest rate contracts 311,375 2,341 2,464 217,435 2,253 1,922
Exchange rate contracts 16,431 171 187 20,226 199 186
Equity contracts 6,694 511 499 6,485 438 423
Credit derivatives 780 - 1 570 - -
Total 335,280 3,023 3,151 244,716 2,890 2,531
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
22 Derivative financial instruments (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.
23 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 half year ended 30 June
2007 and year ended 31 December 2006. 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.
Half-year ended 30 June 2007 Year ended 31 December 2006
Assets Average Interest Average Average Interest Average
balance Rate balance Rate
EUR m EUR m EUR m EUR m EUR m EUR m
Loans and receivables to banks
Domestic offices 8,147 192 4.8 4,930 191 3.9
Foreign offices 1,830 51 5.6 2,307 116 5.1
Loans and receivables to customers
Domestic offices 74,931 2,139 5.8 62,641 3,162 5.1
Foreign offices 38,626 1,331 6.9 33,133 2,177 6.6
Trading portfolio financial assets
Domestic offices 7,775 170 4.4 9,205 349 3.8
Foreign offices 1,093 10 1.8 1,316 31 2.3
Financial investments available for
sale
Domestic offices 15,353 359 4.7 14,671 588 4.0
Foreign offices 4,983 123 5.0 4,339 209 4.8
Total interest earning assets
Domestic offices 106,206 2,860 5.4 91,447 4,290 4.7
Foreign offices 46,532 1,515 6.6 41,095 2,533 6.2
Net interest on swaps (23) 85
Total average interest earning 152,738 4,352 5.7 132,542 6,908 5.2
assets
Non-interest earning assets 9,762 8,827
Total average assets 162,500 4,352 5.4 141,369 6,908 4.9
Percentage of assets applicable to
foreign activities 31.1 31.5
Notes to the accounts
23 Average balance sheets and interest rates (continued)
Half-year ended 30 June 2007 Year ended 31 December 2006
Liabilities and shareholders' equity Average Interest Average Average Interest Average
balance Rate balance Rate
EUR m EUR m EUR m EUR m EUR m EUR m
Due to banks
Domestic offices 29,113 683 4.7 28,375 1,067 3.8
Foreign offices 2,414 58 4.8 2,098 96 4.6
Due to customers
Domestic offices 37,352 540 2.9 36,101 809 2.2
Foreign offices 26,048 540 4.2 21,282 768 3.6
Other debt issued
Domestic offices 22,473 453 4.1 13,615 456 3.4
Foreign offices 10,602 286 5.4 10,144 499 4.9
Subordinated liabilities
Domestic offices 3,776 96 5.2 3,542 182 5.2
Foreign offices 1,013 29 5.8 551 32 5.8
Total interest earning liabilities
Domestic offices 92,714 1,772 3.9 81,633 2,514 3.1
Foreign offices 40,077 913 4.6 34,075 1,395 4.1
Total average interest earning 132,791 2,685 4.1 115,708 3,909 3.4
liabilities
Non interest earning liabilities 21,208 18,263
Total liabilities 153,999 2,685 3.5 133,971 3,909 2.9
Ordinary shareholders' equity 8,501 7,398
Total average liabilities and
shareholders' equity 162,500 2,685 3.3 141,369 3,909 2.8
Percentage of liabilities applicable to
foreign operations 30.9 30.2
24 Post-balance sheet events
On 31 July 2007, subsequent to the interim balance sheet date, an interim
dividend of EUR 27.8 cent per share was declared by the Board of Directors for
payment on 25 September 2007. The interim dividend amounts to EUR 245 million
and has not been recorded as a liability in the balance sheet.
25 Approval of accounts
The accounts were approved by the Board of Directors on 31 July 2007.
Financial and other information
Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
Operating ratios 51.2% 52.4% 53.5%
Operating expenses/operating income 31.0% 31.2% 30.7%
Other income/operating income
Net interest margin:
Group 2.20% 2.29% 2.26%
Domestic 2.02% 2.04% 2.04%
Foreign 2.61% 2.84% 2.77%
Rates of exchange
EUR/US $
Closing 1.3505 1.2713 1.3170
Average 1.3317 1.2287 1.2566
EUR/Stg
Closing 0.6740 0.6921 0.6715
Average 0.6750 0.6883 0.6822
EUR/PLN
Closing 3.7677 4.0546 3.8310
Average 3.8439 3.8991 3.8965
Capital adequacy information Half-year Half-year Year
30 June 30 June 31 December
2007 2006 2006
EUR m EUR m EUR m
Risk weighted assets
Banking book:
On balance sheet 115,061 89,394 101,285
Off-balance sheet 12,451 13,203 13,033
127,512 102,597 114,318
Trading book:
Market risks 7,098 8,000 8,172
Counterparty and settlement risks 686 470 544
7,784 8,470 8,716
Total risk weighted assets 135,296 111,067 123,034
Capital 10,264 8,913 10,116
Tier 1
Tier 2 3,966 3,815 3,838
14,230 12,728 13,954
Supervisory deductions 173 349 310
Total 14,057 12,379 13,644
Capital ratios
Tier 1 7.6% 8.0% 8.2%
Total 10.4% 11.1% 11.1%
The interim dividend has been deducted in arriving at the capital ratios for
June 2007 and June 2006. The final dividend was not taken into account in the
calculation of the Tier 1 and Total capital ratios at 31 December 2006. 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.
Changes to supervisory rules during 2007 also require certain supervisory
deductions to be 50% from Tier 1 and 50% from Tier 2. Applying these principles
to previous periods would have reduced the reported Tier 1 capital ratio by
0.1%. The total capital ratio is not impacted by this change.
Independent review report of KPMG to Allied Irish Banks, p.l.c.
Introduction
We have been engaged by the company to review the financial information for the
six months ended 30 June 2007, which comprises the statement of accounting
policies, consolidated interim income statement, consolidated interim balance
sheet, condensed interim statement of cash flows, consolidated interim statement
of recognised income and expense, condensed consolidated interim reconciliation
of movements in shareholders' equity and the related notes on pages 22 to 37. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Irish Stock Exchange and the UK Financial Services Authority. Our
review has been undertaken so that we might state to the company those matters
we are required to state to it in this review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
review report, or for the conclusions we have reached.
Directors' responsibilities
This interim report, including the financial information contained therein, is
the responsibility of and has been approved by the
directors. The directors are responsible for preparing this interim report in
accordance with the Listing Rules which require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual financial statements except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in Ireland and the United Kingdom. A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
KPMG
Chartered Accountants
Dublin
31 July 2007
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 01 August, 2007 By: ___________________
John O'Donnell
Group Director, Finance,
Risk and Enterprise
Technology
Allied Irish Banks, p.l.c.