Allied Irish Banks (AIBG.L) 2008年年度報告「LSE」.pdf

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1、4Chairmans statement6Group Chief Executives review8Corporate Social Responsibility12Financial Review-Business description-Financial data-5 year financial summary-Management report-Capital management-Critical accounting policies-Deposits and short term borrowings-Financial investments available for s

2、ale-Financial investments held to maturity-Contractual obligations-Off balance sheet arrangements59Risk Management-Risk Factors-Framework-Individual risk types-Supervision and regulation106Corporate Governance-The Board&Group Executive Committee-Directors Report-Corporate Governance statement-Employ

3、ees119Accounting policies136Consolidated income statement137Balance sheets139Statement of cash flows141Statement of recognised income and expense142Reconciliations of movements in shareholders equity146Notes to the accounts255Statement of Directors responsibilities in relation to the Accounts256Inde

4、pendent auditors report258Additional information276Principal addresses278IndexContents1Forward-Looking InformationThis document contains certain forward-looking statements within the meaning of the United StatesPrivate Securities Litigation Reform Act of 1995 with respect to the financial condition,

5、results ofoperations and business of the Group and certain of the plans and objectives of the Group.In particular,among other statements,certain statements in the Chairmans statement,the Group Chief Executivesreview,and the Financial Review and Risk Management sections,with regard to management obje

6、ctives,trends in results of operations,margins,risk management,competition and the impact of changes inInternational Financial Reporting Standards are forward-looking in nature.These forward-lookingstatements can be identified by the fact that they do not relate only to historical or current facts.F

7、orward-looking statements sometimes use words such as aim,anticipate,target,expect,estimate,intend,plan,goal,believe,or other words of similar meaning.Examples of forward-looking statementsinclude among others,statements regarding the Groups future financial position,income growth,loanlosses,busines

8、s strategy,projected costs,capital ratios,estimates of capital expenditures,and plans andobjectives for future operations.Because such statements are inherently subject to risks and uncertainties,actual results may differ materially from those expressed or implied by such forward-looking information

9、.By their nature,forward-looking statements involve risk and uncertainty because they relate to events anddepend on circumstances that will occur in the future.There are a number of factors that could causeactual results and developments to differ materially from those expressed or implied by these

10、forward-looking statements.These factors include,but are not limited to,the effects of continued volatility in creditmarkets,the effects of changes in valuation of credit market exposures,changes in valuation of issued notes,changes in economic conditions globally and in the regions in which the Gro

11、up conducts its business,changes in fiscal or other policies adopted by various governments and regulatory authorities,the effectsof competition in the geographic and business areas in which the Group conducts its operations,theability to increase market share and control expenses,the effects of cha

12、nges in taxation or accountingstandards and practices,acquisitions,future exchange and interest rates and the success of the Group inmanaging these events.Any forward-looking statements made by or on behalf of the Group speak only asof the date they are made.AIB cautions that the foregoing list of i

13、mportant factors is not exhaustive.Investors and others shouldcarefully consider the foregoing factors and other uncertainties and events when making an investmentdecision based on any forward-looking statement.In light of these risks,uncertainties and assumptions,theforward-looking events discussed

14、 in this Annual Report may not occur.The Group does not undertake torelease publicly any revision to these forward-looking statements to reflect events,circumstances orunanticipated events occurring after the date hereof.23You will note this years Annual Report includes additional information that w

15、as not included inour 2007 and earlier reports.This additional information primarily reflects material that isresponsive to the disclosure requirements that are applicable to AIB by virtue of the listing of itsordinary shares on the New York Stock Exchange and its reporting obligations under the USS

16、ecurities Exchange Act of 1934.In an effort to ensure all investors,wherever they are based,areprovided with substantially the same information at the the same time,we have decided this yearto include all relevant information in one report in line with a practice being adopted by anincreasing number

17、 of major European and other companies that have United States as well asdomestic reporting obligations.The turbulence experienced in the global economyand financial markets in the second half of 2008 was without precedent in our lifetimes.Its strengthand ferocity took most people by surprise.AIB Gr

18、oup,in common with hundreds of financialinstitutions around the world,was not immune tothe effects of a downturn that turned rapidly into asevere recession.Im acutely conscious that the consequences ofthese events have greatly affected our shareholdersand many of our customers and this is a matter o

19、fdeep regret to me.Let me try and update you on AIBs current position.CapitalAIB has always prided itself on being a well-capitalised bank.In recent months,it becameclear that the markets were looking for a level ofcomfort that was higher than what was previouslyregarded as adequate.On 11 February t

20、his year we accepted the IrishGovernments offer of new capital on the samebasis as Bank of Ireland.This agreement,which has to be approved by you,our shareholders,the European Union andthe regulators,will see the Government injectingtotal core Tier 1 capital of 3.5 billion into AIB inthe form of pre

21、ference shares giving certain rightsto the Minister for Finance,including the right tosubscribe to purchase 25%of the ordinary sharecapital of the enlarged equity of the bank.Assuming completion of the transaction,the effect of this recapitalisation would have beento increase our core Tier 1 capital

22、 ratio at the endof December 2008 to approximately 8.4%,our Tier 1 ratio to approximately 10.0%and our totalcapital ratio to approximately 13.1%.We believe this agreement with the Governmentstrikes the right balance between the interests ofshareholders,the need to provide a fair return tothe Irish t

23、axpayer and the provision of support forthe Irish economy.The Government guaranteescheme was also a vital part of the moves made to increase stability in the Irish financial sector.AIB welcomes the Governments stated intentionto look at ways of extending this scheme beyond 2010.The significant signs

24、 of stress as a result of theadverse economic conditions at the end of 2008generated a bad debt charge of 1.8 billion,equivalent to 1.37%of average loans.The Government is to examine proposals for themanagement and reduction of risks connected withland and property in banks like AIB.This will bedone

25、 as a matter of priority and in consultationwith the European Central Bank and the relevantEuropean Union authorities.RemunerationAIB shares the view of the Government that payrestraint is important in the current economicconditions.The Government has also made it clearthat significant changes in th

26、e remunerationstructures of banks are needed.In 2008,and again this year,the Group ChiefExecutive,the non-executive directors and myselfvoluntarily waived remuneration.For more details,see Note 59 to the Financial Statements.AIB is co-operating with the Covered InstitutionRemuneration Oversight Comm

27、ittee(CIROC),which was appointed by the Minister for Finance.AIB will consider the CIROC report on theremuneration plans of senior executives of the Irishbanking institutions.Chairmans Statement4Board changesThere were changes in the composition of the AIBBoard in 2008 and this year.Adrian Burke and

28、 Jim OLeary retired as non-executive directors inApril 2008 while Bernard Somers resigned fromthe board,also as a non-executive director,inDecember.Senior Independent Director MikeSullivan is to retire from the board at the AIBAGM 2009.His successor as Senior IndependentDirector is David Pritchard.I

29、 wish to thankAdrian,Jim,Bernard and Mike for their valuablecontribution over the years.In January this year,as part of the agreement withthe Government,Declan Collier and Dick Springwere appointed to the AIB Board as non-executivedirectors and I welcome them to the board.OutlookWe expect the operat

30、ing environment to remainextremely difficult throughout 2009.It will be atime of global uncertainty with the Irish economyin a very challenging phase.A prolonged economic downturn and dislocationof global credit markets will reduce therecoverability and value of AIBs assets and requirean increase in

31、 the groups level of provision for impairment losses.Markets worldwide are experiencing severetightening in the availability and duration ofunsecured liquidity and term funding.If theseconditions continue,AIBs access to traditionalsources of liquidity will be further constrained.I realise that AIBs

32、shareholders will want to knowwhen the steep decline in our share price will bereversed.There is no easy answer to that question.The market view of AIB,as reflected in the shareprice,is outside our control.What we need to do is focus on the fundamentals.AIB is learning from the events of recent year

33、s.We are working through the issues around our asset quality,focusing on our funding positionafter the strong growth in our deposit base last yearand we are tightly managing our costs.We are determined to ensure AIB remains asustainable,responsible and profitable company.The restoration of sharehold

34、er value is the goal of everyone who works at AIB.Dermot GleesonChairman52008 was a very disappointing year for AIB.We didsee good growth in operating profit beforeprovisions but net profit and earnings per share weresignificantly down on 2007 levels.There also was adecrease in our share price of cl

35、ose to 90%in 2008.AIB,like other banks,was particularly affectedby the contraction of the Irish commercial andresidential property sectors.It was one of a numberof factors contributing to the decline in shareholdervalue over the year a situation which I regret.Despite the turmoil and the recession,A

36、IB staffcontinued to demonstrate real commitment to theorganisation and I want to thank them for theircontribution and hard work throughout achallenging year.Divisional CommentaryAIB Bank in the Republic of Ireland had a verydifficult year.The Irish economy moved intorecession with asset values drop

37、ping rapidly.The charge for impaired loans rose significantlyfrom 0.16%in 2007 to 1.74%of average loans for2008.AIB Bank maintained its operating profitbefore provisions at 2007 levels and supportedcredit growth in the home mortgage,small andmedium enterprise and personal lending markets.Loan balanc

38、es were up by 5%overall and mortgagelending rose by 10%.AIB Banks operating expenseswere down by 7%through early identification ofcost savings and strong management action whichdelivered efficiencies across the division.AIB Capital Markets enjoyed a solid performanceacross all its franchises with it

39、s operating profitbefore provisions increasing by 52%.The divisionsimpaired loan charge was 0.6%in 2008.In 2007,the division had net writebacks representing 0.08%of average loans.Capital Markets Global Treasury unit made profitbefore tax of 213 million in 2008,a strongperformance when compared with

40、2007 when itbroke even.Wholesale Treasury performed verystrongly,particularly from cash management,interest rate and liquidity management activities.Corporate Bankings profit before taxation declinedby 13%due to an increase in provisions for loanimpairment.Investment Bankings pre-tax profitwas down

