AIB has agreed to buy AmCredit, a mortgage business that operates in Latvia, Lithuania and Estonia, for about €40 million.

Analysts said the purchase was small given the overall size of the company, but that it was a good opportunity for the Irish bank to "dip its toes in the water" of a new market. AIB already operates in Poland through Bank Zachodni WBK (BZWBK), in which it has a 70.5 per cent stake.

AmCredit, which has 13 outlets and 145 staff, is part of the Baltic-American Enterprise Fund, a Delaware corporation set up in 1994 as part of a US government initiative to promote investment in the Baltic States. It currently operates as a single product mortgage business, though AIB said it would seek approval to expand the range of banking products.

AIB chief executive Eugene Sheehy welcomed the acquisition, saying it gave the bank an established foothold in the high-growth Baltic market, as well as providing an opportunity to develop the business in a market adjacent to its Polish operations.

AIB has seen significant growth in its Polish business since entering the country in the early 1990s. In a trading update earlier this month, the bank said its Polish loan book is forecast to grow by 20 per cent and deposits by 10 per cent this year, following a profit increase of 56 per cent last year.

In fact, at the group's annual general meeting in May, shareholders were told that business in Poland was so strong that a new branch was opening there every 10 days.

Analysts said the there was no doubt the Baltic region was a growing market and that it was a good one to be getting into.

"This is a good and cheap way for AIB to gain an understanding of how the market operates in these regions," said one Dublin-based analyst.