AIB has reported pre-tax profits of €1.28 billion for the first half of this year, down from €1.32 billion in the same period a year earlier. Its adjusted earnings per share fell 4% to 104.9 cent.
The bank called the performance resilient in a 'very testing' environment of difficult conditions on financial markets and slowing economic growth.
But it lowered its outlook for the full year, saying there was no sign of a pick-up in the difficult conditions in many of its markets. As a result, it said, funding costs and bad debts would increase. It now expects full-year earnings to fall by up to 10% to €1.85 to €1.90 per share. It had previously expected a small rise.
AIB warned that there was still a high level of uncertainty in the markets - including about interest rates, exchange rates and unemployment.
Profits in its retail banking business in the Republic of Ireland fell 5%, while capital markets profits were down 8%. Profits in the UK and Poland were slightly higher. The bank has increased its interim dividend to shareholders by 10% to 30.6 cent.
AIB said its lending growth slowed to 6%, but deposits from customers rose by 9%. The bank said its funding position was strong.
Its provision for bad debts was 0.21% of loans. AIB also said 'criticised loans' rose significantly - from 5.3% of loans at the end of 2007 to 7.6%. These are defined as loans which the bank's management are watching more closely than usual. The bank said the increase was mainly attributable to Ireland, and the downturn in property.
A breakdown showed that Republic of Ireland profits were €574m, up 7% but down 5% when profits from the disposal of a business were stripped out. Total income was flat, and loans grew by just 4%. The bank set aside €43m to cover bad debts, almost double the figure for a year earlier.
Capital markets profits fell 8% to €295m. Underlying UK profits rose by 1% to £151m, while profits in Poland grew by 4% to 618 million zloty. But profits from its stake in US bank M&T fell 11%.
AIB said the percentage of its loans that it would classify as 'impaired' had gone up to 1.1% from 0.8% last December. Impaired loans are those that involve a bigger than normal risk of loss, from being partially worthless up to being totally uncollectable.
In Ireland, impaired loans as a percentage of customer loans grew to 1% at the end of June, from 0.7% at the end of December.
AIB shares closed up 50 cent at €7.85 in Dublin.
