Allied Irish Banks Plc. (NYSE: AIB)
Allied Irish Banks (AIB) is one of Ireland’s major commercial banks, offering a full range of personal and corporate banking services. The Company’s business is conducted through five operating divisions: AIB Bank Republic of Ireland (ROI) (which holds approximately 44% of the group’s assets), Capital Markets (33%), AIB Bank UK (12%), Central & Eastern Europe (7%) and Group (4%).
AIB Bank ROI division consists of the group’s retail and commercial activities in the Republic of Ireland, which also includes its life and pensions subsidiary and other specialist businesses offering credit cards, car finance and leasing products, home mortgages and other services. Through the AIB Bank UK division, the Company provides retail and commercial banking services in Great Britain, where it operates under the name Allied Irish Bank (GB) and Northern Ireland, where it trades as First Trust Bank. AIB Capital Markets comprises Investment Banking, Asset Management, Corporate Banking and Global Treasury activities of the group as well as the Allied Irish America network, which caters for the community and charity sector in the United States. The Company also owns 70.5% of Bank Zachodni WBK S.A., one of Poland’s leading financial institutions.
AIB was incorporated in 1966, and is headquartered in Dublin, the Republic of Ireland.
|
Share Statistics 01-Sept-09) |
|
2007 |
2008 |
% Chg |
Q2 ‘08 |
Q2 ‘09 |
% Chg |
|
|
Symbol |
Net Interest Income, €Mn |
3,418 |
3,867 |
n/a |
3,139 |
1,982 |
n/a |
|
|
Current price |
$6.66 |
Gross marg. |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
52wk Range: |
0.72-27.13 |
Oper. margin |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
Avg Vol (3m): |
2,879,730 |
Net margin |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
Market Cap. |
2.93B |
|
|
|
|
|
|
|
|
Dil. Shares Outst. |
459.22M |
EPS, $ |
0.769 |
2.180 |
n/a |
1.032 |
-0.425 |
n/a |
Source: Reuters.com, SEC Filings.
Financial Summary
In an unaudited financial report, AIB posted heavy losses for the first six months of 2009, reflecting a very challenging period for the Company. The Company cited the worsening economic environment and conditions across its markets and the deterioration in its lending portfolios particularly in its property portfolios in Ireland and the United Kingdom.
The Company reported operating profit before provisions of euros1,738 million , down 6% compared to the same period last year, and a loss of euros786 million . Losses and declines were felt throughout the Company’s operating divisions: AIB Bank ROI posted a loss of euros1,522 million while operating profit was down 33%; AIB Bank UK posted a loss of pounds28 million while operating profit was down 17%.
Capital Markets posted a profit of euros252 million but was down 13% while operating profit was up 55%. Poland recorded a profit of złoty313 million, down 49%, while operating profit declined by 4%. M&T’s dollar contribution was down 71%, with impairment charge of euros200 million taken against investment.
Investment Highlights
Formed in 1966, AIB has brought together three long established Irish banks, namely: the Provincial Bank, founded in 1825; The Royal Bank, established eleven years later; and The Munster and Leinster, the largest of the three banks with the most extensive branch network, which was formed in 1885. The Company has grown to become one of the truly diverse banking and financial services organizations worldwide.
The Company operates principally in Ireland, Britain, Poland and the United States. It has furthered its international presence last year when it acquired interests in AmCredit, a mortgage provider in the Baltic states of Estonia, Latvia and Lithuania, and also entered into an agreement to purchase a 49.99% interest in BACF, a Bulgarian-based specialist provider of secured funding to small and medium businesses. The Company has also established representative offices in several other key locations including Budapest, Paris, Luxembourg, Sydney, Frankfurt and Zurich.
In the United States, the Company’s AIB Capital Markets division comprises Investment Banking, Asset Management, Corporate Banking and Global Treasury activities, as well as the Allied Irish America network, which caters for the community and charity sector. The Company also has a 24.3% stake in M&T Bank Corp., one of the top regional banks in the United States.
The Company’s business is conducted through five operating divisions: AIB Bank Republic of Ireland (ROI) (which holds approximately 44% of the group’s assets), Capital Markets (33%), AIB Bank UK (12%), Central & Eastern Europe (7%) and Group (4%).
Reflecting the weak economic condition, AIB reported heavy losses for first six months of 2009, while offering poor outlook for the remainder of the year. The Company reported a substantial loss of euro872 million ($1.26 billion) in the first six months of 2009, as compared to euro1.28 billion profit it posted for the same period a year ago. Its core market in the Republic of Ireland the neighboring United Kingdom reflected lost deposits and weak business. In addition, the Company’s loan book suffered from customers’ late-payments and non-payments, pushing the Company to write off euro2.37 billion of loans. AIB’s asset quality deteriorated further, most notably in property portfolios, with the overall bad debt charge increasing to 358 basis points and criticized loans increasing to 25.0% of customer loans of which 8.1% were impaired. Meanwhile, the Company reported that customer loans decreased by 2% and customer deposits reduced by 12% with the loan to deposit ratio increasing from 140% at December 31, 2008, to 156% at June 30, 2009.
