Allied Irish Banks, p.l.c. Reports Preliminary Results 31 December 2000.Business Editors DUBLIN, Ireland--(BUSINESS WIRE)--Feb. 21, 2000 Highlights and Chief Executive's summary (1) Adjusted earnings per share EUR 104.0c - up 15% Basic earnings per share EUR 89.0c (2) Operating profit before provisions up 14% (2) Profit before taxationE1,251m, up 10.5% (2)E546m (44%) of profit made in Republic of Ireland, E 705m (56%) in rest of world AIB AIB - Abteilung Immobilien und Betrieb (German: department of real estates and enterprise) AIB - Academy of International Business AIB - Accident Investigation Board AIB - Accountant in Bankruptcy (UK) AIB - Acquisition Interface Bus AIB - Action Item Browser AIB - Add-In Board AIB - Admiralty Interview Board AIB - Air Intelligence Brief AIB - Alabama Industries for the Blind AIB - Allied Irish Bank AIB - Alpha-Aminoisobutyric Acid Bank profit up 19% Poland division profit up 40% Total dividend up 15% (1) Before goodwill amortisation and exceptional item Exceptional Item Charges incurred that must be noted on a company's balance sheet, in accordance with GAAP principles. Even though they are considered to be part of ordinary business charges, exceptional items must be disclosed due to their sheer size or frequency.Notes: Don't confuse exceptional items with extraordinary items: the latter are not part of a company's ordinary business dealings.(2) Before exceptional item I am pleased to report that AIB's performance in 2000 represented the ninth successive year of real profit growth. We have consistently increased shareholder value while growing the balance sheet to E 80 billion during this period. 2000 was an outstanding year with buoyant revenues, higher productivity and robust asset quality. I want to take this opportunity to examine the factors in AIB's continuing success. We are the market-leading banking and financial services company in our home market. This position has been developed successfully while AIB has become a truly international organisation. We remain committed to this policy of portfolio diversification and the enrichment of our existing franchises. AIB has more than five million retail, commercial and corporate customers. We believe in offering extensive choice in the ways our customers can access the group's wide range of products and services. In 2000, technology markets were volatile yet the opportunities offered by the network economy remain. AIB's integrated multi-channel distribution strategy is proving successful - we are winning business through our on-line channels. We are also seizing the opportunities presented by the new technologies in e-enabling our internal processes to make them more efficient. The challenge is to ensure the correct balance is struck between cost-efficiency and the need to invest for the future. Service differentiation is crucial. AIB knows this can best be achieved through the development of professional, expert and experienced staff working to a common set of values. This is the last time I will report as AIB Group Chief Executive. The pace of change since I became CEO in 1994 has been astounding, especially in terms of technological advances and the competitiveness of our markets. Nevertheless, I am proud to say that return on equity has averaged 22.2%(3) over those seven years while compound growth in adjusted earnings per share was 17.3% and compound growth in dividend per share was 17.7%. Our success has been built on the commitment of our 31,000 employees worldwide and I want to record my gratitude to them for their hard work. I believe AIB is well positioned for the future. I wish my successor Michael Buckley well and I have every confidence in the continuing ability of our company to deliver real shareholder value. --Tom Mulcahy,Group Chief Executive, 21 February 2001 (3) Before exceptional items Allied Irish Banks, p.l.c. (AIB Group) today announced its results for the year ended 31 December 2000. The results include an exceptional charge of E 113 million in respect of the full and final settlement reached with the Irish Revenue Commissioners in relation to deposit interest retention tax ('DIRT') including interest and penalties for the period April 1986 to April 1999. Earnings per share, excluding the exceptional item and goodwill amortisation, increased by 15% to EUR 104.0c. Profit attributable to ordinary shareholders amounted to E 762 million and basic earnings per share was EUR 89.0c. Dividend The Board is recommending a final dividend payable on 26 April 2001 of EUR 25.25c per share to shareholders on the company's register of members at the close of business on 2 March 2001. The final dividend, together with the interim dividend of EUR 13.50c per share, amounts to a total dividend of EUR 38.75c per share, an increase of 15% on 2000.
Financial highlights
For the year ended 31 December 2000
2000 1999 1998
E m E m E m
Results
Total operating income 3,326(1) 2,822 2,589
Group prot before taxation 1,251(1) 1,132 1,049
Prot attributable 762 761 633
Prot retained 357 428 362
Per E 0.32 ordinary share
Earnings - basic 89.0c 89.5c 74.7c
Earnings - adjusted (note 13) 104.0c 90.5c 81.1c
Earnings - diluted 88.1c 88.0c 73.7c
Dividend 38.75c 33.70c 28.06c
Tax credit on dividend(2) - - 3.12c
Dividend cover - times 2.3 2.6 2.7
Net assets 492c 424c 331c
Performance measures
Return on average total assets 1.25%(1) 1.33% 1.39%(3)
Return on average ordinary shareholders'
equity 21.6%(1) 23.5% 27.3%(3)
Balance sheet
Total assets 79,688 67,070 53,720
Shareholders' funds: equity
interests 4,296 3,651 2,829
Loans etc 50,239 43,127 35,496
Deposits etc 65,210 55,241 44,840
Capital ratios
Tier 1 capital 6.3% 6.4% 7.5%
Total capital 10.8% 11.3% 11.1%
(1) Adjusted to exclude the impact of the deposit interest
retention tax settlement.
(2) For dividends payable after 5 April 1999 the tax credit is
zero.
(3) Adjusted to exclude the impact of the phased reduction in
Irish corporation tax rates on deferred tax balances.
