AIB's share price rose 3 per cent yesterday after the bank said its 2007 earnings per share (EPS) would grow by 13 per cent - in line with an earlier forecast - despite writing down the value of assets due to the credit crunch.
The bank said in a trading statement yesterday that it was writing down €141 million in the value of some of its assets due to the market volatility, but that it was still maintaining its August guidance on full-year EPS growth on the back of lending increases.
The bank also said it expected profits to grow across each of its businesses and at overall group level in 2008.
The writedown comprised a €100 million mark-down in the value of its mortgage portfolio, a charge of $35 million (€24 million) on the revaluing of an asset-backed securities portfolio, and a charge of $25 million from the revaluing of a collateralised debt obligation portfolio at M&T, the US bank in which AIB has a 24 per cent stake.
"To be able to reiterate low-teens earnings growth taking all this on board is better than we would have hoped for," said Emer Lang, financial analyst at Davy's.
Stuart Draper, head of research at Dolmen Stockbrokers, described the level of writedowns as "very comforting".
He said it was "very encouraging" that there was no significant deterioration in the quality of loans, with the bank expecting a bad debt charge of 0.15 per cent of average loans in 2007 before recoveries are included.
The bank said it was forecasting profit growth this year in each of its four operating divisions - Republic of Ireland, capital markets, the UK and Poland. It said loans would grow by around 20 per cent in its capital markets, Irish and UK divisions, and by over 30 per cent in Poland.
"We are trying to get across the message that we are very confident about the future," said AIB group finance director John O'Donnell in a conference call.
"If we can come through the turbulence that we have had in the last number of months in such good condition, it bodes very well."
AIB said 47 per cent of its funding was provided by deposits from about two million customers, which - when combined with wholesale funding maturing after the middle of next year - covers all of its loans.
The bank said the cost of funding had risen but "will not have a significant effect" on this year's performance and is unlikely to cost more than "tens of millions" next year.
The bank's share price rose by almost 6 per cent to €16 at one point yesterday, before slipping back to close at €15.60. The share price is down 30 per cent since the start of this year.
Over that same period, the index of Irish financial stocks has fallen 33 per cent and is heading for its first annual decline since 2002.