Through this unprecedented period, AIB, along with its competitor Bank of Ireland accepted euro3.5 billion from the Irish government as a part of the Bank Recapitalization scheme.
AIB expects the economic condition to continue to prevail with little compelling evidence of recovery. And while revenue generation proves to be difficult, AIB looks to maintain an active focus on costs, as well as on asset quality and risk management, while comprehensively dealing with credit issues. For the first half of 2009, AIB’s active management of its cost base yielded a 7% reduction in costs generating a neutral income/cost growth rate gap and a reduction in the underlying cost income ratio of 0.9% to 48.3%, with operating profit before provisions reducing by 6%.
Through its geographically diverse franchises and strong competitive position, the Company looks to emerge from the downturn. At June 30, 2009, the Company’s core tier 1 ratio was 8.5%, while total capital ratio was 10.7%.
In a move to restructure the banking sector, the Irish government is reportedly planning to take over risky property loans with book value of up to 90 billion euros ($129.2 billion) from AIB, Bank of Ireland and other lenders. This move is expected to free up the flow of credit as these companies are temporarily placed in a National Asset Management Agency, or bad bank. In other news, Finance Minister Brian Lenihan insisted that the government won’t have to take ownership of AIB and Bank of Ireland despite the write-down on loans.
Technical Analysis
Source: http://stockcharts.com/h-sc/ui
AIB has traded between $0.72 and $27.13 over the last 52 weeks.
Currently, the MACD for AIB currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.
AIB is trading within its Bollinger Bands. This is a normal condition and suggests that the penny stock is neither overbought nor oversold relative to the recent price action.
With share prices currently above the penny stock’s 13-day moving average, a bullish trend is indicated. Also, a rising moving average signals that there has been buying interest in this small cap stock.
Comparative Analysis
AIB has a negative return on Assets of -0.54%, compared with an industry average of 0.20%; and return on equity of -6.15%, compared with an industry average of 1.83%.
|
Company Name |
Ticker |
Price per |
Mrkt. Cap. |
P/E |
P/S |
||
|
Sept-01-2009 |
symbol |
Share, $ |
$ Mn |
2009 |
2010 |
2009 |
2010 |
|
Barclays PLC (ADR) |
BCS |
|
49,600 |
8.53 |
– |
1.45 |
– |
|
Bank of Ireland (ADR) |
IRE |
|
3,200 |
39.64 |
– |
0.63 |
– |
|
Lloyds Banking Group PLC (ADR) |
LYG |
|
10,300 |
2.43 |
– |
1.10 |
– |
|
Canadian Imperial Bank of Commerce (USA) |
CM |
|
21,500 |
29.99 |
– |
2.66 |
– |
|
Royal Bank of Canada (USA) |
RY |
|
71,400 |
28.92 |
– |
3.23 |
– |
|
Banco Santander S.A. (ADR) |
STD |
|
121,000 |
10.24 |
– |
2.48 |
– |
|
Royal Bank of Scotland Group plc (ADR) |
RBS |
|
50,100 |
– |
– |
0.94 |
– |
|
National Bank of Greece (ADR) |
NBG |
|
17,300 |
17.38 |
– |
2.52 |
– |
|
ICICI Bank Limited (ADR) |
IBN |
|
16,600 |
22.45 |
– |
2.42 |
– |
|
HSBC Holdings plc (ADR) |
HBC |
|
182,000 |
307.41 |
– |
2.26 |
– |
|
Median |
|
|
|
22.45 |
– |
2.34 |
– |
|
|
|
|
|
|
|
|
|
|
Allied Irish Banks plc. (ADR) |
|
2,930 |
– |
– |
0.43 |
– |
|
Source: Reuters.com
Insider Trading Activity
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NET SHARE PURCHASE ACTIVITY |
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Insider Purchases – Last 6 Months |
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Shares |
Trans |
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||||
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Purchases |
N/A |
0 |
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|
Sales |
N/A |
0 |
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Net Shares Purchased |
N/A |
0 |
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Total Insider Shares Held |
708.88K |
N/A |
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||||
|
% Net Shares Purchased |
0.0% |
N/A |
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|
Net Institutional Purchases – Prior Qtr to Latest Qtr |
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|
Shares |
|
|||||
|
Net Shares Purchased (Sold) |
(7,656,800) |
|
|||||
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% Change in Institutional Shares Held |
(1080.1%) |
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Data provided by Thomson Financial |
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