Consolidated profit and loss account
for the year ended 31 December 2000
2000 1999 1998
Notes E m E m E m
Interest receivable:
Interest receivable and similar
income arising from debt securities
and other fixed income securities 1,140 833 772
Other interest receivable and similar
income 3 3,987 3,009 3,194
Less: interest payable 4 (3,105) (2,072) (2,357)
Deposit interest retention tax 5 (113) - -
Net interest income 1,909 1,770 1,609
Other income 6 1,304 1,052 980
Total operating income 3,213 2,822 2,589
Before exceptional item 3,326 2,822 2,589
Deposit interest retention tax 5 (113) - -
Administrative expenses:
Staff and other administrative
expenses 8 1,778 1,491 1,313
Integration costs in continuing
businesses - - 20
1,778 1,491 1,333
Depreciation and amortisation 9 171 127 109
Total operating expenses 1,949 1,618 1,442
Group operating profit before
provisions 1,264 1,204 1,147
Before exceptional item 1,377 1,204 1,147
Deposit interest retention tax 5 (113) - -
Provisions for bad and doubtful
debts 15 133 85 126
Provisions for contingent liabilities
and commitments 2 2 1
Amounts (written back)/written off fixed
asset investments (1) 5 7
Group operating profit - continuing
activities 1,130 1,112 1,013
Before exceptional item 1,243 1,112 1,013
Deposit interest retention tax 5 (113) - -
Income from associated undertakings 3 3 4
Profit on disposal of property 5 2 32
Profit on disposal of business 10 - 15 -
Group profit on ordinary activities before
taxation (carried forward) 1,138 1,132 1,049
Before exceptional item 1,251 1,132 1,049
Deposit interest retention tax 5 (113) - -
Consolidated profit and loss account (continued)
for the year ended 31 December 2000
2000 1999 1998
Notes E m E m E m
Group profit on ordinary activities
before taxation (brought forward) 1,138 1,132 1,049
Taxation on ordinary activities 318 327 315
Impact of phased reduction in Irish
corporation tax rates on deferred
tax balances - - 55
11 318 327 370
Group profit on ordinary activities
after taxation 820 805 679
Equity and non-equity minority interests
in subsidiaries 12 38 28 29
Dividends on non-equity shares 20 16 17
58 44 46
Group profit attributable to the ordinary
shareholders of Allied Irish Banks, p.l.c. 762 761 633
Dividends on equity shares 335 288 239
Transfer to reserves 70 45 32
405 333 271
Profit retained 357 428 362
Earnings per E 0.32 ordinary share
- basic 13(a) 89.0c 89.5c 74.7c
Earnings per E 0.32 ordinary share
- adjusted 13(b)104.0c 90.5c 81.1c
Earnings per E 0.32 ordinary share
- diluted 13(c) 88.1c 88.0c 73.7c
Consolidated balance sheet
31 December 2000
2000 1999
Notes E m E m
Assets
Cash and balances at central banks 938 1,119
Items in course of collection 1,116 916
Central government bills and other
eligible bills 297 718
Loans and advances to banks 4,193 3,831
Loans and advances to customers 14 45,880 39,171
Securitised assets 933 598
Less: non-returnable proceeds (767) (473)
166 125
Debt securities 16 18,986 15,108
Equity shares 412 297
Interests in associated undertakings 8 22
Intangible fixed assets 17 466 468
Tangible fixed assets 1,127 1,039
Own shares 177 123
Other assets 1,708 1,071
Prepayments and accrued income 1,835 1,195
Long-term assurance business attributable to
shareholders 18 238 166
77,547 65,369
Long-term assurance assets attributable to
policyholders 18 2,141 1,701
79,688 67,070
Liabilities
Deposits by banks 12,478 8,608
Customer accounts 19 48,437 42,335
Debt securities in issue 4,295 4,298
Other liabilities 3,079 2,360
Accruals and deferred income 1,665 1,294
Provisions for liabilities and charges 155 125
Deferred taxation 357 242
Subordinated liabilities 2,249 1,984
Equity and non-equity minority interests
in subsidiaries 20 272 227
Shareholders' funds: non-equity interests 264 245
Called up ordinary share capital 281 277
Share premium account 1,620 1,594
Reserves 401 330
Profit and loss account 1,994 1,450
Shareholders' funds: equity interests 4,296 3,651
77,547 65,369
Long-term assurance liabilities to
policyholders 18 2,141 1,701
79,688 67,070
Consolidated cash flow statement
for the year ended 31 December 2000
2000 1999 1998
Em Em Em
Net cash inflow from operating
activities 2,433 3,191 3,721
Dividends received from associated
undertakings - 2 3
Returns on investments and servicing of
finance (184) (108) (110)
Equity dividends paid (228) (215) (176)
Taxation (199) (237) (204)
Capital expenditure (3,004) (1,405) (2,774)
Acquisitions and disposals 2 (391) 22
Financing 164 640 67
(Decrease)/ increase in cash (1,016) 1,477 549
Reconciliation of Group operating profit
to net cash inflow from operating
activities 2000 1999 1998
E m E m E m
Group operating profit 1,130 1,112 1,013
Increase in prepayments and
accrued income (607) (20) (279)
Increase in accruals and
deferred income 355 351 41
Provisions for bad and doubtful debts 133 85 126
Provisions for contingent liabilities
and commitments 2 2 1
Amounts (written back)/written off
fixed asset investments (1) 5 7
Increase in other provisions 11 1 -
Depreciation and amortisation 171 127 109
Amortisation of own shares 1 - -
Profit on disposal of business - 15 -
Interest on subordinated liabilities 155 95 82
Profit on disposal of debt securities
and equity shares (23) (31) (79)
Averaged gains on debt securities
held for hedging purposes (16) (18) (15)
Profit on disposal of associated
undertakings (5) (3) (14)
Amortisation of (discounts)/premiums on debt
securities held as financial fixed assets (2) 13 (15)
Increase in long-term assurance business (72) (47) (33)
Net cash inflow from trading activities 1,232 1,687 944
Net increase in deposits by banks 3,621 479 2,602
Net increase in customer accounts 4,854 2,545 2,977
Net increase in loans and advances to
customers (5,812) (5,398) (4,111)
Net (increase)/decrease in loans and
advances to banks (1,015) 2,748 698
Decrease/(increase) in central government
bills 445 (414) (44)
Net (increase)/decrease in debt securities and
equity shares held for trading purposes (710) (542) 379
Net (increase)/decrease in items in course
of collection (160) 192 (175)
Net (decrease)/increase in debt securities
in issue (266) 1,912 37
Net increase in notes in circulation 23 16 4
(Increase)/decrease in other assets (595) (289) 333
Increase in other liabilities 674 126 127
Effect of exchange translation and
other adjustments 142 129 (50)
1,201 1,504 2,777
Net cash inflow from operating
activities 2,433 3,191 3,721
Statement of total recognised gains and losses
2000 1999 1998
E m E m E m
Group profit attributable to the
ordinary shareholders 762 761 633
Unrealised surplus on revaluation of
property - - 141
Currency translation differences on
foreign currency net investments 113 281 (60)
Total recognised gains relating to the year 875 1,042 714
Reconciliation of movements in shareholders' funds:
equity interests
2000 1999 1998
E m E m E m
Group profit attributable to the
ordinary shareholders 762 761 633
Dividends on equity shares 335 288 239
427 473 394
Unrealised surplus on revaluation
of property - - 141
Other recognised gains/(losses) relating
to the year 113 281 (60)
New ordinary share capital subscribed 27 28 26
Goodwill written back - 1 -
Ordinary shares issued in lieu of cash
dividend 78 39 29
Net addition to shareholders' funds: equity
interests 645 822 530
Opening shareholders' funds: equity
interests 3,651 2,829 2,299
Closing shareholders' funds: equity
interests 4,296 3,651 2,829
Note of historical cost profits and losses Reported profits on ordinary activities before taxation would not be materially different if presented on an unmodified historical cost basis. Commentary on results Exceptional item The exceptional item refers to a payment made on 3 October 2000 of E113million to the Irish revenue Commissioners in full and final settlement of deposit interest retention tax (DIRT), including interest and penalties for the period April 1986 to April 1999. Although AIB believes that it had an agreement with the revenue Commissioners in 1991 in relation to DIRT, the Board considered that concluding this settlement was in the best interests of shareholders, customers and staff.
