UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the date of 11 May, 2009
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.
INTERIM
MANAGEMENT STATEMENT
In advance of its Annual General Meeting on 13th May,
Allied Irish Banks, p.l.c. (“AIB”) [NYSE:AIB]
is issuing the following update on business and key performance trends. Please
note that all trends in the update are in constant currency terms.
The economic environment prevailing at the time of our 2008 results announcement
has continued to deteriorate in the intervening period.
Key features of our overall performance in the year to date are:
-
A resilient operating profit before bad debt provisions
-
Increased provisions as asset quality continues to weaken
-
Continued focus on funding our business in markets that remain dislocated
In the
US, M&T continues to outperform its peers and achieved net income of $64m in the
first quarter of 2009 despite increasing its impairment and provision charges.
Profit before bad debt provisions has been
good
in the year to date and up on the corresponding period in 2008.
However, this outcome benefited from base period effects, most no
tably
higher
costs in the early part of 2008.
The
outcome
reflects the very strong
performance of Capital Markets and Global Treasury in particular, driven by
interest rate
management activities.
This performance is continuing and will be a positive factor for the full
year.
Performance in o
ur other operating divisions is in line with our expectations
and therefore
down relative to the same period last year. For the group overall, both
costs and
income
are down in the year to date. Costs are
being
very actively
managed and are
down by a higher percentage rate than income at this point.
Downward
pressure on income is
expected as the year progresses due to
a
continuation of poor economic conditions and dislocated funding markets.
Demand for credit remains weak and loan balances remain broadly in line with the
end of last year in each division. In
our
Republic
of
Ireland
business
there has been a recent pick up in home mortgage applications but no material
increase as yet in drawdowns. This increased activity reflects an attractive
customer offering and very weak competitor presence in the market
Customer deposits have
stabilised
in recent weeks following some outflows earlier in the year.
In the current recessionary conditions balances in current (money transmission)
accounts have reduced. In
Poland, our deposits are broadly stable and continue to exceed our loans.
Customer resources,
which include deposit and current accounts,
are down by around 10%
in the first four months of this year. This
mainly reflects
seasonal factors and outflows from our foreign institutional deposit base
earlier in the year and
a reduction
from what was a very strong position at the end of 2008.
Customer resources
were up c. 9% year on year at the end of the first quarter.
In highly competitive markets and a low interest rate environment, customer deposit
margins continue to contract. The elevated price of wholesale market funding is
also having an adverse effect on
the net interest
margin. Though negative effects are being partly offset by better margins on our
lending, overall the net interest margin is expected to reduce this year.
Lower fees from banking activity, investment banking and asset management and
the cost of the Government Guarantee Scheme
are expected to adversely affect
non-interest income for the full year.
Cost management is a key priority in the current difficult revenue environment. All
expense categories across our business are being closely monitored and controlled.
The successful drive to reduce costs in 2008 is continuing; costs are
significantly down in the first quarter of this year relative to the corresponding
period in 2008 and we are also targeting a reduction for the full year 2009.
At our 2008 results announcement on 2
nd
March we outlined a base case and a stress scenario.
The bad debt charge in the first quarter of 2009 of close to €800m was a
little ahead of the upper end of that base case.
Conditions across our markets have worsened and
there
will be further pressure on the bad debt provision charge for full year 2009.
All commentators broadly concur on the significant downward revisions to
expectations for
Irish economic activity and employment that have issued since the beginning of
March. Therefore our key
macro
assumptions
for
Ireland
are now
more negative than in the stress scenario
presented at
our results announcement.
The pace of change is increasing loan impairment and bad debt charges. This
continuing factor means that the previous stress scenario charge is likely to be
exceeded and we now expect
our bad debt charge
for 2009 to
be around
€4.3 bn, c. 325 basis points of average loans.
Group criticised loans (watch, vulnerable and impaired) have increased in the first
quarter to c. €24.3 bn, an increase of close to €
9
bn.
Republic
of
Ireland
division
represents over 70% of the increase and c. 75% of the group bad debt charge.
Increases continue to be heavily influenced by downgrades in the property, building
and construction sector.
When established and implemented, the National Asset Management Agency (NAMA) will
seek to address problems in this sector.
Informed by the deteriorating environment and evidenced by the increase in
criticised loans,
we are aggressively recognising impairment
as it arises.
I
ncreases in the levels of criticised loans in
other
sectors
are
now more evident
in the
Republic
of
Ireland.