41、72%with declining asset values resultingin lower trading and income.AIB Bank UKs operating profit before provisionsof 323 million was in line with 2007.In difficultmarket conditions,the division focused on depositgathering,lending returns and cost management.Good growth was achieved in underlying ne

42、t interest income as customer loan and depositbalances increased by 7%and 22%respectively,themajority of loan growth occurring in the first sixmonths.In the second half of 2008 the recession led to an increase in the number of customersexperiencing cash flow difficulties and the impairedloans charge

43、 rose to 1.11%of average loans in 2008from 0.08%in 2007.Allied Irish Bank(GB)saw its net interest incomegrow by 2%in 2008 reflecting continued success atmargin management and a strong increase incustomer deposit balances,which have grown by29%since December 2007.The operatingperformance was achieved

44、 through a combinationof active management of interest income andsuccessfully targeted reductions in the underlyingcost base.First Trust Banks customer loan balanceswere maintained at the same level as last year,withthe continued focus on balance sheet managementleading to an improvement in lending

45、margins along with a 9%growth in customer deposit balances.AIBs newest division Central&Eastern Europe(CEE)was formed in 2008.It brought togetherAIBs interests in BZ WBK in Poland along withthose in Bulgaria and the Baltic region.Our operations in Poland saw profit before taxdrop 9%in 2008.This refl

46、ected trends in a Polisheconomy which slowed markedly,especially in theGroup Chief Executives Review6second half of 2008.Mortgage lending grew by49%and other personal lending was up 55%whilebusiness lending rose by 37%with strong growthin the corporate and SME sectors.Customerdeposits increased by 4

47、1%following a strongfocused drive for resources throughout 2008.Business deposits grew strongly,particularly in thefourth quarter.The provision charge of 1.16%onaverage loans was up from 0.03%in 2007.In February 2008,AIB acquired the AmCreditmortgage business in the Baltic states of Latvia,Lithuania

48、 and Estonia.In August,the group alsoacquired a 49.99%shareholding in BACB,a lenderto small and medium sized businesses in Bulgaria.The acquisitions of AmCredit and BACB resultedin losses in AIB of 33 million and 56 millionrespectively including the write-off of goodwillof 15 million in AmCredit and

49、 57 millionin BACB.AIB has a 24.2%share in US bank M&T.Its euro contribution to AIB was affected by theweakening of the US dollar rate relative to theeuro in recent times.AIBs share of M&Tsafter-tax profit for 2008 was 94 million.Key ObjectivesAll banks are operating in a difficult businessenvironme

50、nt which looks set to continue.The key objectives for AIB during this testing time include:Actively managing our risk to minimise bad debt charges.Maintaining our position in the markets and sectors in which we operate.Continuing to manage our cost base in the lower income growth environment to ensu

51、re productivity levels remain high relative to our peer banks across Europe.Maintaining our capital ratios at a level that continues to fully support our business.The successful pursuit of these objectives willenable AIB to continue to support both itscustomers and economic activity in general.The F

52、utureAIB is very much open for business in 2009.Everyone at AIB is determined to rebuild theorganisation as a strong and independent institution.We are grateful to the Irish Government for theirrecapitalisation package and we are committed toplaying our part in meeting the needs of viablesmall and m

53、edium sized businesses and first timehouse buyers in Ireland.Across our other franchisesin Central and Eastern Europe,Poland,the UK,and the US,we will do what we can to supporteconomic revival.Assuming completion of the Governmentsproposed preference share investment in AIB,our capital position will

54、 improve significantly.Our well spread customer deposit base is anadditional strength.I continue to have a strong belief in the quality andresilience of the AIB Group and am confident thatthe depth and diversity of the customer franchisesbuilt by our people will stand us in good stead.Eugene SheehyG

55、roup Chief Executive7At AIB Group our commitment to corporate socialresponsibility extends throughout the organisation.AIB supports the voluntary approach to CSR andhas a commitment to build on existing practicesand policies.Our website information on all our activities.Here aresome highlights for 2

56、008.MarketplaceCorporate responsibility in the marketplaceconcerns relations with customers,suppliers andbusiness partners.Our customers are thefoundation of our business.The security and confidentiality of our customersinformation is very important.AIBs internetbanking service continues to grow,wit

57、h forexample,over 5 million customer log ins to theservice and 1.5 million internet online paymentsduring July 2008.AIBs aim is to protect this information on theInternet as we do through our other bankingchannels.To support this,a security demo forinternet banking customers was launchedexplaining t

58、he types of online threats which canaffect customers and showing them how torespond to these threats.Topics include phishing,reporting online fraud,logging in securely andstaying safe online.In the UK,Treating Customers Fairly(TCF)iscentral to the Financial Services Authoritys retailstrategy.During

59、2008,Allied Irish Bank(GB)andFirst Trust Bank have been embedding TCF toensure continuous delivery of fair outcomes forretail consumers based around corporate culture,product design,clear information,suitable adviceand meeting customer expectations.In additiontheir personal banking customer literatu

60、re itemswere awarded the Plain English crystal mark.Enterprise Services&Technology and GBNITechnology Services were formally accredited withISO/IEC 20000 certification.This award is one ofthe highest standards available world-wide andreflects AIBs commitment to operationalexcellence and the ability

61、to deliver IT services asan integrated set of processes.BZ WBK was awarded the Customer OrientedCompany award for the second time by OsrodekCertyfikacji i Oponiowania.This awardacknowledges the excellent customer serviceprovided by staff in branches in Poland.AIB has a Code of Business Ethics which

62、is basedon the corporate values of honesty,integrity andfairness.The code continued to be embedded withstaff undertaking courses to support awareness andlearning,including topics such as Fraud Awarenessand Ethics4Everyone.In support of Corporate Responsibility week inIreland,AIB hosted a seminar tit

63、led Sustainabilityin the Supply Chain for Business in theCommunity.The seminar discussed sustainableprocurement in supply chains encompassing bothchallenges and benefits.Research undertaken during 2008 by OnsideResearch in Ireland showed that AIB climbed tothe top position at 78%,up 4%on 2007,in ter

64、msof being seen as a company taking its socialresponsibility seriously.This was the highest scoreever recorded for any brand in the nine years ofthis research.EnvironmentDuring 2008,AIB continued on its journey toAdd more green and review practices to ensurethat environmentally responsible behaviour

65、 wasadopted into our business practices.Research undertaken by AIB shows that 79%ofpeople said they would like their bank to promoteenvironmentally responsible initiatives.eStatements,where the customer opts for online statementsrather than paper statements,continue to beembraced,and come with a com

66、mitment by AIBto donate 5 to the Add more green fund,forCorporate Social Responsibility(CSR)8each customer who opts to receive their statementelectronically.Over one million eStatements weredelivered in 2008.As a result of changed legislation,AIBs shareholderswere urged to go green and opt for elect

67、roniccopies of the groups annual report and accounts.Asa result in the coming year there will be areduction of over 11 million printed pages.In the UK Division,a focused programme ofactivity took place including the adoption of theRecycle Now logo for marketing literature;charity donations rather th

68、an sending Christmascards and reductions in both energy usage and thelevel of waste going to landfill.AIB continued to reward customers for theirsupport of green initiatives and offered an Addmore green cashback offer on AIB Car Insurancewhere the customer had purchased a low carbonemissions car.Thi

69、s ensured the customer benefitedfrom not only helping the environment but alsofrom lower car insurance.Two preservation projects managed by the World Land Trust in South America weresupported by the Add more green fund.The Trustis working to preserve land in both Paraguay andBrazil protecting a uniq

70、ue habitat home to anumber of important animal species.This includesthe puma and eight species of armadillo as well asrestoring and preserving the rainforest habitat,re-introducing species and carrying out localeducation programmes.As well as encouraging others,AIB has taken steps tomanage its own e

71、nvironmental impacts:The AIB company car policy was revised so thatas cars as replaced,they are changed to diesel carsonly.This change will minimise harmfulemissions and will reduce AIBs CO2emissions inIreland by 2%.Print on demand(PoD)technology has beenrolled out at head office locations in Irelan

72、d andthe UK with printers automatically defaulting toblack and white and double sided printing.It isestimated that there will be a reduction in thecarbon footprint of the printing facilities atBankcentre alone of just over 50%.In the UKDivision the PoD project target is to reduce theamount of paper

73、used there by 6.5 million sheetsof A4 paper per year.Allied Irish Bank(GB)will reduce emissionsthrough an initiative to replace water coolers withtap water dispensers,thus reducing the need todeliver bottled water.The restaurant at head office at Bankcentre,Dublin caters daily for up to 5,000 users,

74、whichpresents challenges in terms of being green.Anumber of green initiatives have been introducedto include:serviettes made from recycled paperand compostable cups made from corn starch.Kitchen food waste goes through a state of the artwaste system,where all food is macerated,waterextracted and the

75、 by product processed intocompost which is collected and reused.In 2008,AIB worked with other institutions and theIrish Banking Federation(IBF)to develop the IBFClimate Change Principles for the Financial Sector.These principles are designed to demonstrate thefinancial sectors support for measures i

76、n Ireland,which help to promote environmental sustainabilityand mitigate climate change.AIB participated in the Carbon Disclosure Project andthe Dow Jones Sustainability Index,which allowedAIB benchmark its environmental performance andascertain areas for development and improvement.BZ WBK became a

77、signatory of the UN GlobalCompact,an initiative by which companies can joinUN agencies,labour leaders and civil society insupporting principles in the areas of human rights,labour,anti-corruption and environment.9AIB received two prestigious environmental awardsthis year:At the ICT(representative gr