Summary profit and loss account
Year Excep- Year Year %
2000 tional 2000 1999 Change
as item before excl.
reported exceptional exceptional
E m E m E m E m
Net interest income 1,909 113 2,022 1,770 14
Other income 1,304 - 1,304 1,052 24
Total operating income 3,213 113 3,326 2,822 18
Staff costs 1,144 - 1,144 970 18
Other costs 634 - 634 521 22
Depreciation and
amortisation 171 - 171 127 35
Total operating expenses 1,949 - 1,949 1,618 20
Group operating profit
before provisions 1,264 113 1,377 1,204 14
Provisions for bad and
doubtful debts 133 - 133 85 57
Other provisions 1 - 1 7 -
Total provisions 134 - 134 92 46
Group operating profit -
continuing activities 1,130 113 1,243 1,112 12
Income from associated
undertakings 3 - 3 3 -
Profit on disposal of
property 5 - 5 2 -
Profit on disposal of
business - - - 15 -
Group profit on ordinary
activities before
taxation 1,138 113 1,251 1,132 10.5
The current year includes Bank Zachodni ('BZ BZ - 3-Quinuclidinyl Benzilate BZ - Battle Zone BZ - Beach Zone BZ - Belize BZ - Below Zone BZ - Benzene BZ - Benzilic Acid BZ - Benzodiazepine (class of sedative drugs) BZ - Berliner Zeitung (German: Berlin Times) BZ - Bionicle Zone BZ - Blizzard BZ - Blutzucker (German: Blood Sugar) BZ - Bolzano - Bozen (Trentino Alto Adige, Italy) BZ - Boyzone BZ - Branch on Zero (IBM) BZ - Bravo Zulu (term for Good Job/Well Done)') in which AIB took a majority shareholding on 16 September 1999. The 1999 accounts include BZ for the period from 16 September 1999 to 31 December 1999. The following commentary on results excludes the impact of the exceptional item. Group operating profit before provisions - up 14% to add E1,377 million for the year to December 2000. The second half-year profit of E 705 million was 5% higher than the first half-year. Group operating profit - continuing activities was up 12% on 1999. Group profit on ordinary activities before tax amounted to E 1,251 million and adjusted earnings per share excluding goodwill amortisation (E 26 million) and the exceptional item increased by 15% to EUR 104.0c per share. Basic earnings per share was EUR 89.0c per share. The second half-year profit on ordinary activities before taxation of E 642 million was up 5% on the first half-year. Commentary on results The following commentary on the profit and loss account and balance sheet headings is based on underlying percentage growth adjusting for the impact of currency movements and excluding BZ in both years. Net interest income Net interest income at E 2,022 million increased by 4% compared with 1999. Loans to customers and customer accounts increased by 13% and 8% respectively since December 1999. Loans to customers and customer accounts (excluding money market funds and currency factors)
Loans to Customer
Customers Accounts
% change December 2000 v December 1999 % change % change
Republic of Ireland 19(1) 14
Northern Ireland 16 9
Britain 20 -6(2)
USA 3 3
Poland 9 16
AIB Group 13 8
(1)The Republic of Ireland loan growth was 21% adjusting for the securitisation of certain loans (2)The reduction of 6% in Britain customer accounts was due to the movement of some large deposits from customer accounts to money market funds. Branch customer accounts in Britain were up 23%. The divisional commentary contains additional comments on the key business trends in relation to loans to customers and customer accounts Net interest margin (incl. BZ) Half-Year Half-Year Basis Year Year Basis Dec 2000 June 2000 Points 2000 1999 Points % % Change % % Change 2.76 2.73 +3 Domestic 2.75 2.97 -22 3.08 3.40 -32 Foreign 3.23 3.54 -31 2.94 3.10 -16 Total 3.02 3.27 -25 Average interest earning assets (incl. BZ) Half-Year Half-Year Year Year Dec 2000 June 2000 Change 2000 1999 Change E m E m % E m E m % 31,420 28,201 11 Domestic 29,819 25,611 16 38,824 35,572 9 Foreign 37,207 28,502 31 70,244 63,773 10 Total 67,026 54,113 24 The net interest margin was 3.02%, a decrease of 25 basis points on 1999. The decrease mainly occurred in AIB Bank and Allfirst, both operating in very competitive markets. The domestic margin stabilised in the second half reflecting stabilising product margins in the Republic of Ireland where strong second half growth in customer accounts outpaced the growth in loans in AIB Bank. The second half reduction in the foreign margin was due to a lower Treasury margin and a modest reduction in Allfirst and Poland margins. Net interest income of E1,037 million for the half-year to December 2000 was up 3% on the half-year to June 2000. Commentary on results Other income Other income increased by 14% to E1,304 million. This represented 39% of total income compared with 37% in 1999.
