AIB SEES ADVERSE CHANGES IN BANKING - Adverse changes in worldwide banking - that is in the first sentence of AIB's group annual results today. Nonetheless the bank has reported overall profit before tax of €2.5 billion for the year ending December 2007, down 4% from €2.6 billion last year. Revenues rose by 12% to €4.87 billion last year from €4.33 billion the previous year, despite those adverse changes.
The results are in line with bank guidance, and 'good given the turbulence in the markets over the last six months in particular, according to AIB's CEO Eugene Sheehy
Mr Sheehy said there were strong divisional performances at the bank. 'There is some noise in the numbers because of adjustments at the Capital Markets division, but the underlying profits performance of all the divisions, including Capital Markets, is very positive,' he said.
Official banking sector figures released last week showed a 22% decline in mortgage lending in 2007. During this time AIB grew its mortgages in value by about 14%. 'We expect the likely out-turn in 2008 to be between 7 or 8%,' the bank boss said. He added that this was not a big problem for AIB as it makes about 6% of group profits from its Irish mortgage business. 'Homeloans are a very valuable part of our franchise. It's a key part of our customer relationship, so we intend to remain aggressive in the mortgage market,' Sheehy said.
Mr Sheehy said that house prices are now about 15% off their peak and that there is probably about another 5% to go, which is a positive thing for the market. 'We are now looking at a situation where affordability is really coming back into the market. While we are not making any assumptions about a dramatic recovery in the market in 2008, we are assuming there will be about 45,000 houses built in 2008, and we think that 2009 is probably looking better,' he said.
Asked if AIB would pass on any European Central Bank rates reductions to its customers, given adverse changes in banking worldwide, Sheehy questioned whether in fact the ECB would reduce rates. 'If you look at our track record, as rates have moved up and down we have moved with the rates. A lot of our products are tracker based which assume automatic rate movements,' he stated.
On the Irish economy, the AIB CEO said that the bank thinks the economy is generally in good shape, with some correction in the housing market.
Mr Sheehy said AIB's share price has tracked the general decline in bank share prices Europe wide that have occurred in the last year.
'Irish share prices have suffered a bit more, because I think there has been an Irish discount in our price which we think has not been merited. The market has been turbulent,' he said.
'We are in a position where we have avoided almost all of the problems that are there for international banks. Our funding is very solid and we have minimal exposure to sub-prime. We are in a strong position, our capital is strong, and we think we are in a good position to grow. We are in a good position actually to take advantage of opportunities that are there now because lots of banks have lost a lot of capital,' he stated.
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MORNING BRIEFS - Heineken Ireland has reported revenues of €346m for 2007, up 4% on the previous year as it said its sales performance continues to benefit from people's preference for lager.
*** Oil prices went through a $100 a barrel last night again. Oil hit a new record high of $100.10 late yesterday after an explosion at a Texas refinery and fears that the oil producers OPEC, will cut production at their next meeting. This morning crude is back down at $97.77.
*** Porsche wants to sue London's mayor Ken Livingstone, who intends to introduce a £25 sterling a day congestion charge in London for cars with big engines. Porsche, whose cars are the ultimate emblem of success in the City, says the charge would 'unfairly penalise successful people who generate wealth in the London'.
*** Shabra Plastics announced yesterday that it is creating 35 new jobs in Castleblaney, Co Monaghan.
*** PC and printer maker Hewlett-Packard last night reported strong gains in sales and earnings for the first three months of its financial year. The figures are a sign that the technology giant is gaining market share against rivals and that its cost cutting is paying off. The firm is the world's biggest PC maker, and it earned $2.1 billion in the three month period, up 38% from a year ago.
