Profits at US bank M&T, in which AIB holds a 24 per cent stake, plummeted 70 per cent in the final quarter of 2007 due to debt write-downs and the continuing turmoil in the American residential property market.

Net income at M&T, the first large US bank to report fourth-quarter results, fell to $64.9 million (€43.6 million), or 60 cents per share, from $213.3 million, or $1.88 per share during the quarter. Operating profit came to $83.7 million or 77 cents per share - well below analysts' expectations of $1.85 per share.

The weak property market forced it to write down debt securities (collateralised debt obligations) by $127 million, which reduced profit by $78 million or 71 cents per share. Profits also fell by $29 million or 27 cents per share as M&T set aside $48 million for credit losses. "We believe that our exposure to residential real estate has been appropriately provided for," said M&T's chief financial officer Rene Jones.

NCB analyst John Cantwell said that while results were lower than expected, they would not have affect AIB's earning forecasts as M&T contributed 6 per cent of the Irish group's profits.

M&T was one of the few large US banks not to have warned investors on how the credit market volatility would hurt fourth-quarter results. It was one of the first lenders to reveal that defaults were spreading beyond subprime mortgages last year. Increasing defaults have curbed profits at the largest US banks, most of which are to report lower profits or losses by the middle of next week.

M&T also reduced earnings by 13 US cents per share for its share of anti-trust litigation involving the credit card network Visa, and by eight cents per share for acquisitions.

M&T's full-year earnings fell 22 per cent to $654 million in 2007. Non-performing loans doubled in the past year to $447 million, while net charge-offs, the cost of bad loans that will not be fully repaid, more than doubled to $53 million.