- Contribution of life assurance company up 48%
- Investment banking fees down 8% or up 33% excluding 1999 privatisation
revenues
- Banking fees and commissions up 14%
- Asset management fees up 11%
Year Year Underlying
2000 1999 % Change
Other income E m E m 2000 v 1999
Dividend income 6 2 -
Banking fees and commissions 807 643 14
Asset management fees 187 152 11
Investment banking fees 107 114 -8
Fees and commissions receivable 1,101 909 11
Less: fees and commissions payable (108) (93) -8
Dealing profits 103 74 33
Contribution of life assurance
company 95 64 48
Other 107 96 -2
Other operating income
(see note 7 of this release) 202 160 17
Total other income 1,304 1,052 14
Banking fees and commissions increased reflecting higher business volumes with strong growth in branch banking, corporate banking, credit card and finance and leasing revenues. Asset management fees were up due to good business growth in Ireland and Britain coupled with higher trust and investment advisory fees in Allfirst. Excluding fees received in 1999 in relation to a major privatisation in the Irish market, investment banking fees were up 33% mainly due to a strong performance from stockbroking, corporate finance and international financial services activities. Dealing profits were up 33% with buoyant revenues in foreign exchange trading activities. Ark Life reported significant profit growth reflecting strong sales of investment products, substantial growth in new regular pensions and the benefit of lower corporation tax rates. Other income increased by 13% to E 693 million in the half-year to December 2000 reflecting a strong performance in all divisions with particularly strong growth in Ark Life and good growth in asset management fees and banking fees and commissions. Other income as a percentage of total operating income was 40% in the second half-year.
Total operating expenses
Operating expenses at E 1,949 million were up 7% compared with
1999.
Year Year Underlying
2000 1999 % Change
Operating expenses E m E m 2000 v 1999
Staff costs 1,144 970 6
Other costs 634 521 9
Depreciation and amortisation 171 127 9
Total operating expenses 1,949 1,618 7
The Group's tangible cost income ratio, excluding goodwill amortisation, at 58% was slightly higher than 1999. The increase in operating expenses was mainly attributable to increased business activity, technology and e-business expenditure, and branch network expansion in Poland. Arising from the implementation of a new accounting standard, the depreciation charge for freehold and long leasehold property increased by E 9 million. Higher salary costs and some once-off expenses relating to research and development work on a standalone internet bank in Ireland contributed to the cost increase. Following a review of our e-business strategy in Ireland, AIB will focus on developing and expanding 24hour-online, our existing online service, as the core internet offering for the Irish personal market and will not proceed with the development of a standalone internet bank at this time. Investment in e-business in the US and Poland continues and the Group remains committed to an integrated multi-channel distribution strategy. Commentary on results Operating expenses were up 8% in the half-year to December 2000 compared with the half-year to June 2000. The increase was mainly due to wage cost pressures in Ireland, branch and ATM network expansion in Poland and technology and e-business expenditure across the Group. Asset quality The provision for bad and doubtful debts in 2000 was E133 million compared with an adjusted E101 million in 1999, excluding write-backs in 1999 of E16 million relating to Latin American provisions. The charge for the year represented 0.30% of average loans compared with an adjusted 0.28% charge in 1999. In Ireland asset quality remained strong. The AIB Bank Republic of Ireland specific charge was 0.16% of average loans with the level of non-performing loans at a historically low level as a percentage of loans. Reflecting the slowdown in the economy, non-performing loans in the USA increased, however coverage is still strong at 205%. The provision for bad and doubtful debts reduced following a significant improvement in the maritime portfolio more than offsetting higher commercial loan provisions. Allfirst's provisions as a percentage of loans amounted to 1.4% at 31 December 2000, a level of provisioning in line with its peer group banks. The vast majority of Allfirst's provisions are in non-specific categories. Capital Markets showed a reduction particularly in non-credit related provisions with coverage remaining strong at 262%. In Poland, asset quality in WBK WBK - Welcome Back, Kotter (70s US TV Show) WBK - Word Backup (Microsoft Word file extension) continued to improve with non-performing loans as a percentage of total loans amounting to 7.6%, significantly lower than the industry average. In BZ, non-performing loans increased to 30.7% as a percentage of total loans at 31 December 2000. The completion of the fair value exercise resulted in the reclassification of some loans to non-performing and also generated additional fair value provisions of E38 million. AIB is involved in an intensive workout of this portfolio with Group resources actively participating. Group non-performing loans as a percentage of total loans amounted to 1.9% or 1.0% excluding BZ. The Group increased its level of non-specific provisions in 2000. Coverage for non-performing loans remained strong at 100% (135% excluding BZ). Taxation The taxation charge was E 318 million compared with E 327 million in 1999. The adjusted effective tax rate for the year was 26.3% down from 28.9% in 1999. The reduction was mainly due to the decrease in the standard rate of Irish corporation tax from 28% in 1999 to 24% in 2000 and a lower effective tax rate in Allfirst. The effective tax rate is also influenced by the geographic and business mix of profits. Euro AIB has made a significant investment in the preparations for the introduction of euro notes and coins in 2002. Expenditure to date on EMU preparations and the introduction of the euro has been E16 million relating to systems development, communications and education programmes. We estimate that further expenditure of E 40 million will be required to cover a range of incremental costs and complete systems and other changes required for the introduction of euro notes and coins in 2002. Return on equity and return on assets The return on equity, excluding the exceptional item, amounted to 21.6% continuing the trend of returns in excess of 20% with an average return of 23.5% over the last five years. The return on equity was 23.5% in 1999. The return on assets was 1.25% and the return on risk weighted assets, a measure of the efficient use of capital, was 1.65%. The equity base has increased by 18% since December 1999 due principally to profit retentions and translation of foreign currency reserves. Balance sheet Total assets have increased by E13 billion to E 80 billion at 31 December 2000, an increase of 15% on an underlying basis since December 1999 while loans to customers increased by 13% and customer accounts by 8%. The US dollar and the Polish zloty both strengthened by 8% against the euro while sterling weakened marginally resulting in reported balance sheet growth of 19%. Commentary on results Assets under management/administration and custody Assets under management in the Group increased to E40 billion at 31 December 2000 from E 39 billion at 31 December 1999 reflecting growth in new business partly offset by a decline in stock market values. Assets under administration and custody increased from E 152 billion at 31 December 1999 to E 214 billion at 31 December 2000. This strong growth of 41% reflects the success of the AIB joint venture with the Bank of New York which was established in 1997. Capital ratios The Group's capital ratios remained strong with the Tier 1 ratio at 6.3% and the total capital ratio at 10.8%. Tier 1 capital increased by E 646 million to E 3.8 billion reflecting retained profit for the year of E 357 million and the impact of stronger US$ and Polish zloty exchange