M&T Bank, the US bank in which AIB has a 22.5 per cent interest, has reported a 3 per cent rise in after-tax profits to $117 million (€101 million) in the first quarter of 2003.

Earnings per share at the upstate New York operation rose by 4 per cent to $1.23, with basic earnings some 2 per cent lower than in the final quarter of 2002 due to some $4 million in costs incurred as part of the merger agreement with Allfirst, AIB's Baltimore-based unit.

This is the first set of results issued by M&T since the deal with AIB was completed on April 1st. M&T has taken over the 269 branches operated by Allfirst in Maryland, Pennsylvania, Virginia and the District of Columbia.

Announcing the results yesterday, M&T executive president and chief financial officer Mr Michael Pinto said the weakening economy continued to present a challenging environment for the bank but that it was encouraged by the strong growth in its consumer loan portfolio and other lines of business during the three-month period.

"Excluding the effects of Allfirst and assuming that the economy begins to rebound later this quarter, we remain comfortable with our previously stated belief that M&T's full-year results will be within the range of $5.25 to $5.35 of diluted earnings per share," he said.

Mr Pinto added that these estimates were subject to the possible adverse impact of future economic and political conditions. He also welcomed the staff in Allfirst to the bank and said he believed the combined company would be one of the premier financial institutions in the US.

At the end of March, M&T had total assets of $33.4 billion, up from $31.3 billion a year earlier.

Loans and leases rose by 4 per cent to $26.2 billion while deposits increased marginally to $21.9 billion from $21.6 billion.

The bank made provisions of $33 million for credit losses, up from $24 million in the first quarter. It charged off $25 million of loans during that time, up from $16 million in the same period last year and recorded non-performing loans totalling $230 million.

M&T has allowed $445 million, or 1.7 per cent of its total loans, for credit losses and it seized assets worth $17 million, which was down from $22 million in the same quarter last year.

Under the terms of the merger, M&T paid AIB $886 million in cash with the Irish bank taking a 22.5 per cent shareholding. AIB has been using this cash to buy back its shares. To date, it has repurchased 24.8 million shares, which is equivalent to 2.9 per cent of its total shares in issue, at an average price of €13.42, spending €332 million.

The Irish bank has said that its share of profits and dividends earned from the upstate New York-based bank will be paid back to Ireland.