78、oup for the hightech/knowledge sector within IBEC,the IrishBusiness EmployersConfederation)ExcellenceAwards,the AIB Windows Server Virtualisationproject won the Green IT Initiative of the Yearaward.This project means AIB will need fewerservers,which are that vital bit of equipmentneeded to deliver-o

79、r serve files,data,businessapplications and print resources to each computerin AIB,thus using less electricity.At the Sustainable Energy Ireland awards,AIBreceived an award for an energy efficiencyinitiative in Bankcentre,Dublin which uses aCombined Heat and Power(CHP)plant.Inone year the CHP plant

80、has provided morethan eight million units of electricity.The plantalso provides energy for the complexs hotwater supply and chilled water for air-conditioning.It has also reduced AIBs carbonfootprint by nearly 3,500 tonnes.People AIB wants to create a workplace that motivates anddevelops employees t

81、o achieve success,whilstmaintaining an effective work-life balance.Learning and development activities receive highpriority in AIB.During 2008,in excess of 60,000 e-learning training sessions were completed.Inaddition,AIB supports and encourages staffdevelopment through formal education.Forexample,i

82、n 2008,125 staff in the UK divisionattained educational qualifications in topics such asAdministration,Customer Service,Management,Sales&Marketing,HR and Employment Law andFinancial Services.The AIB Choices Policy,which offers a range ofoptions,including personalised hours and jobsharing was reviewe

83、d and enhanced,demonstratingAIBs continued commitment to family friendlywork arrangements.BZ WBK also introducedfamily friendly arrangements.A revised Absence Management policy wasintroduced,which enables AIB to provide supportto staff who are ill,while at the same timeminimising the impact of sickn

84、ess absence oncustomers and colleagues.The Partnership between AIB and the Irish BankOfficialsAssociation(IBOA),the recognised tradeunion for bank officials in the Republic of Ireland,Northern Ireland and Great Britain,continued in2008.Across AIB,55 managers and IBOArepresentatives were trained and

85、over 1,000 staffbriefed on the introduction of Local Partnershipinto their area.Improvements to the UK Defined ContributionPension Scheme were also agreed with the IBOA.Key changes include:increased contributions by thebank,mandatory contributions by members,introduction of age-related scale of cont

86、ributions,automatic enrolment of new members into thenew arrangement and an additional payment topension accounts for existing staff who opt to jointhe new arrangements.10Employee Information AIB Group20072008Total employees*25,89825,919Voluntary attrition rate(%)6.8%5.39%Permanent/Temporary Staff(%

87、)90.1%(P)9.9%(T)90.9%(P)9.1%(T)Part-time/Full time Staff9.7%(PT)90.3%(FT)9.2%(PT)90.8%(FT)Male/Female employees(%)35%(M)65%(F)35.5%(M)64.5%(F)*Reflects full staff headcount.Includes staff on leave arrangements eg maternity,career break etc.Capital Markets Business Support Services haveretained the p

88、restigious FS Platinum ExcellenceThrough People Standard.This is Irelands national standard for human resource developmentfor which accreditation and assessment processesare very intensive.AIB received the Responsible Employer award atthe 2008 Chambers Ireland Presidents Awards.Thiswas awarded in re

89、cognition of AIBs Staff WellbeingProgramme,which has the key objective ofproviding a health and fitness at work programmethat supports early intervention,supporting the factthat prevention is better than cure.Other awards received included:1.In Poland,BZ WBK won an award at theHuman Resources Manage

90、ment Leader Awardsfor its innovation in creating new tools for HRmanagement in the bank.2.A gold medal in the Hotel&Catering Reviewawards.This was won by the Catering Team atBankcentre,Dublin for excellence in menuconstruction and rotation,nutrition,creativity,brand development,marketing and custome

91、r care.CommunityEvery year AIB Group supports large numbers ofindividuals,groups and organisations through anumber of different programmes and initiatives.Our principal programme,the Better Irelandprogramme donated almost 2m to 547 deservingchildrens groups in Ireland.Each community usedtext votes t

92、o decide which group would receive10k from their local AIB Branch.Over 300,000text votes were received with proceeds going to thecharities involved.In addition,four flagship projectswere also launched.They will receive 1.4m overtwo years,which will enhance the lives of over 950children across Irelan

93、d.In Poland,the BZ WBK Foundation supportedlocal organisations and schools through grantprogrammes,dedicated to disadvantaged children,with 300k allocated through material andeducational support.Comprehensive details of community activities areon our CSR website.Here are some highlights:Two communit

94、y-based sponsorships undertaken were:1.AIB Street Performance World Championshipfestival took place in Dublin where over 80,000 people enjoyed this free event of over120 shows.2.AIB sponsored a series of educational films andworkshops for schools at the Cinemagic Filmand Televisions Festival for You

95、ng People.In addition,staff across the group took on thechallenges of supporting communities:1.In the UK,Newcastle upon Tyne branch staffran their 12th Shamrock fundraising ball whichcontributes 22k each year to local charities.Coventry and Southampton branches haveraised similar funds for local cha

96、rities.2.The AIB Staff Florin Fund is a voluntarysubscription fund,established in 1942,which hasraised 3m in funds.This year they presented acheque for 350k to the Society of St.Vincentde Paul,the largest voluntary charitableorganisation in Ireland.3.Staff at Bankcentre raised almost 50k for 20 diff

97、erent charities which they supported.4.In AIB Corporate Banking North America,staffundertook a wide range of activities in supportof charities and also commenced a MatchingGifts programme where AIB matches staffcontributions to charitable causes up to amaximum of$1,000 per annum.AIB was awarded a hi

98、ghly commended CSR awardand a JudgesSpecial Recognition Award at theBusiness to Arts Awards 2008 in Ireland for itspartnership with theatre company Rough Magic.Thisgrassroots community programme supports emergingtheatre artists in Ireland in reaching their potential.Further details at description1.1

99、 History131.2 The businesses of AIB Group141.3 Organisational structure161.4 Strategy171.5 Competition 181.6 Economic conditions affecting the Group 192.Financial data-5 year financial summary213.Management report 244.Capital management475.Critical accounting policies 506.Deposits and short term bor

100、rowings 537.Financial investments available for sale 558.Financial investments held to maturity 579.Contractual obligations 5710.Off-balance sheet arrangements 58Financial review 121.1 HISTORYAIB,originally named Allied Irish Banks Limited,was incorporated in Ireland in September 1966 as a result of

101、 the amalgamation ofthree long established banks:the Munster and Leinster Bank Limited(established 1885),the Provincial Bank of Ireland Limited(established 1825)and the Royal Bank of Ireland Limited(established 1836).Since that time,it has grown to become the largest Irish-based banking group based

102、on market capitalisation at 31 December 2008.AIB Group,comprising Allied Irish Banks,p.l.c.and its subsidiaries,conducts a broad retail and commercial banking business inIreland,which,in addition to being one of the leading national branch networks,includes significant corporate lending and capitalm

103、arkets activities from its head office at Bankcentre and from Dublins International Financial Services Centre.The Group has conducted significantly greater international activities than its principal Irish based competitors since the early1970s.It has established retail and corporate banking busines

104、ses in the United Kingdom(including Northern Ireland,where it alsoenjoys bank note issuing powers),Poland and the United States,primarily through its 24.2%non-consolidated ownership interest inM&T Bank Corporation(“M&T”),a New York Stock Exchange-listed commercial banking business based in Buffalo,N

105、ew York,with significant businesses in Maryland,Pennsylvania and other Eastern states.As of 31 December 2008,M&T,on a US GAAP basis,reported consolidated total assets of$66 billion,deposits of$34 billion and shareholdersequity of$6.8 billion.AIB owns thisshareholding by virtue of the 2003 integratio

106、n of the previously wholly owned Allfirst Financial Inc.(Allfirst)into M&T.The Group also has overseas branches in the United States,Germany,France and Australia among other locations,and a subsidiarycompany in the Isle of Man and Jersey(Channel Islands).It also has representative offices in a numbe

107、r of States in the United States.In July 1991,AIB acquired TSB Bank Northern Ireland p.l.c.(“TSB NI”),a bank with 56 branches in Northern Ireland.InOctober 1996,AIBs retail operations in the United Kingdom were integrated under the direction of a single board and the enlargedentity was renamed as AI

108、B Group(UK)p.l.c.with two distinct trading names First Trust Bankin Northern Ireland and Allied IrishBank(GB)in Great Britain.The Group entered the Polish market in 1995,when it acquired a minority interest in WBK.Since that time,it has completed anumber of other transactions in Poland and through i

109、ts 70.5%interest in Bank Zachodni WBK S.A.(“BZWBK”)is responsible for themanagement of a retail and commercial business that had consolidated total assets of 13.9 billion,deposits of 10.3 billion andshareholdersequity of 1.3 billion at 31 December 2008.In January 2006,AIB completed a transaction tha

110、t brought together Hibernian Aviva Life&Pensions Limited(an Aviva Groupp.l.c.subsidiary)and AIBs life assurance subsidiary Ark Life under a holding company Hibernian Life Holdings Limited(“HLH”).Asa result,AIB owns an interest of 24.99%in HLH and has entered into an exclusive agreement to distribute

111、 the life and pensionsproducts of the venture.Financial review-1.Business description131.2 THE BUSINESSES OF AIB GROUPThe business of AIB Group is conducted through four major operating divisions as described below:AIB Bank Republic of Ireland divisionThe AIB Bank Republic of Ireland(“ROI”)division,

112、with total assets of 80.8 billion at 31 December 2008 encompasses theGroups retail and commercial banking operations in Ireland,Channel Islands and Isle of Man;AIB Finance&Leasing;the CardAcquiring and Card Issuing businesses;Wealth Management and AIBs share in Hibernian Life Holdings Limited(“HLH”)

113、,the lifeand pensions venture with Aviva.AIB Bank ROI provides banking services through a distribution network of some 273 locations(182 branches,87 outlets and 4 business centres),and in excess of 800 automatic teller machines(“ATMs”).AIB cardholders also haveaccess to over 2,000 other bankATMs in

114、Ireland,56,000 LINK ATMs in the UK as well as close to 1 million Visa Plus servicedATMs worldwide.AIB has an agency agreement with An Post,the national post office network,which enables AIB personal andbusiness customers to carry out basic transactions at over 1,000 post office locations nationwide.