rates. Tier 2 capital increased by E 375 million since December 1999 reflecting the issue of E 149 million in subordinated debt by the parent company as well as currency movements. In line with the growth in the balance sheet, risk weighted assets increased by 22% to E 60 billion, 18% excluding currency factors. On 5 February 2001 AIB issued E 500 million of 7.5 per cent Step-up Callable Perpetual Reserve Capital Instruments which on a proforma basis increases the Tier 1 ratio to 7.2%. Cash flow As reflected in the consolidated cash flow statement, there was a net decrease in cash of E 1,016 million during the year ended 31 December 2000. Net cash inflow from operating activities was E 2,433 million, of which E 1,232 million arose from trading activities. This cash inflow was offset by outflows of E 199 million for taxation, equity dividends of E 228 million and capital expenditure of E 3,004 million, consisting mainly of net increases in debt and equity securities of E 2,830 million and expenditure on property and equipment of E 237 million. Financing, primarily the issue of subordinated debt, generated a net cash inflow of E164 million. Outlook AIB continues to perform strongly and is confidently looking forward to meeting its objective of low double-digit earnings growth in 2001 and into the medium term. Divisional commentary On a divisional basis profit is measured in euro and consequently includes the impact of currency movements. AIB Bank Retail and commercial banking operations in Republic of Ireland, Northern Ireland, Britain, Channel Islands and Isle of Man; AIB Finance and Leasing; Card Services; and AIB's life and pensions subsidiary Ark Life Assurance Company. AIB Bank profit increased to E 696 million - a 19% increase over the same period last year, reflecting a strong performance in all key business units. The profit increase of 19% reflects a strong performance in the Republic of Ireland, Northern Ireland and Britain, with profit growth in the high teens in all three areas. The divisional cost income ratio, despite an underlying increase of 10% in costs, further improved from 53.5% to 52.1% reflecting high levels of productivity.
Year Year % change
2000 1999 2000 v 1999
AIB Bank profit and loss account E m E m
Net interest income 1,056 932 13
Other income 508 422 20
Total operating income 1,564 1,354 16
Total operating expenses 816 724 13
Operating profit before provisions 748 630 19
Provisions 56 45 25
Operating profit - continuing activities 692 585 18
Profit on disposal of property 4 2 -
Profit on ordinary activities
before taxation 696 587 19
Banking operations in the Republic of Ireland experienced strong growth in business volumes reflecting the strength of the domestic economy, the power of the AIB franchise and favourable demographics with increasing disposable income creating higher demand for financial services. Loans increased by 22% with growth well spread across all economic sectors and customer accounts were up 17% since December 1999 with particularly strong growth in the second half-year. Lower margins partly offset the favourable impact of volume growth. There was good demand for Home Mortgage lending, up 26% since December 1999 despite competition from new entrants to the market. The growth in business activity levels coupled with wage cost pressures in Ireland has resulted in higher costs, however the ongoing commitment to productivity has maintained the cost income ratio at 52% in 2000. The strength of the Irish economy and the underlying demographics underpin the growth prospects going forward. Ark Life reported substantial growth in profit of 48% to E95 million for the year to December 2000. The increased profit was driven by record new business volumes and the benefit of lower corporation tax rates. Single premium product sales were very strong at E 547 million, up 35% on 1999. New regular premium business amounted to E 103 million, an increase of 21% including particularly strong growth of 55% in new regular pensions. The new pension legislation in Ireland has greatly enhanced the attractiveness of retirement provision, especially for the self employed and proprietary directors. Annual Premium Equivalent (APE) sales were up 25% to E 158 million. First Trust Bank had a very strong performance reflecting higher volumes and strong growth in other income with foreign exchange income and branch commissions in particular, well ahead of 1999. An improved cost income ratio of 51% down from 54% in 1999 reflected improved efficiency with only a modest increase in costs since 1999. Loans increased by 16% and customer accounts were up 9% since December 1999. In Britain, business activity was buoyant in an economy where inflation was less than 3%. Business volumes increased and the cost income ratio reduced to 52% from 57% in 1999 with costs remaining at the same level in 2000. Progress has been made in changing the profile of the business including a higher level of business with medium sized firms and expansion in the professional sector. There was good growth in commercial loans, home mortgages, current accounts and term deposits. Branch loan and deposit volumes increased by 15% and 23% respectively. Divisional Commentary USA includes Allfirst's banking operations in Maryland, Pennsylvania, Virginia, Washington DC, and AIB's own brand retail and corporate operations in New York, Philadelphia, Los Angeles, Chicago and San Francisco. USA profit was E 337 million, up 10% on the year to December 1999 profit of E 307m.
Year Year % change
2000 1999 2000 v 1999
USA profit and loss account E m E m
Net interest income 537 506 6
Other income 381 296 29
Total operating income 918 802 15
Total operating expenses 543 463 17
Operating profit before provisions 375 339 11
Provisions 38 33 18
Operating profit - continuing activities 337 306 10
Income from associated undertakings - 1 -
Profit on ordinary activities before
taxation 337 307 10
Allfirst has separately reported in US dollars growth of 7% in net income to common shareholders in 2000 on a US GAAP(1)basis. On a Group basis in line with Irish GAAP, profit after tax was down 2% on 1999. Net interest income reduced due to more reliance on wholesale funding, lower treasury profit and competitive pressures on product margins. Underlying revenue highlights included strong growth of 16% in electronic banking income, 12% in corporate deposit service charges, higher joint venture and trust revenues and an 8% increase in commercial loan balances since December 1999. A decline in retail lending reduced overall growth in loans to 2%. Continued cost containment was reflected in a modest underlying increase of 1%. Provisions for bad and doubtful debts decreased due to the significant improvement in the foreign maritime portfolio. AIB's operations produced a strong performance with a good increase in operating profit before provisions. An investment program is underway which includes plans to increase the number of representative offices and `e-enable' the business to further develop the national franchise in the charity and church sectors commonly known as the not-for-profit sector. The Chicago office opened in 2000 and the San Francisco office opened in early 2001 in addition to the established offices in New York, Philadelphia and Los Angeles. Loans increased by 20% since December 1999 and there was a 34% increase in other income. (1)United States Generally Accepted Accounting Principles Divisional commentary Capital Markets Corporate Banking, Investment Banking and Treasury & International Capital Markets profit at E156 million was up 3%. Capital Markets had a very successful year. Excluding fees received in 1999 in relation to a major privatisation in the Irish market, profit growth was in excess of 20%. There has been substantial growth in recent years in corporate banking, asset management, IFSC IFSC - International Fuzzy Systems Conference IFSC - Irish Financial Services Centre services and corporate treasury activities. This has resulted in the position where the vast majority of revenues are derived from customer services and a reduced proportion obtained from proprietary activities.