Mortgage arrears stand at c. 2.0% of total mortgages at the end of March up from c. 1.5% in December 2008 and
impaired loans have increased to €234m. Pressure on employment is a key factor
in these increases although the levels of arrears and impairment remain well below
available industry average comparatives.
In our
UK
division, growth in impaired loans
also
primarily relates to the property, building & construction sector. That sector
accounted for close to 90% of the bad debt charge for the first quarter. There is
also deterioration in other portfolios in tough economic conditions with increasing
pressure evident in the leisure sector.
In Capital Markets there
has been some negative grade migration across portfolios though there
are no material adverse trends in any
particular sector or geography.
Our Treasury portfolios
continue to be
subject to regular and intensive review
and we remain satisfied
that they will redeem at par.
There
is
some
deterioration
evident in our Polish loan book, most notably in the property
and consumer cash loan
portfolios.
There is little current activity in the property market, as is the case in other
countries, but the Polish market fundamentals remain relatively strong.
Our capital remains well in excess of regulatory requirements. Our core tier
one capital ratio was c. 5.5% at the end of March and will be strengthened in
the event that the €3.5 bn Government recapitalisation proposal is
approved at the Extraordinary General Meeting on 13th May. We have
previously announced our aim to further increase our core tier one capital by
€1.5 bn and will advise progress on this initiative as it takes place.
The creation of NAMA will be a key event for the bank and the industry.
We support this Government initiative and will work with the Government to
expedite its implementation.
It is premature at this
point
to estimate its effect on our capital.
Despite challenging wholesale funding market conditions, w
e continue to source funds across currencies, geographies and products through a
range of programmes. Our level of qualifying liquid assets
/ contingent funding
continues to be above the regulatory requirement. We continue to develop contingent
collateral and liquidity facilities to further support our funding agenda. Market
conditions improved during April and we successfully increased our existing
Government guaranteed issue maturing in September 2010 by €1 bn to €3 bn.
There was good demand for the issue and overseas investors subscribed for 78% of
the additional amount.
We have also recently seen very good demand for private placements.
Over time, we continue to target a reducing loan to deposit ratio although the already referred to reduction in customer resources since the end of 2008 h
as
subsequently
increased that
ratio.
Further details of our performance and outlook will be provided at our
2009 Interim Results
announcement on
5
th
August.
For further information please contact:
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General Manager, Group Finance
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Head of Corporate Relations
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Tel: +353-1-6600311 ext. 12162
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Tel: +353-1-6600311 ext. 13894
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Forward-looking statements
This document contains certain forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations and business of the Group and certain of
the plans and objectives of the Group. In particular, certain statements with
regard to management objectives, trends in results of operations, margins, risk
management, competition and the impact of changes in Financial Reporting Standards
are forward-looking in nature. These forward-looking statements can be identified
by the fact that they do not relate only to historical or current facts. Forward
looking statements sometimes use words such as 'aim', 'anticipate', 'target',
'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of
similar meaning. Examples of forward-looking statements include among others,
statements regarding the Group's future financial position, income growth, business
strategy, projected costs, capital position, estimates of capital expenditures, and
plans and objectives for future operations. Because such statements are inherently
subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking information. By
their nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future. There
are a number of additional factors that could cause actual results and developments
to differ materially from those expressed or implied. These factors include, but
are not limited to, changes in economic conditions globally and in the regions in
which the Group conducts its business, changes in fiscal or other policies adopted
by various governments and regulatory authorities, the effects of competition in
the geographic and business areas in which the Group conducts its operations, the
ability to increase market share and control expenses, the effects of changes in
taxation or accounting standards and practices, acquisitions, future exchange and
interest rates and the success of the Group in managing these events. Any
forward-looking statements made by or on behalf of the Group speak only as of the
date they are made.
The Group cautions that the foregoing list of important factors is not exhaustive.
Investors and others should carefully consider the foregoing factors and other
uncertainties and events when making an investment decision based on any
forward-looking statement. In light of these risks, uncertainties and assumptions,
the forward-looking events discussed in this Report may not occur. The Group does
not undertake to release publicly any revision to these forward-looking statements
to reflect events, circumstances or unanticipated events occurring after the date
hereof.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorised.
ALLIED IRISH BANKS, p.l.c.
(Registrant)
Date 11 May, 2009
By: ___________________
John O'Donnell
Group Director, Finance,
Risk
and Enterprise Technology
Allied Irish Banks, p.l.c.