115、AIB also offers customers a debitcard,which is co-branded Laser and Maestro and secured by the CHIP and PINtechnology.This card provides customers Point ofSale access domestically via the Laser scheme(Laseris operated jointly with other financial institutions in Ireland),ATM accessdomestically via b

116、i-lateral agreements and internationally at any Point of Sale or ATM that displays the Maestro symbol.Through thebranch network,the division provides a broad suite of savings and investment products,loans and overdrafts,home mortgages,paymentservices and foreign exchange facilities,and also issues V

117、isa and Mastercard credit cards.In addition,the division offers secureinternet and telephone banking services for personal customers,who can avail of a range of traditional banking products and services.For business customers,an Internet based banking service called iBusiness Banking is available.It

118、 offers secure internet bankingand a comprehensive cash management solution,including domestic and cross-border payment functionality.Branch banking servicesare provided through a comprehensive relationship management structure to a full range of customer segments,including individuals,small and med

119、ium sized businesses(“SMEs”),farmers,and large commercial and corporate clients.AIB Finance&Leasing is AIBs asset financing arm in Ireland.It markets its services through the AIB branch network andthrough intermediaries with whom it has established relationships,such as motor dealers,equipment suppl

120、iers,brokers and otherprofessionals,including lawyers,accountants and estate agents.It also lends directly to customers.Its lending services include vehicle,equipment and fleet leasing,retail and investment property loans,vehicle and equipment hire purchase,insurance premium financingand personal lo

121、ans.AIBs Wealth Management unit comprises Private Banking and Investment&Protection.It provides a wide range of wealthmanagement offerings,including retirement,investment and estate planning.HLH provides a full range of life and pensions products in this sector.In Ireland,general insurance products

122、are sold in the branchnetwork through alliances with partners in the insurance industry.Capital Markets divisionThe activities of AIB Capital Markets,with total assets of 60.5 billion at 31 December 2008,comprise corporate banking,globaltreasury and investment banking,which includes asset management

123、 and stockbroking activities.These activities are delivered throughthe following business units:AIB Corporate Banking;Global Treasury;Investment Banking;and Allied Irish America(“AIA”).AIB Corporate Banking provides a fully integrated,relationship-based banking service to top-tier companies,both dom

124、estic andinternational,including financial institutions and Irish commercial state companies.AIB Corporate Bankings activities also includeparticipating in,developing and arranging acquisition,project,property and structured finance in Ireland,the UK,North America,Continental Europe and the Asia Pac

125、ific region.Corporate Banking has also originated and manages four Collateralised DebtObligation(“CDO”)funds.The cumulative size of the CDO funds at 31 December 2008 was 1.6 billion.Global Treasury,through its treasury operations,manages on a global basis the liquidity and funding requirements and t

126、he interestand exchange rate exposure of the Group.In addition,it undertakes proprietary trading activities,and provides a wide range of treasuryand risk management services to corporate,commercial and retail customers of the Group.It also provides import and export relatedfinancial services through

127、 its international activities.Investment Banking provides a comprehensive range of services including corporate finance through AIB Corporate FinanceLimited;corporate finance and stockbroking through Goodbody Stockbrokers;outsourced financial services through AIBInternational Financial Services Limi

128、ted;and asset management through AIB Investment Managers Ltd(“AIBIM”).AIBIM managesassets principally for institutional and retail clients in the Republic of Ireland.Investment Banking also includes the management ofproperty fund activities(principally in Polish properties).Financial review-1.Busine

129、ss description14AIAs core business activities are aimed at the not-for-profit sector,operating principally from New York and Los Angeles.AIB Capital Markets is headquartered at Dublins International Financial Services Centre and has operations in a number ofprincipal UK,US and Polish cities;and in F

130、rankfurt,Paris,Luxembourg,Budapest,Zurich,Toronto and Sydney.AIB Bank UK divisionThe AIB Bank UK division,with total assets of 22.0 billion at 31 December 2008,operates in two distinct markets,Great Britainand Northern Ireland,with different economies and operating environments.The divisions activit

131、ies are carried out primarilythrough AIB Group(UK)p.l.c.,a bank registered in the UK and regulated by the Financial Services Authority(“FSA”).Great BritainIn this market,the division operates under the trading name Allied Irish Bank(GB)from 31 full service branches and 5 businessdevelopment offices.

132、The divisional head office is located in Mayfair,London with a significant back office operation in Uxbridge,West London and a divisional processing centre in Belfast.A full service is offered to business and personal customers,professionals,and high net worth individuals.Internet banking is alsooff

133、ered to customers.Corporate Banking services are offered from London,Birmingham and Manchester,with particular emphasis on the commercialproperty,education,health,horse racing and charity sectors.Northern IrelandIn this market,the division operates under the trading name First Trust Bank from 48 bra

134、nches and outlets throughout NorthernIreland.The First Trust Bank head office is located in Belfast,together with the divisional processing centre.A full service,including internet banking,is offered to business and personal customers across the range of customer segments,including professionals and

135、 high net worth individuals,small and medium sized enterprises,and the corporate sector.Specialist services,including mortgages,credit cards,invoice discounting and asset finance are based in Belfast and deliveredthroughout the division.First Trust Independent Financial Services provides sales and a

136、dvice on regulated products and services,including protection,investment and pension requirements to the whole of the division.Central&Eastern Europe divisionCentral&Eastern Europe division,with total assets of 12.4 billion at 31 December 2008 comprises(i)BZWBK,the Polish bank inwhich AIB has a 70.5

137、%shareholding,together with its subsidiaries and associates(ii)Bulgarian American Credit Bank,a commercialbank operating through five branches in Bulgaria in which AIB has a 49.99%shareholding and(iii)AmCredit which consists of threebranches of Allied Irish Banks,p.l.c.,operating in Lithuania,Latvia

138、 and Estonia.BZWBK wholesale treasury and an element ofBZWBK investment banking subsidiariesresults are reported in the Capital Markets division.BZWBK is Polands fourth largest bank by loans and by total equity.As at 31 December 2008 BZWBK Group had total assets ofPLN 57.9 billion(13.9 billion),oper

139、ated through 505 branches and 1004 ATMs,and employed an average of 9,754 staff,includingthose in subsidiaries(9,651 of the staff are in the Central&Eastern European division).BZWBKs registered office is located inWroclaw in south-western Poland.Support functions are also located in offices based in

140、Poznan and Warsaw.BZWBK is a universalbank providing a full range of financial services for retail customers,small and medium-sized enterprises and corporate customers.Apart from core banking facilities,the bank provides insurance services,trade finance,transactions in the capital,foreign exchange,d

141、erivatives and money markets.Brokerage services,mutual funds,asset management,leasing and factoring products are delivered tocustomers through subsidiaries.BZWBK set up two joint ventures with Aviva plc(a general and life insurance company)in 2008.BZWBK24,its electronic banking service,gives retail

142、and business customers convenient and safe access to their accounts viatelephone,mobile phone and the internet,and facilitates operations such as fund management and the purchase of standard products(cash loans,credit cards,savings accounts,insurance).The BZWBK branch network was originally concentr

143、ated in the western part ofthe country while elsewhere in Poland the bank operated primarily in major urban areas.Since 2007,BZWBK has grown its presencein central,northern and southern Poland,thus spanning most of the country.Basic retail products are also available through a franchisenetwork mainl

144、y situated in customersresidential areas.As at 31 December 2008,the bank operated six Corporate Business Centres(based in Warsaw,Poznan,Wroclaw,Krakow,Gdansk and Lodz)providing comprehensive services for large corporates and eightBusiness Banking Centres(based in Warsaw,Poznan,Wroclaw,Gdansk,Krakow,

145、Lodz,Szczecin and Chorzow)dedicated to medium-sized enterprises.Financial review-1.Business description15AIB BANK ROI DIVISIONAllied Irish Banks,p.l.c.General retail and commercial bankingthrough some 273 branches,outlets andbusiness centres in the Republic of Ireland.AIB Leasing LimitedAsset financ

146、ing company providing leasingproducts.AIB Insurance Services LimitedProvision of general insurance services.Actsas an insurance intermediary.AIB Bank(CI)LimitedJersey(Channel Islands)based companyproviding a full range of offshore bankingservices including lending and internetbanking facilities and

147、also offering offshoretrust and corporate services through asubsidiary company.It also maintains abranch in the Isle of Man.AIB Mortgage BankThe Companys principal activity is the issueof Mortgage Covered Securities for thepurpose of financing loans secured onresidential property or commercial prope

148、rty,in accordance with the Asset CoveredSecurities Act,2001.CAPITAL MARKETS DIVISIONAllied Irish Banks,p.l.c.Management of liquidity and fundingneeds;interest and exchange rateexposures;financial market tradingactivities;provision of lending;tradefinance and commercial treasuryservices;provision of

149、corporatebanking and not-for-profit activities.AIB Capital Markets plcProvision of asset management,fundmanagement and corporate advisoryservices,including equity investmentand corporate finance.AIB Corporate Finance LimitedProvision of corporate advisoryservices to companies includingmerger,acquisi

150、tion,capital raisingand strategic financial advice.Goodbody Holdings LimitedProvision of a broad range ofstockbroking services,and corporateadvisory services,through itssubsidiaries,Goodbody Stockbrokersand Goodbody Corporate Financerespectively.AIB International Financial Services LimitedProvider o