Year Year % change
2000 1999 2000 v 1999
Capital Markets profit and loss account E m E m
Net interest income 127 141 -10
Other income 304 270 13
Total operating income 431 411 5
Total operating expenses 260 239 9
Operating profit before
provisions 171 172 -1
Provisions 18 23 -20
Operating profit - continuing activities 153 149 2
Income from associated undertakings 3 2 -
Profit on ordinary activities before
taxation 156 151 3
Corporate Banking had a record year, reporting substantial growth in profits, with other income up 52%. Loans were up 25% since December 1999 with all areas of the business performing very well. The domestic business continued to pursue its strategy of providing innovative financing solutions and consulting services to its customers. The special finance unit which focuses on project and acquisition finance had a superb year and the international business conducted from the IFSC produced a strong performance. The business in Britain produced a very strong performance in only its third year of operation and won many arranging and underwriting mandates. AIB Corporate Banking established a presence in New York during 2000 and plans to develop a lending business in structured corporate credit. AIB became one of the first European banks to enter the fund management business for corporate debt and bonds by launching E 350 million Collateralised Debt Obligation (CDO) in January 2001. Investment Banking produced a strong performance in all major business units. Asset Management business had a good performance with strong profit growth driven by new business mandates. Higher profit was achieved in the UK, where fees were earned from new investment trusts launched in 1999 and 2000. Profit from Custodial, Trustee and Funds Administration businesses was substantially higher due to significant growth in new business volumes, underpinning our presence as a major provider of funds administration and trustee services in the IFSC. Goodbody Stockbrokers, Corporate Finance and International Financial Services Centre operations performed very well. Goodbody benefited from its involvement in a number of Initial Public Offerings and private placements and was the leading equity fundraiser in Ireland for the technology sector in 2000. Treasury & International reported profits were lower than 1999 due to a lower performance from interest rate management and trading activities, particularly in the second half-year. Treasury customer business had a very good year with strong growth particularly in commercial foreign exchange in Corporate and Commercial Treasury and a strong performance in International Business Services activities. Divisional commentary Poland Wielkopolski Bank Kredytowy S.A., in which AIB has a 60.1% shareholding, together with its subsidiaries and associates, and Bank Zachodni S.A., in which AIB has an 83.0% shareholding, together with its subsidiaries and associates. Poland contributed E 88 million in 2000, a 40% increase on the profit of E 63 million in 1999. A majority shareholding in BZ was acquired in September 1999.
Year Year % change
2000 1999 2000 v 1999
Poland profit and loss account E m E m
Net interest income 252 139 81
Other income 153 87 75
Total operating income 405 226 79
Total operating expenses 295 154 91
Operating profit before provisions 110 72 52
Provisions 23 9 146
Operating profit - continuing activities 87 63 38
Profit on disposal of property 1 - -
Profit on ordinary activities before
taxation 88 63 40
The above profit and loss account includes BZ for the full year in 2000 and for the period from 16 September to 31 December in 1999. WBK achieved record profit with growth of 15% in 2000, or 31% excluding the impact of equity investment disposals in 1999. The strong results reflect increased business volumes, wider deposit margins and good growth in fee income. Loans increased by 16% and customer accounts were up 21% since December 1999. There was significant growth of 24% in other income, excluding the impact of equity investment disposals in 1999, illustrating the growing revenue potential of our Polish franchises. Key highlights of the performance included a 128% increase in card fees, growth of 46% in foreign exchange profits and a 16% increase in current account fees and branch commissions. Costs increased as a result of expansion and development of the branch and ATM networks and technology enhancements. WBK expanded its franchise with 28 new outlets and 44 new ATMs. BZ full year accounts were included for the first time in 2000. Significant progress is being achieved in transferring AIB's business and lending processes to BZ. The analysis and assessment of credit quality for fair value purposes at BZ was completed in 2000 resulting in additional fair value provisions of E 38 million. Loan volumes were up 1% while deposit volumes increased by 10% since December 1999. As part of its development programme BZ opened 16 new outlets and installed 29 new ATMs since December 1999. AIB invested a further PLN 200 million in BZ during the year, increasing the Group's shareholding to 83%. AIB, in conjunction with BZ and WBK, has initiated a change management process that includes a project to implement a new centralised branch banking system common to both Polish banks with rollout scheduled for the third quarter of 2001. On 10 October 2000 AIB announced the proposed merger of WBK and BZ. The proposal was ratified by the shareholders of both banks at an extraordinary general meeting on 20 December 2000. The merger is planned to take effect in June 2001 and it is proposed that the new entity will adopt the name Bank Zachodni WBK (`BZWBK'). The merger will create Poland's fifth largest bank and presents AIB Poland with the opportunity to achieve synergies while expanding and developing the branch and electronic networks. Divisional commentary Group includes interest income earned on capital not allocated to divisions, the funding cost of the BZ acquisition and central services costs.
