AIB yesterday reiterated earlier profit guidance, saying it is on track for "low double-digit" earnings growth this year, citing strong demand for its products.

In a trading update ahead of its first-half results to be released at the beginning of August, the bank said it is targeting mid to high-teen growth in operating profit before bad debt provisions for the full year and that it expects figures for the first half to be in line with the forecasts for the full year

These expectations are unchanged from the outlook given at the time of the group's full-year results in March and the "low double-digit" earnings growth forecast compares with growth of 25 per cent last year.

In yesterday's statement, AIB said it expects income to grow by a rate "at least 3 per cent higher" than costs in each of its divisions of the Republic, the UK, Poland and capital markets. The US-based M&T Bank, in which it has a 24.2 per cent stake, should start to improve following a challenging first quarter.

The bank said asset quality remains strong and bad-debt provisions are set to remain low.

Shares in the bank fell yesterday, closing down 2.8 per cent, or 61 cent, at €21.18, despite the trading statement being in line with analysts' expectations.

Dealers said the bank was a victim of overall negative sentiment in the market and that the declines were no reflection of the outlook for the group.

In the Republic, AIB welcomed the slowdown in house price appreciation and the supply of new homes following the strong rates of growth in previous years, and said it expects mortgage volumes to increase by a low to mid-teen percentages this year.

A strong performance from the group's business lending division is expected to boost overall loan growth by about 20 per cent. This compares with 32 per cent last year. In deposits, the company is targeting growth of 10 per cent.

In the UK, AIB said the business is performing strongly and forecast 20 per cent growth in both loan and deposit volumes. In Poland, it is also progressing well, with the loan book forecast to grow by 20 per cent and deposits by 10 per cent.

Capital markets meanwhile will see slower growth in the first half due to exceptional gains last year, although over the full year, growth is expected to be strong, the bank said.

The situation is similar with M&T, which AIB expects to make an increased contribution to profits in the full year after a fall in the first half.