151、f outsourced financialservices to international banks andcorporations.AIB Asset Management Holdings(Ireland)LimitedProvides asset management andfunds services management forinstitutional and retail clientsthrough its subsidiary companiesAIB Investment Managers Ltd.andAIB Fund Management Ltd.AIB BANK

152、 UK DIVISIONAIB Group(UK)p.l.c.31 branches and 5 businessdevelopment offices in Britain,trading as Allied Irish Bank(GB),focused primarily on the mid-corporate business sector.48 branches and outlets in NorthernIreland,trading as First Trust Bank,focused on general retail andcommercial banking and a

153、lso assetfinance and leasing.CENTRAL&EASTERN EUROPE DIVISIONBank Zachodni WBK S.A.A commercial and retail bank whichoperates through 505 branches and56 outlets in Poland.Investment in Bulgarian-American Credit Bank ADA 49.99%interest in a commercialbank which operates through fivebranches in Bulgari

154、a.AmCreditA mortgage lender which operatesthrough three branches in Lithuania,Latvia and Estonia.GROUP DIVISIONInvestment in M&TA 24.2%interest in a retail andcommercial bank,with itsheadquarters in Buffalo,New York,which operates throughapproximately 700 branches.1.3 ORGANISATIONAL STRUCTUREDuring

155、2008,the business of AIB Group was conducted through the following divisions and its principal subsidiary and associatedcompanies as described below:DIVISIONS16The above subsidiary undertakings are wholly-owned with the exception of Bank Zachodni WBK S.A.(70.5%).The registered officeof each is locat

156、ed in the principal country of operations for divisional reporting purposes.AIBs minority investment in M&T isrecorded under the Group division.1.4 STRATEGYThe Groups objective is to maintain its market position,in its core geographies,through a sustainable business model.With thisobjective in mind,

157、the Board has approved a business plan that management has been mandated to implement to 2010.This plan wasdeveloped in the final quarter of 2008 against a considerably changed domestic and international economic environment in which thestructure of banking has changed considerably as evidenced by t

158、he failure and consolidation of a number of major banks world-wide.The plan was updated and approved in early 2009,against the background of further deterioration in the global economic andfinancial environment,and significant uncertainties that were evident in the economic and business environment,

159、both domesticallyand internationally.The key objectives and directional focus of AIB Group over the period of the plan is:-to manage the credit risk exposures in anactive manner in order to minimise the credit losses which will arise;to reduce the Groups dependence on wholesale markets byreducing th

160、e loan/deposit ratio;and to ensure we maintain adequate capital levels to both absorb losses,and support the business,andto support economic activity in Ireland.The credit crisis,together with the world wide decline in real estate,commodity and equity values has prompted a domestic andinternational

161、response from governments,central banks,regulators and international financial institutions.This response has resulted ina considerable reduction in interest rates,capital injections being made available to strengthen banksbalance sheets and economicpackages designed to strengthen growth and address

162、 the dangers of deflation.Like other European governments,the Irish Government has shown a strong commitment to the provision of financial and othersupport to Irelands leading banks(including AIB)and the development of their capital raising and business plans.Among other things,it has guaranteed the

163、 liabilities of AIB through to 29 September 2010 and also proposes to invest 3.5 billion in preference shares asan addition to AIBs core tier 1 capital.AIBs plan is designed to reduce the Groups dependence on wholesale money markets,through a combination of deposit growthand deleveraging on the asse

164、t side,increase its capital base to support core business,manage its credit exposures so as to minimiselosses while supporting customers to the greatest extent consistent with prudent banking practice.AIB will continue to invest in itscore franchise while putting an increased focus on aggressively m

165、anaging underperforming assets.It will continue to focus on costmanagement and improving productivity while supporting the strong control and governance environment of the Group.In Ireland,AIB Bank ROI division will be proactive in promoting business,particularly in the home mortgages and SME sector

166、s.Capital Markets will continue to be a leading provider of banking services and products to both its domestic and internationalcustomer base.In the UK,AIB will continue to diversify its income streams with a strong emphasis on credit and cost managementwhile in Poland and in its other Central and E

167、astern European operations AIB will seek to leverage full benefit from its franchisewhile diversifying its product offering across all sectors.Throughout what will be a particularly difficult economic period in2009/2010,AIB will strive to support its customers and address business opportunities that

168、 may arise.In certain of its operations,the Group has elected to participate as a minority stockholder in businesses that,while clearlyimportant,are better exploited by making use of the management,experience and other resources that exist in the companies inwhich it invested.In the US,where the siz

169、e and complexity of its business and the markets it serves raises challenges,the Group,inaddition to developing its corporate banking activities,has a minority interest in M&T(based in upstate New York,but serving a widerange of Eastern states).This has allowed the Group to benefit from a highly exp

170、erienced and well regarded M&T management teamand the opportunity to participate in this important and comparatively stable market.AIB considers its investment in M&T,which hasaccess to the same types of US government support as other US banks,to be a store of capital and earnings.171.5 COMPETITIONT

171、here is strong competition among providers of banking services,based upon the quality and variety of products and services,thearrival of new institutions,customer relationship management,convenience of location,technological capability,and the level of interestrates and fees charged to borrowers and

172、 interest rates paid to depositors.The dislocation in the wholesale banking market,which startedin 2007 with the sub-prime mortgage sector in the United States,continued in 2008 affecting most developed economies around theworld.Globally this credit crunchspread from sub-prime mortgages to other sec

173、tors,such as property,the motor industry and retailsector.Concerns over which banks had exposures to the sub-prime and related sectors led to the interbank lending markets seizing up,which made it more difficult for all banks to raise market borrowings.This in turn led to a number of banks seeking e

174、mergencyfunding and the major international Central Banks having to extend their liquidity arrangements,injecting substantial funds so as toboost confidence in the interbank markets.Republic of IrelandProviders of financial services to the consumer and business markets compete strongly for banking b

175、usinessbased on multi channel access,technology capability,customer service,new innovation,customer relationship managementintensification and the continuous expansion in the range and depth of keenly priced and functional products and services.Irish consumers and business customers have recently en

176、joyed an unprecedented choice of providers and products.The AccountSwitching codes for both personal and business customers are both now fully operational within the market.The Financial Regulatorcontinues to enhance the transparency of the competing offers through the issuance of regular cost compa

177、rison surveys and otherconsumer guidelines.AIBs principal domestic competitor is Bank of Ireland while other competitors include Anglo Irish Bank,Ulster Bank(asubsidiary of Royal Bank of Scotland),Bank of Scotland(Ireland)-including the Halifax brand(a subsidiary of the Lloyds bankinggroup),National

178、 Irish Bank(a subsidiary of Danske Bank)and Permanent TSB(the retail division of Irish Life&Permanent Group).In addition,there is competition from building societies,mortgage specialists,credit unions,and the post office joint venture withFortis Bank.Throughout 2008,competition for loan and mortgage

179、 business was less intense.AIB made more market share gains than inprevious years.The market for deposits was challenging and was re-defined with the introduction of the Irish Government GuaranteeScheme in late September.This had the effect of putting all market participants on a similar credit stan

180、ding,and has served to putmuch greater emphasis on deposit pricing.Price competition for deposits has been very intense through the later months of the year.Strong competition for new credit cards and new current accounts,both business and personal,was also a feature of the year.UK Despite coordinat

181、ed international action,there were a number of bank failures and bank rescues in the second half of theyear,which have combined to transform the competitive landscape for both investment and retail banks.In the UK,the collapse ofthe Icelandic banks,Kaupthing and Lansbanki,impacted many depositors,as

182、 did the nationalisation of Bradford&Bingley.In the finalquarter of 2008 a UK Government rescue package for the banking system saw the Government broker a deal for Lloyds TSB to takeover HBOS and itself to take a stake in RBS and Lloyds Banking Group to further support the banking system.In October

183、2008 the FSA raised the limit on the amount of deposits they guarantee to 50,000 per person through the FinancialServices Compensation Scheme(“FSCS”).The cost of providing this scheme is shared amongst financial institutions in the UKdeposits market in the form of a levy,and the cost is calculated b

184、ased upon the institutionsshare of the deposit market and fundingcosts incurred by the FSCS associated with any failed institution.Group deposits in the UK,including amounts in excess of 50,000,are covered by the Irish Government guarantee scheme,which guarantees all deposits until September 2010.Po

185、landCompetition in the Polish banking market continues to increase.2008 saw higher funding costs and the emergence ofnew market entrants,increasing the competition for deposits.The key market participants include,inter alia,Pekao,PKO BP,BREBank,ING Bank Slaski,BZWBK,Citi Handlowy and Millenium Bank.

