First Maryland Bancorp (FMB), AIB's US subsidiary, has reported a 180 per cent increase in net income to $95.7 million (£68 million) in the first quarter of 1998 compared with $34.1 million a year earlier.

The results include a $37.5 million net gain from the sale of FMB's consumer credit card business to Bank of America in February and a $17.3 million after-tax benefit from the repositioning of the bank's investment securities portfolio.

FMB took advantage of the low level of interest rates to sell $1.5 billion of higher yielding investment securities and to repurchase $1.3 billion of securities with a lower yield, AIB's chief financial officer, Mr Declan McSweeney, said.

It made a $30 million gain on the sale but will lose $12 million in income because of the lower yield on the new securities, leaving it with a net positive gain before tax of $18 million in the full year or $11 million after tax.

FMB also sold its residential mortgage origination businesses during the quarter but these were sold at book value and did not materially affect the company's earnings. If the exceptional gains are stripped out, underlying first quarter earnings rose by 20 per cent to $40.9 million.

The results also reflect the impact of the acquisition of Dauphin Deposit Corporation, which was integrated with FMB's business only from the third quarter of last year.

The Baltimore-based bank operates in southern Pennsylvania, Maryland, the District of Columbia and northern Virginia, and Mr McSweeney said the economy there was doing well. Commercial loan growth, in particular, proved strong in the first quarter. It increased by 5 per cent on the previous quarter and was up 15 per cent on the first quarter of 1997.

FMB also enjoyed double-digit growth in retail lending, which rose 15 per cent on the year-earlier period, although it was relatively static in the first quarter. Mr McSweeney said this was normal for the time of year.

He said FMB's leasing business posted a 17 per cent rise in the three months to March 31st and trust and investment advisory income rose by 21 per cent.

Asset quality remained strong with non-performing assets amounting to $88.8 million or 0.51 per cent of total assets. Non-performing loans of $72.5 million were covered by total provisions of $161.3 million.

Costs were down 5 per cent on the previous quarter, mainly as a result of the sale of the credit card and mortgage businesses, Mr McSweeney said.

The net interest margin held steady at 3.89 per cent in the first quarter compared to 3.88 per cent in the fourth quarter of 1997.