AIB has told investors that its earnings will be higher than expected this year as continuing strong growth in loans and deposits looks set to swell profits.

In a trading statement issued yesterday, the Republic's biggest bank said its earnings per share for 2005 would be €1.38-€1.40, having previously indicated a range of €1.35-€1.37.

The bank's earnings per share forecasts have been prepared under the new international financial reporting standards, which it says will have less impact on its financial performance than was previously thought.

AIB's statement is an update on its trading performance ahead of its half-year close period. Its shares rose 17 cent to €17.25.

AIB said the strong, consistent and broad-based performance it reported in 2004 was continuing.

Customer demand for its products was particularly strong in the Republic, it said.

The bank is on track to increase deposits by around 15 per cent this year, with loans to personal and business customers expected to grow by more than 20 per cent, it said.

Despite new entrants in the Irish banking market and new structures to make it easier for customers to switch banks, AIB said the impact of competition on its business was largely unchanged. It noted that this was most evident in an increased demand for lower margin deposit and mortgage products.

The statement also signals that its life assurance subsidiary, Ark Life, is on target to achieve a higher operating profit this year.

In the North, its First Trust bank is growing profits in line with expectations and is targeting a 25 per cent increase in loans and a 20 per cent increase in deposits.

Its capital markets division is posting good growth, with loans at its corporate banking division up by around 20 per cent. It said its investment bank was also performing well.

In the UK, its business bank is performing particularly well and is gaining market share with a strong increase in deposits and loans being signalled.

In Poland, AIB expects to achieve good growth this year with deposits up by around 10 per cent, while the percentage increase in its loan book should be in single-digits, it said. Asset quality remains good while its cost management is good, according to the statement.

In the US, M&T Bank, in which AIB has a 22.5 per cent interest, is forecast to produce double-digit growth in earnings per share.