186、UniCredit-owned Pekao,which is now Polands largest bank(after the merger with BPH in 2007)and state-owned PKO BP are leaders in the Polish banking sector with the largest market shareand most densely spread distribution networks.The other large universal banks are roughly comparable in size and mark

187、et penetration.AIB Group,through its investment in BZWBK,has an approximate 5%share of the Polish financial services market.Mediumsized banks such as Lukas,Getin,AIG,Fortis,Eurobank,Santander Consumer and Polbank EFG have emerged over the past few yearsas a distinct group and have steadily gained in

188、 importance as a competitive force in the banking market.Competition was furtherincreased towards the end of 2008 by the entry of two new banks:Alior Bank and Allianz Bank.Most banks in Poland are foreign-owned which has facilitated the transfer of know-how,technology and corporate culture fromabroa

189、d,adding to the competitive pressure in the domestic banking market.Competition is also intensified through similar strategiesbeing pursued by both the large banks and a number of medium-sized banks.Mortgage lending,personal loans,credit cards andFinancial Review-1.Business description18savings/inve

190、stment products are of significant importance in the retail sector.In the corporate sector,the focus is on lending andleasing services to SMEs.In order to increase their market share,many of them continue to expand physical distribution channels byopening small multi-functional outlets or franchisin

191、g networks.Since almost all participants in the market offer the same range of coreproducts,Polish banks endeavour to achieve a sustainable competitive advantage by developing innovative solutions,increasingefficiency of back-office processes and building customer loyalty.Until recently,most banks i

192、n the area of business operations have concentrated on expanding their loan portfolios.With decreasedconfidence in the inter-bank market and rising funding costs following the current global financial crisis,pressure on banks to attractnew customer deposits has been growing.United StatesAIB Corporat

193、e Banking through Corporate Banking North America(“CBNA”)competes with foreign anddomestic banks focussing on participation in syndicated loans and subordinated debt transactions primarily within the leverage,real estateand structured finance and energy arenas.The credit crunch and market dislocatio

194、n caused significant changes to market expectationsresulting in a widespread lack of liquidity while also providing improved loan margins and structures.CBNA expects that growth willslow somewhat,particularly in new leverage deals,and it will continue to focus on portfolio quality.AIA offers credit

195、and treasury products to the US not-for-profit and municipal sectors competing with international and domesticbanks and credit insurers.M&T provides commercial and personal financial services,competing with firms in a number of industries including bankinginstitutions,thrift institutions,credit unio

196、ns,personal loan companies,sales finance companies,leasing companies,securities firms andinsurance companies.Furthermore,diversified financial services companies with financial holding company status,are able to offer acombination of these services to their customers on a nationwide basis.See Superv

197、ision and Regulation-United States.1.6 ECONOMIC CONDITIONS AFFECTING THE GROUPAIB Group activities in Ireland account for approximately 71%of total Group assets.As a result,the performance of the Irisheconomy is extremely important to the Group.However,the Groups business operations in the United Ki

198、ngdom,the eurozone,Poland and the United States,mean that it is also influenced by political,economic and financial developments in those economies.Since August 2007,global financial markets have experienced significant volatility and turmoil which have caused a breakdown ofwholesale banking markets

199、,large write-downs among financial institutions,a major change in the banking landscape and a creditcrunch with potentially serious problems for the non-financial sectors.The impact of this crisis is clearly deepening.According to theInternational Monetary Fund(“IMF”),the three largest parts of the

200、advanced economies the US,Europe and Japan will be inrecession in 2009 and world GDP will expand by just 0.5%.However,further downward adjustments to economic forecasts are likely.Real GDP in Ireland rose by 6%in 2007,bringing the average increase in the five years to 2007 to 5.5%per annum.However,g

201、rowth weakened significantly in the course of 2007,slowing from an annual rate of 7.3%in the first half to 4.8%in the second halfof the year.The weakening trend continued into 2008 when Ireland officially went into recession.Based on incomplete official data,itis estimated that real GDP fell by 1.5%

202、.This is only the second annual decline in real GDP since 1982.While Ireland retains many of the fundamental factors that supported strong rates of economic growth in the past(such as ayoung and highly educated labour force,a relatively competitive personal and corporate tax regime,labour market fle

203、xibility,access toEuropean and global markets,capital inflows from the European Union(“EU”)and continued inward foreign direct investment)thenegative impact of the downward adjustment in residential investment in 2008 predominated.Housing output fell by approximatelyone third knocking about 3.5 perc

204、entage points off real GDP.Largely as a result of the fall in housing output and also in non-residential private investment,real domestic demand declined byover 5%in 2008 compared with a rise of 4.7%in 2007.Real consumer spending on goods and services fell marginally in 2008 butretail spending on ho

205、usehold related items suffered a sizeable contraction.On the external side,it is estimated that exports of goodsand services rose by about 1%in 2008,down from 6.8%in 2007.Because Ireland is a very open economy,the fall in domesticdemand and in exports led to a fall in import demand of over 2.5%in 20

206、08 following growth of over 4%in 2007.Due to the very large role played by exports by foreign owned multinationals in the Irish economy,there is a significant amountof annual profit repatriations which often results in differences in the annual growth in real GDP and real GNP.The latter was smalleri

207、n absolute terms in 2008,by the equivalent of 16%of nominal GDP.Real GNP grew by 4.1%in 2007,but fell by an estimated 2.6%in 2008.Over the five years to 2007,however,real GNP grew at an annual average rate of 5.3%.The Irish economy is forecast to decline by about 5.5%in terms of changes in both real

208、 GDP and real GNP in 2009.A furtherfall in real fixed investment,with housing output down another 50%,will be the main drag on growth.However,with a fall in totalemployment,real consumer spending is projected to fall by about 3.5%.Exports are forecast to fall by 2.5%reflecting the recessionary19cond

209、itions in our main trading partners.However,as domestic demand is expected to decline by over 8%,import demand will shrinkby about 5.5%in 2009.Prospects for the United States,the United Kingdom and the eurozone,Irelands three most important trading partners,areexpected to deteriorate in 2009.Economi

210、c growth in the United States is forecast to fall by about 2.5%;real GDP in the UnitedKingdom is expected to contract by 3%,while growth in the eurozone could fall by 2.5%.The Polish economy should maintain arelatively stronger performance but growth could slow to 0.5%from an estimated 4.8%in 2008.A

211、t this stage,only modest belowtrend recoveries are forecast for 2010.Ireland is a member of the eurozone,where euro notes and coins were introduced on 1 January 2002.The European CentralBank(“ECB”),which regulates monetary policy for the euro area as a whole,cut the official refinancing rate to 2%in

212、 January 2009.Rates had been raised from 4.5%to 4.75%in July 2008 but the ECB implemented a series of cuts since October 2008.As the Irisheconomy accounts for about 2%of eurozone GDP,economic and monetary developments in Ireland have only a marginal impact onthe determination of monetary policy in t

213、he area as a whole.The euro-US dollar exchange rate has been quite volatile since mid-2007.However,the euro has appreciated steadily againststerling.The overall trend in the euro represents a deterioration in Irish competitiveness since the start of the subprime crisis in 2007.Trade with non-eurozon

214、e countries remains important to Ireland.Irish external trade with the United States and the UnitedKingdom,Irelands two most important trading partners,accounted for a combined 37%of total merchandise exports and 45%ofmerchandise imports in 2008.The annual rate of inflation stood at-0.1%in January 2

215、009,down from 1.1%at the end of 2008.The falling rate of inflationlargely reflects lower energy costs and the impact of lower mortgage rates.The average rate of inflation in 2008,as measured by theofficial Consumer Price Index(“CPI”),was 4.1%,down from 4.9%in 2007.Inflation is expected to fall furth

216、er in 2009,recording afall of 3.5%on an annual average basis as lower energy prices and lower mortgage costs continue to depress the overall price index.Irish inflation,as measured by the Harmonised Index of Consumer Prices(“HICP”),is forecast at-0.5%in 2009 compared with 3.1%in 2008.The Irish publi

217、c finances have deteriorated sharply since 2007 moving from an estimated surplus of 0.5%of GDP in terms of thegeneral government balance to an expected deficit of 6.3%in 2008.The rise in the deficit is due to the fall in tax revenues largelyassociated with the downturn in the Irish housing market.Th

218、e Irish deficit is now outside the terms of the EUs Stability and GrowthPact,which sets an upper limit of 3%on general government deficits as a percentage of GDP,but which also allows for deviations inexceptional and temporary circumstances.The EU Commission decided on 18 February 2009 that while th

219、e Irish deficit was due toexceptional circumstances,it was not temporary.Indeed,the Irish authorities plan to reduce the deficit to below 3%of GDP over afive year period.The Irish budget deficit is officially forecast at 9.5%of GDP for 2009,after corrective action,but this includesspending on the ca

220、pital programme which is equivalent to over 5%of GNP.As a result of higher budget deficits and falling levels ofGDP,Irelands general government debt/GDP ratio is forecast at 52.7%in 2009,up from 40.6%in 2008.The debt ratio had fallensteadily from over 95%in 1991 to a low of 24.8%in 2007.It should be

221、 noted that the general government debt is defined on a grossbasis.The 2008 figure does not allow for the equivalent of over 10%of GDP in cash balances to be offset against the gross position.Ireland has experienced a large rise in population over recent years averaging about 2.25%per annum,stemming

222、 from a naturalincrease in the population and positive net migration.However,the strong net inward migration trend is expected to diminishsignificantly in 2009 as labour market conditions weaken.Employment in Ireland fell by 1.2%year-on-year in the third quarter of2008.However,the labour force conti

223、nued to expand in the same period by 1.2%pushing the unemployment rate up to 6.3%,seasonally adjusted from 5.4%in the previous quarter.With an expected large decline in employment in construction,totalemployment growth is forecast to fall by about 4.5%in 2009 accompanied by a rise in the unemploymen

224、t rate to over 12%in thecourse of the year.Financial review-1.Business description20The financial information in the tables below for the years ended 31 December 2008,2007,2006,2005,and 2004 has been derivedfrom the audited consolidated financial statements of AIB Group for those periods.AIB Groups

225、consolidated financial statements areprepared in accordance with International Financial Reporting Standards(“IFRS”)as issued by the International AccountingStandards Board(“IASB”),for the years ended 31 December 2008,2007,2006,2005 and 2004(except for the application of IAS 32,IAS 39 and IFRS 4 whi

226、ch apply with effect from 1 January 2005).This information should be read in conjunction with,and isqualified by reference to,the accounting policies adopted,the consolidated financial statements of AIB Group and notes therein forthe years ended 31 December 2008,2007 and 2006 included in this Annual

227、 Report.SUMMARY OF CONSOLIDATED STATEMENT OF INCOME Years ended 31 December20082007200620052004 m m m m mNet interest income 3,8673,4182,9992,5302,072Other income1,2011,4501,3271,1171,144Total operating income5,0684,8684,3263,6473,216Total operating expenses2,3572,5212,3142,0111,869Operating income

228、before provisions2,7112,3472,0121,6361,347Provisions1,84999104143133Operating profit 8622,2481,9081,4931,214Associated undertakings37128167149132Profit on disposal of property1276365149Construction contract income12559645-Profit on disposal of businesses(1)106179517Profitbefore taxation,minority int

229、erests in subsidiaries and preference dividends(2)1,0292,5082,6151,7061,372Income tax expense144442433319267Profit after taxation-continuing operations8852,0662,1821,3871,105Discontinued operation,net of taxation-1164653Net income for the period8852,0662,2981,4331,158Minority interests in subsidiari

230、es1181171139029Distributions to RCI holders and others 383838384Profit attributable to ordinary shareholdersx1,1011507291,9112,1471,3051,125Per ordinary shareBasic earnings per share 82.9c218.0c246.8c151.0c132.0cDiluted earnings per share 82.8c216.4c244.6c149.8c131.5cDividends81.8c74.3c67.6c61.5c59.