Year Year
2000 1999
Group profit and loss account E m E m
Net interest income 50 52
Other income (42) (23)
Total operating income 8 29
Total operating expenses 35 38
Operating profit before provisions (27) (9)
Provisions (1) (18)
Operating profit - continuing activities (26) 9
Profit on disposal of business - 15
Profit on ordinary activities before
taxation (26) 24
Group reported a loss of E26 million in 2000, compared with a profit of E24 million in 1999. This decrease was primarily due to provision write-backs of E16 million in 1999 relating to Latin American provisions no longer required, hedging costs in relation to the translation of our foreign currency profits and the funding cost of the BZ acquisition. The 1999 profit included a gain of E15 million from the sale of AIB's private banking and treasury operations located in Singapore to Keppel TatLee Bank. Notes 1 Accounting policies and presentation of financial information There are no changes to the accounting policies as set out on pages 37 to 39 of the Annual Report and Accounts for the year ended 31 December 1999. During the year the Group implemented Financial Reporting Standard 15 - Tangible Fixed Assets (`FRS15') and Financial Reporting Standard 16 - Current Tax (`FRS 16'). Previously, freehold and long leasehold properties were not depreciated. In accordance with FRS 15, freehold and long leasehold properties are now depreciated. The effect of implementing FRS 15 on the current results is E 9 million. The effect of the implementation of FRS 16 is that of additional disclosures in relation to current tax. The currency used in these accounts is the euro which is denoted by 'EUR' or the symbol E.
2000
AIB Bank USA Capital Poland Group Total
division division Markets division
division
2 Segmental information E m E m E m E m E m E m
Operations by business segments(1)
Net interest income before
exceptional item 1,056 537 127 252 50 2,022
Other income 508 381 304 153 (42) 1,304
Total operating income before
exceptional item 1,564 918 431 405 8 3,326
Total operating expenses 816 543 260 295 35 1,949
Provisions 56 38 18 23 (1) 134
Group operating profit before
exceptional item 692 337 153 87 (26) 1,243
Income from associated
undertakings - - 3 - - 3
Profit on disposals 4 - - 1 - 5
Group profit on ordinary
activities before
exceptional item 696 337 156 88 (26) 1,251
Deposit interest retention tax (113)
Group profit on ordinary
activities before taxation 1,138
Balance sheet
Total loans 23,112 12,995 10,386 3,645 101 50,239
Total deposits 25,019 15,941 19,271 4,897 82 65,210
Total assets 29,607 20,458 23,218 6,054 351 79,688
Total risk weighted
assets 21,133 20,318 14,837 3,655 279 60,222
Net assets 1,508 1,449 1,058 261 20 4,296
Notes
1999
AIB Bank USA Capital Poland Group Total
division division Markets division
division
2 Segmental information
(continued) E m E m E m E m E m E m
Operations by business segments(1)
Net interest income 932 506 141 139 52 1,770
Other income 422 296 270 87 (23) 1,052
Total operating income 1,354 802 411 226 29 2,822
Total operating expenses 724 463 239 154 38 1,618
Provisions 45 33 23 9 (18) 92
Group operating profit 585 306 149 63 9 1,112
Income from associated
undertakings - 1 2 - - 3
Profit on disposals 2 - - - 15 17
Group profit on ordinary
activities
before taxation 587 307 151 63 24 1,132
Balance sheet
Total loans 19,306 11,769 9,013 2,754 285 43,127
Total deposits 21,956 14,357 14,758 3,993 177 55,241
Total assets 25,008 17,834 18,675 4,990 563 67,070
Total risk weighted
assets 17,919 16,898 11,375 2,838 245 49,275
Net assets 1,328 1,252 843 210 18 3,651
1998
AIB Bank USA Capital Poland Group Total
division division Markets division
division
E m E m E m E m E m E m
Operations by business segments(1)
Net interest income 844 490 116 95 64 1,609
Other income 385 334 213 62 (14) 980
Total operating income 1,229 824 329 157 50 2,589
Total operating expenses 656 492 186 95 13 1,442
Provisions 68 32 27 13 (6) 134
Group operating profit 505 300 116 49 43 1,013
Income from associated
undertakings - 2 2 - - 4
Profit on disposals 32 - - - - 32
Group profit on ordinary activities
before taxation 537 302 118 49 43 1,049
Balance sheet
Total loans 15,132 9,928 9,262 1,069 105 35,496
Total deposits 19,091 13,296 10,748 1,750 (45) 44,840
Total assets 19,417 15,596 16,496 2,068 143 53,720
Total risk weighted
assets 14,005 13,940 9,961 1,188 19 39,113
Net assets 1,013 1,008 721 86 1 2,829
(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, the funding cost of the Bank Zachodni acquisition
and central services costs are reported in Group.
Notes:
2000
Republic of United United Poland Rest Total
Ireland States Kingdom of
of the
America world
2 Segmental information
(continued) E m E m E m E m E m E m
Operations by geographical segments(2)
Net interest income before
exceptional item 791 568 392 269 2 2,022
Other income 570 336 243 151 4 1,304
Total operating income before
exceptional item 1,361 904 635 420 6 3,326
Total operating expenses 770 557 327 292 3 1,949
Provisions 51 38 23 23 (1) 134
Group operating profit before
exceptional item 540 309 285 105 4 1,243
Income from associated
undertakings 3 - - - - 3
Profit on disposals 3 - 1 1 - 5
Group profit on ordinary
activities before
exceptional item 546 309 286 106 4 1,251
Deposit interest retention tax (113)
Group profit on ordinary activities
before taxation 1,138
Balance sheet
Total loans 24,027 13,018 9,545 3,645 4 50,239
Total deposits 29,055 17,585 13,672 4,897 1 65,210
Total assets 37,502 19,716 16,162 6,060 248 79,688
Net assets 1,746 1,477 794 261 18 4,296
1999
Republic of United United Poland Rest Total
Ireland States Kingdom of
of the
America world
E m E m E m E m E m E m
Operations by geographical segments(2)
Net interest income 754 514 350 149 3 1,770
Other income 483 299 182 86 2 1,052
Total operating income 1,237 813 532 235 5 2,822
Total operating expenses 690 473 291 154 10 1,618
Provisions 48 22 10 9 3 92
Group operating profit 499 318 231 72 (8) 1,112
Income from associated
undertakings 2 1 - - - 3
Profit on disposals 16 - 1 - - 17
Group profit on ordinary
activities
before taxation 517 319 232 72 (8) 1,132
Balance sheet
Total loans 20,511 11,797 8,061 2,751 7 43,127
Total deposits 25,056 15,410 10,787 3,988 - 55,241
Total assets 30,970 18,137 12,721 5,000 242 67,070
Net assets 1,491 1,264 668 210 18 3,651
Notes
1998
Republic of United United Poland Rest Total
Ireland States Kingdom of
of the
America world
2 Segmental information
(continued) E m E m E m E m E m E m
Operations by geographical segments(2)
Net interest income 684 507 311 107 - 1,609
Other income 404 331 166 63 16 980
Total operating income 1,088 838 477 170 16 2,589
Total operating expenses 581 502 255 94 10 1,442
Provisions 53 33 20 13 15 134
Group operating profit 454 303 202 63 (9) 1,013
Income from associated
undertakings 2 2 - - - 4
Profit on disposals 30 - 2 - - 32
Group profit on ordinary
activities
before taxation 486 305 204 63 (9) 1,049
Balance sheet
Total loans 18,044 10,020 6,186 1,070 176 35,496
Total deposits 20,620 13,833 8,562 1,750 75 44,840
Total assets 25,872 15,928 9,663 2,069 188 53,720
Net assets 1,242 1,015 471 87 14 2,829
(2)The geographical distribution of profit before taxation is based primarily on the location of the office recording the transaction. Assets by segment The fungible nature of liabilities within the banking industry inevitably leads to allocations of liabilities to segments, some of which are necessarily subjective. Accordingly, the directors believe that the analysis of total assets is more meaningful than the analysis of net assets.
