AIB generated profits of €2.25 million (£1.77 million) per day after tax for 2000. Just under €1 million per day of these profits were made in the Irish market, where AIB is the biggest retail bank.

The profits are huge in absolute terms. But profits should not be considered in isolation - they need to be related to the scale of the operation and the amount of capital invested to achieve them.

At 21.6 per cent, AIB's return on average equity compares with an average of about 19 per cent for UK banks and just more than 18 per cent for European banks. While average performances cover a wide range of outcomes, AIB's results are at the top end of banking performance.

A strong Irish economy has helped enhance the AIB outcome. Among the factors underlying this performance are falling Irish tax rates which stimulate post-tax profits, a better bad debt profile - mainly because of the strength of the Irish economy - and good growth in income, particularly non-interest income such as fees and commissions.

The strong returns could suggest that charges for products and services in the Irish market are higher and therefore more profitable for the bank than those which its rivals in more competitive overseas markets can apply. There is some evidence to suggest that Irish banks are vulnerable to competition from lower-cost entrants into the market. For instance, they were forced to - and possessed the room to - improve deposit rates and reduce mortgage interest rates following the arrival of Northern Rock and Bank of Scotland in the Irish market.

But a price earnings ratio at a discount of about 30 per cent to European banks and about 10 per cent to UK banks could indicate that the market considers that the bank's current level of profitability will not be sustained.

On the lending/deposit business, net interest margins have fallen and at around 2.7 per cent for AIB Bank - are now lower than an average level of about 3 per cent in the UK.

Profits on non-interest income business - mainly fees and commissions on insurance, investment, advisory and other services - are now probably more lucrative for the bank.

Generating strong profits is the best way to ensure survival, mount a defence against takeover and to protect the jobs of employees. In running AIB, chief executive Mr Tom Mulcahy has a number of stakeholders to consider, including shareholders, employees and customers. Shareholders will be happy with the latest results with a 15 per cent rise in their dividends to 38.75 cents. Employees will be concerned about the future of the jobs as the banking market changes but strong profit levels provide some insulation.

Customers will be concerned that they are paying over the odds to boost the profits of the bank. Competition in the market is their best form of protection against funding excess profits. But until the arrival of additional overseas rivals and the advent of new financial services regulation, customers have very little protection against the charges imposed by strong financial institutions and the decisions taken by them.