231、4cFinancial review-2.Financial data-5 year financial summary21SELECTED CONSOLIDATED BALANCE SHEET DATAYears ended 31 December20082007200620052004 m m m m mTotal assets.1821182,143177,862158,526133,214101,109Loans and receivables to banks and customers.135,755137,068120,01592,36167,278Deposits by ban

232、ks,customer accounts and debt securities in issue.155155,996153,563136,839109,52082,384Dated loan capital.2,9702,6512,6682,6781,923Undated loan capital.692813871868346Other capital instruments.8641,1411,205210497Minority interests in subsidiaries.1,3441,3511,3071,2481,211Shareholdersfunds:other equi

233、ty interests.497497497497182Ordinary shareholdersequity.8,4419,3308,1086,6725,745Total capital resources.14,80815,78314,65612,1739,904Share capital-ordinary sharesNumber of shares outstanding.918.4918.4918.4918.4918.4Nominal value of 0.32 per share.294294294294294Share capital-preference sharesNumbe

234、r of shares outstanding.-0.250.250.250.25Preference shares(2).-169189210182Years ended 31 DecemberOTHER FINANCIAL DATA(3)20082007200620052004%Return on average total assets 0.471.211.631.201.22Return on average shareholdersequity 8.221.829.020.620.7Dividend payout ratio 37.036.429.343.545.5Average o

235、rdinary shareholdersequity as apercentage of average total assets 4.85.15.25.35.7Allowance for loan losses as a percentage oftotal loans to customers at year-end 1.40.60.70.81.2Net interest margin(4)2.212.142.262.382.45Tier 1 capital ratio(5)7.4(6)7.58.27.28.2Total capital ratio(5)10.5(6)10.111.110.

236、710.9(1)The profit on disposal of businesses in 2008 relates to a joint venture with First Data Corporation(see note 15 to the financialstatements).The profit on disposal of businesses in 2006 of 79 million includes profit relating to(a)the transfer by Ark Life ofinvestment management contracts pert

237、aining to the sale of Ark Life of 26 million(tax charge Nil);(b)the sale of AIBs 50%stakein AIB/BNY Securities Services(Ireland)Ltd of 51 million(tax charge Nil);and(c)the sale of Ketchum Canada Inc.of 1 million(tax charge Nil)and(d)the accrual of 1 million(tax charge 0.3 million)arising from the sa

238、le of the Govettbusiness in 2003.(2)250,000 non-cumulative preference shares of US$25 each were reclassified as subordinated liabilities and other capital instrumentson transition to IFRS.Accordingly,from 1 January 2005,distributions on these preference shares are included within net interestincome.

239、The distributions in 2008,2007,2006 and 2005 relate to the Reserve Capital Instruments(see note 21 to the financial statements).These preference shares were redeemed in July 2008.(3)The calculation of the average balances includes daily and monthly averages and are considered to be representative of

240、 the operationsof the Group.(4)Net interest margin represents net interest income as a percentage of average interest earning assets.The net interest margin for theyears ended 31 December 2008 and 2004 reflects a net interest income figure that was adjusted to reflect a 365 day year forcomparative p

241、urposes.Financial review-2.Financial data-5 year financial summary22(5)The Irish Financial Services Regulatory Authority(the Financial Regulator)has issued its guidelines for implementation of the requirements of the EC Council Directives on own funds,solvency ratios and capital adequacy in Ireland

242、which require minimum tier 1 and total capital ratios of 4.0%and 8.0%for banking groups,respectively.The Board of Governors of the Federal Reserve System in the US(the Federal Reserve Board)guidelines for risk-based capital requirements,applicable to all bank holdingcompanies,require the minimum rat

243、ios of tier 1 capital and total capital to risk adjusted assets to be 4%and 8%respectively.Furthermore,the Federal Reserve Board has adopted leverage capital guidelines requiring bank holding companies to maintain a minimum ratio of tier 1 capital to total quarterly average assets(tier 1 leverage ra

244、tio)of at least 3%,in the case of a bank holding company which has the highest regulatory examination rating and is not contemplating significant growth.All other bank holding companies are expected to maintain a tier 1 leverage ratio at least 1%to 2%above the stated minimum.(6)Calculated under Pill

245、ar 1(minimum capital requirements)under the Capital Requirements Directive(see pages 47-49).23OverviewThe volatility and uncertainty in world financial markets and the rapid deterioration in global economic conditions made 2008 a verychallenging year for the banking industry generally.Many large fin

246、ancial institutions incurred substantial losses and there was theLehman Brothers bankruptcy followed by several banks failing or being rescued in the second half of 2008.The year witnessedsignificant government intervention and action in many countries,bank funding and liquidity issues and rising re

247、cessionary conditionsglobally.Both the Irish and UK economies entered recession during 2008.Against the backdrop of these global economic and market conditions,AIB reported operating profit before provisions of 2.7 billion,pre-tax profit of 1 billion and basic earnings per share of EUR 82.9c,reflect

248、ing a resilient performance by the Groupin 2008 in the prevailing environment.There was a significant deterioration in asset quality,most notably in property portfolios,with the overall bad debt chargeincreasing to 1.8 billion and criticised loans increasing to 15.5 billion of which 3.0 billion were

249、 impaired.Loan growth wasslower than previous periods at 8%with reduced customer demand and increased focus on maintaining a strong funding and liquidityposition and reducing the loan to deposit ratio.Deposit growth at 22%was very strong and the loan to deposit ratio reduced from157%at 31 December 2

250、007 to 140%at 31 December 2008.In this climate of slower revenue growth,swift action and aggressive management of our cost base yielded a 6%reduction in costsin 2008 generating a reduction in the cost income ratio from 51.8%to a historic low of 46.5%.This positive income/cost growthposition drove an

251、 18%increase in operating profit before provisions to 2.7 billion demonstrating AIBs efficiency,operatingflexibility and recurring customer revenues.The operating environment continues to be extremely difficult with deteriorating economic conditions clearly evident in themarkets in which we operate.

252、Significant uncertainty remains in markets generally,with the Irish economy in a very challengingphase.In these conditions,AIB is relatively well positioned through its high quality geographically diverse franchises,strongproductivity and flow through of endowment income.We expect our balance sheet

253、to remain resilient even in a stressed environmentand we will maintain an intense focus on risk management as bad debts rise.AIBs funding position remains good with broadly basedand resilient customer deposits and a well spread debt maturity profile.The proposed injection of 3.5 billion of core tier

254、 1 capitalfrom the Irish Government,which was announced on 11 February 2009 and is subject to shareholder,regulatory and EU state aidapproval,is expected to underpin the Groups strong capital position and enable it to support its businesses in the current environmentand into the future.Financial rev

255、iew-3.Management report24COMMENTARY ON RESULTSAIB provides supplemental information of its results on a non-GAAP basis to enable readers and investors to understand the impact ofthe underlying performance on the key captions in the consolidated statements of income and consolidated balance sheets,ex

256、cludingthe impact of currency factors.While this information is a non-GAAP measure under IFRS,AIBs management considers theidentification of currency factors to be an aid to the understanding and interpretation of the financial performance of the organisation.The effect of currency factors is descri

257、bed in more detail below.Currency factorsA significant proportion of the Groups earnings are denominated in currencies other than the euro.As a result,movements inexchange rates can have an impact on earnings growth.In 2008,the US dollar and sterling average accounting rates weakened relative to the

258、 euro by 7%and 14%respectively and thePolish zloty strengthened relative to the euro by 8%compared with the year to December 2007.The impact on the 2008 incomestatement was offset by hedging gains of 4 million.At 31 December 2008,approximately 30%of the Groups assets were denominated in currencies o

259、ther than the euro.Movementsin exchange rates can therefore have an impact on balance sheet caption growth rates.US dollar and sterling rates at 31 December2008 compared to 31 December 2007,relative to euro over the same period were 6%and 23%weaker respectively.Polish zlotyweakened relative to the e

260、uro by 13%over the period from 31 December 2007 to 31 December 2008.In 2007,the US dollar and sterling average accounting rates weakened relative to the euro by 9%and 1%respectively and thePolish zloty strengthened relative to the euro by 3%compared with the year to December 2006.The impact on the 2

261、007 incomestatement was offset by hedging gains of 12 million.At 31 December 2007,approximately 45%of the Groups assets were denominated in currencies other than the euro.US dollarand sterling rates at 31 December 2007 compared to 31 December 2006,relative to euro over the same period were 11%and 8%

262、weaker respectively.Polish zloty strengthened relative to the euro by 7%over the period from 31 December 2006 to 31 December2007.In addition,the Group presents an adjusted earnings per share,in accordance with IFRS,to adjust for material items of a non-recurring or one-off nature which impact on the

