AIB Bank today reported a pre-tax profit of €1.28 billion and adjusted basic earnings per share of 104.9 cent in the first-half of 2008. The decline of 4% in the adjusted basic earnings per share in what the bank termed a very testing environment of difficult market conditions and slowing economic growth observed in the half-year to June 2008, reflects the resilience of its business.

AIB, Ireland's biggest bank, said it expects its good operating performance to continue through 2008. It also said that funding costs and bad debts will increase relative to last year and it expects these adverse effects to reduce its full year adjusted earnings per share to a range of 185 cent - 190c (205.9 cent in 2007).

AIB said that slower loan growth of 6% in the half-year to June 2008 reflected lower customer demand and its focus on matching incremental loan and deposit volume growth to maintain strong funding and liquidity positions. In response to the lower growth environment, the bank said that it has acted swiftly to manage its costs which have reduced by 2% in the period.

The cost income ratio has improved by 2% to a new low of 49.2%.

Due to changing economic conditions and a more difficult operating environment, the bad debt charge has increased, from an exceptionally low level in the half-year to June 2007 to 21 basis points for the current period. AIB says that an exceptional level of provision write-backs was a feature of the 4 basis points charge in the half-year to June 2007.

The bank says that the operating environment remains difficult. There is a high level of uncertainty in the markets generally, including the future direction of interest rates, currency exchange rates and unemployment. The Irish economy has entered a challenging phase after a prolonged period of strong growth with the slowdown in the housing market being a particular feature. Despite the continuing market dislocation conditions experienced to date in 2008, AIB says its funding position remains strong. In addition to customer deposit growth of 9% in the first half-year, its funding is supplemented by good access to wholesale markets, particularly across a one to twelve month horizon. The strong capitalisation fully supports the business in the current environment. The tier 1 ratio was 7.7% and total capital ratio was 10.6% at 30 June 2008.

AIB Group Chief Executive Eugene Sheehy said:"The €1.28 billion profit before taxation reported by AIB for the first half of 2008 represents a well balanced operating performance across our domestic and international businesses.

This performance was achieved despite the adverse effect of slowing economies and difficult market conditions. It reflects the commitment of our people, deep customer relationships across geographically diverse franchises and a resilient risk management framework. All of this enables us to continue to operate effectively in the current challenging environment."

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