2000 1999 1998
3 Other interest receivable and similar
income E m E m E m
Interest on loans and advances to banks 238 157 487
Interest on loans and advances to customers 3,544 2,683 2,559
Income from leasing and hire purchase
contracts 205 169 148
3,987 3,009 3,194
2000 1999 1998
4 Interest payable E m E m E m
Interest on deposits by banks and customer
accounts 2,701 1,818 2,159
Interest on debt securities in issue 249 159 116
Interest on subordinated liabilities 155 95 82
3,105 2,072 2,357
5 Deposit interest retention tax (`DIRT') On 3 October 2000, AIB announced that it had reached a full and final settlement with the Irish Revenue Commissioners of IR(pound)90.04m (E 114.33m) in relation to DIRT, interest and penalties in Ireland for the period April 1986 to April 1999. The settlement included IR(pound)1.08m (E 1.37m) paid in prior years. Although AIB believe that it had an agreement with the Revenue Commisioners in 1991 in relation to DIRT, the Board considered that concluding this settlement was in the best interests of shareholders, customers and staff. As a result an exceptional charge of IR(pound)88.96m (E 112.96m) has been reflected in the accounts for the year ended 31 December 2000. Notes 22 Group financial information for US investors Adjustments to financial statements The Group financial statements conform with accounting principles generally accepted in Ireland. The following tables provide the significant adjustments to the consolidated net income (Group profit attributable to the stockholders of AIB) and consolidated ordinary stockholders' equity, total assets and total liabilities, which would be required if accounting principles generally accepted in the United States (US GAAP) had been applied instead of those generally accepted in Ireland (IR GAAP).
Year ended December 31
Consolidated net income 2000 1999 1998
(millions except per share amounts)
Net income (Group profit attributable
to the stockholders of AIB)
as in the consolidated profit
and loss account E 762 E761 E633
Adjustments in respect of:
Depreciation of freehold and long
leasehold property - (5) (4)
Long-term assurance policies (70) (43) (50)
Goodwill (78) (73) (61)
Premium on core deposit intangibles (9) (11) (14)
Profit on disposal of US credit card
business - - 53
Pension cost 122 97 47
Preference dividends 20 16 17
Securities held for hedging purposes (25) 34 (5)
Derivatives hedging available-for-sale
securities (9) - -
Internal derivative trades (6) (3) -
Post-retirement benefits (1) (1) (1)
Internal use computer software 11 - -
Deferred tax effect of the above
adjustments (5) (22) (13)
Impact of phased reduction in Irish
corporation tax rates - (55) 55
Net income in accordance with US GAAP E712 E695 E657
Net income applicable to ordinary
stockholders of AIB in accordance
with US GAAP E692 E680 E640
Equivalent to US $ 644
Income per American Depositary Share
(ADS (1)) in accordance with US GAAP E1.62 E1.60 E1.51
Equivalent to US $ 1.50
Year end exchange rateE/US $ 0.9305
(1) An American Depositary Share represents two ordinary shares of
E0.32 each.
Notes
22 Group financial information for US investors (continued)
Adjustments to financial statements (continued)
Consolidated ordinary stockholders' equity 2000 1999
(millions except per share amounts)
Ordinary stockholders' equity as in the
consolidated balance sheet E4,296 E3,651
Revaluation of property (210) (211)
Depreciation of freehold and long leasehold
property (27) (27)
Goodwill 1,097 1,074
Core deposit intangibles 26 33
Dividends payable on ordinary shares 221 188
Preference dividend declared - (1)
Long-term assurance policies (150) (97)
Unrealised (losses)/gains not yet recognised on:
Available-for-sale debt securities 16 (208)
Available-for-sale equity securities (6) 10
Derivatives hedging available-for-sale
securities (63) (17)
Securities held for hedging purposes 26 51
Internal derivative trades (10) (3)
Pension cost 256 138
Post-retirement benefits (5) (4)
Internal use computer software 11 -
Own shares (177) (123)
Deferred tax effect of the above
adjustments (64) 11
Ordinary stockholders' equity in accordance
with US GAAP E5,237 E 4,465
Equivalent to US $ 4,873
Ordinary stockholders' equity per ADS
in accordance with US GAAP E11.99 E10.38
Equivalent to US $ 11.16
Ordinary stockholders' equity per ADS
in accordance with IR GAAP E9.84 E8.49
Equivalent to US $ 9.15
Consolidated total assets 2000 1999
(millions)
Total assets as in the consolidated
balance sheet E79,688 E67,070
Revaluation of property (210) (211)
Depreciation of freehold and long
leasehold property (27) (27)
Goodwill 1,097 1,074
Core deposit intangibles 26 33
Available-for-sale debt securities 16 (208)
Available-for-sale equity securities (6) 10
Derivatives hedging available-for-sale
securities (63) (17)
Internal derivative trades (10) (3)
Internal use computer software 11 -
Own shares (177) (123)
Long-term assurance policies (150) (97)
Long-term assurance assets attributable to
policyholders (2,141) (1,701)
Securitised assets (3) (1)
Acceptances 147 143
Total assets in accordance
with US GAAP E78,198 E65,942
Equivalent to US $ 72,763
This results announcement and a detailed informative presentation can be viewed on our internet site at www.aibgroup.com/investorrelations/home |
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