263、 performance of the organisation in the period under assessment.They are set outbelow as follows:Interest rate hedge volatilityUnder IFRS,the reporting of hedges in place for interest rate volatility(hedging ineffectiveness and derivative volatility)can result inthe net recording of a gain/loss in t

264、he statement of income.In 2008,this resulted in an increase in profit before taxation of 27 million(26 million after taxation)equivalent to EUR 3.0c in earnings per share.The impact of hedge volatility was negligiblein 2007.In 2006 the impact was a decrease of 4 million in profit before taxation(4 m

265、illion profit after taxation)equivalent toEUR 0.5c in earnings per share.Business acquisitions/disposalsIn January 2008,an arrangement with First Data Corporation was finalised.This arrangement involved the disposal of the Groupsmerchant acquiring businesses which comprised property,plant and equipm

266、ent amounting to 3 million and merchant contracts whichare intangible assets and had not been recorded in the books due to IFRS transitional rules.These assets were acquired by a groupoperating under the name AIB Merchant Services in which AIB Group holds a 49.9%share,with First Data Corporation hol

267、ding 50.1%.The transaction gave rise to a profit on disposal of 106 million before tax(tax charge:Nil).There were no significant business acquisitions/disposals during 2007.In January 2006,AIB completed a venture that brought together Hibernian Aviva Life&Pensions Limited(an Aviva Group p.l.c.subsid

268、iary)and Ark Life under a holding company Hibernian Life Holdings Limited.As a result,AIB owns an interest of 24.99%inHibernian Life Holdings Limited and entered into an exclusive agreement to distribute the life and pensions products of the venture.The profit relating to Ark Lifes operations dispos

269、ed of for the year ended 31 December 2006 amounted to 4 million and has beenreported net of taxation as a discontinued operation below profit for the period.During 2006,AIB recorded profit on disposal of businesses amounting to 189 million equivalent to earnings per share of EUR 21.7c.This included

270、112 million in relation to disposal of Ark Life recorded within discontinued activities.In addition,AIBrecorded income from the transfer by Ark Life of management of certain investment contracts to Aviva as part of the disposal of ArkLife(26 million after taxation)and gain from the sale of its 50%st

271、ake of AIB/BNY Securities Services(Ireland)Limited(51 million after taxation).25Financial review-3.Management report26Strategic property disposalsIn 2005,AIB began a programme of sale and leaseback transactions on a number of branches and its headquarter location in Ireland.As part of this programme

272、 during 2008,income of 14 million(12 million after taxation)was recorded of which profit on disposalof property amounted to 2 million(1 million after taxation)and construction contract income amounted to 12 million(11 million after taxation).In total,strategic property disposals contributed EUR 1.4c

273、 to earnings per share in 2008.During 2007,income of 119 million(106 million after taxation)was recorded of which profit on disposal of propertyamounted to 64 million(58 million after taxation)and construction contract income amounted to 55 million(48 millionafter taxation).In total,strategic proper

274、ty disposals contributed EUR 12.1c to earnings per share in 2007.During 2006,income of 454 million(372 million after taxation)was recorded during the year ended 31 December 2006 ofwhich profit on disposal of property amounted to 358 million(290 million after taxation)and construction contract income

275、amounted to 96 million(82 million after taxation).In total,strategic property disposals contributed EUR 42.8c to earnings pershare in 2006.Key performance indicatorsThe Group uses the following performance indicators in assessing the performance of the business:Adjusted EPS;net interest margin;cost

276、income ratio;bad debt provision charge;impaired loans as a percentage of total loans;and tier 1 capital ratio.The commentary inthis section discusses performance in relation to these metrics.Earnings per shareBasic earnings per share was EUR 82.9c in the year ended 31 December 2008 compared to EUR 2

277、18.0c in 2007,a decrease of EUR 135.1c.When earnings per share for the year ended 31 December 2008 is adjusted for the gain on hedge volatility of EUR 3.0c,profit on disposal of business of EUR 12.0c and the profit relating to strategic property disposals of EUR 1.4c,adjustedearnings per share is EU

278、R 66.5c in 2008.This is a decrease of EUR 139.4c,or 68%on an adjusted earnings per share for 2007 ofEUR 205.9c,when adjusted for the gain arising from strategic property disposals of EUR 12.1c.Basic earnings per share was EUR 218.0c in the year ended 31 December 2007 compared with EUR 246.8c in 2006

279、,a decreaseof EUR 28.8c or 12%.When earnings per share for the year ended 31 December 2007 is adjusted for the the gain arising from thestrategic property disposals of EUR 12.1c adjusted earnings per share was EUR 205.9c in 2007.This is an increase of EUR 23.1c or13%on an adjusted earnings per share

280、 for 2006 of EUR 182.8c,when adjusted for the negative impact of interest rate hedge volatilityof(EUR 0.5c),strategic property disposals of EUR 42.8c and gain on disposal of businesses of EUR 21.7c(see note 20 to thefinancial statements).Net interest income200820072006Net interest income m m mNet in

281、terest income3,8673,4182,999200820072006Average interest earnings assets m m mAverage interest earnings assets174,412159,570132,542200820072006Net interest margin%Group net interest margin2.212.142.262008 v 2007Net interest income was 3,867 million in 2008,compared to 3,418 million in 2007,an increa

282、se of 449 million.The increase wasimpacted by currency factors of 95 million.Excluding this item,net interest income increased by 544 million or 16%.AIB Group manages its business divisionally on a product margin basis with funding and groupwide interest exposure centralisedin,and managed by,Global

283、Treasury.While a domestic and foreign margin is calculated for the purpose of statutory accounts,theanalysis of net interest margin trends is best explained by analysing business factors as follows:The Group net interest margin amounted to 2.21%,an increase of 7 basis points compared with the year t

284、o December 2007.Thenegative impact of higher funding costs was largely offset by a higher treasury margin.Higher funding costs reduced the net interest margin by 11 basis points.The Treasury margin was higher principally arising from interest rate and liquidity management activities benefiting from

285、lowerUS dollar interest rates compared with higher euro based lending rates.The net interest income benefit of borrowing in US dollarsand converting to euro had approximately 150 million or an 8 basis point positive impact on the net interest margin which wasoffset by the cross currency swap cost wh

286、ich is reported in trading income on the other income line in the income statement.In addition,Treasurys positioning in interest rate markets had an 8 basis points positive impact on net interest margin.In total,thehigher Treasury margin had a 16 basis point positive impact on the Groups net interes

287、t margin.Excluding higher funding costs,the interest income benefit of borrowing in US dollars and converting to euro,and positiveTreasury income from positioning in interest rate markets,the Group net interest margin was 2 basis points higher than 2007.2007 v 2006Net interest income was 3,418 milli

288、on in 2007,compared to 2,999 million in 2006,an increase of 419 million.The increasewas impacted by currency factors of 4 million.Excluding this item,net interest income increased by 423 million or 14%.The key drivers were strong loan growth in Republic of Ireland and strong loan and deposit growth

289、in the UK,Poland andCorporate Banking.Loans to customers increased by 23%and customer accounts increased by 12%on a constant currency basis since31 December 2006.The Group net interest margin was 2.14%,a decrease of 12 basis points compared with 2006.The margin reduction was due to the following fac

290、tors:(a)customer loans increasing at a faster rate than customer deposits(9 basis points);(b)a changing mix of products where stronger volume growth has been achieved in lower margin products,corporate loans and prime rate advances on the lending side and term deposits and other lower margin product

291、s on the deposit side and competitive pressures on loan and deposit pricing(2 basis points);and(c)higher funding costs experienced in the periods(1 basis point).While the strong lending growth generated good incremental income,the funding impact resulted in a reduction in the overall netinterest mar

292、gin calculation when net interest income is expressed as a percentage of average interest earning assets.While it is difficult to disaggregate trends in product margins between mix and competitive factors,competitive pricing behaviourdid impact loan and deposit margins.The Groups new business lendin

293、g continued to meet targeted return on capital hurdles.Both loan and deposit margins were broadly stable while higher funding costs had a 1 basis point impact on the overall margin.The reinvestment of customer account funds had a close to neutral effect on the net interest margin in 2007.27Other inc

294、omeThe following table shows other income for the years ended 31 December 2008,2007 and 2006.200820072006Other income m m mDividend income273123Banking fees and commissions8921,029921Investment banking and asset management fees291424314Fee and commission income1,1831,4531,235Fee and commission expen

295、se(142)(197)(161)Trading(expense)/income(104)62167Currency hedging profits41210Interest rate hedge volatility27-(4)Net trading income(73)74173Other operating income2068957Total other income1,2011,4501,3272008 v 2007In the year ended 31 December 2008,other income was 1,201 million,compared with 1,450

296、 million for the year ended 31 December 2007,a decrease of 249 million.This decrease included the impact of currency factors of 8 million,excluding thisfactor,other income decreased by 241 million.This decrease mainly reflects the cost of cross currency swaps used to manageliquidity(cost of approxim

297、ately 150 million offset in net interest income-see previous page),lower revenues from assetmanagement and wealth management activities,the 28 million cost of the Irish Government guarantee,which commenced inOctober 2008 and the disposal of 50.1%of AIBs merchant acquiring business.The decline of the

298、se income elements was partly offsetby growth in customer treasury fees.Dividend income of 27 million primarily reflects dividends from investments held by the Polish business.Banking fees and commissions decreased by 13%,reflecting the disposal of 50.1%of AIBs merchant acquiring business.Excludingt

299、he impact of the disposal,banking fees and commissions were down 1%.Investment banking and asset management fees were down 31%in 2008.The decrease reflects lower asset management income asa result of lower managed funds and a lower level of stockbroking income.Fee and commission expense in 2008 incl

300、udes an amount of 28 million in relation to the Irish Government guarantee scheme.The decrease in fee and commission expense in 2008 was primarily due to the disposal of AIBs merchant acquiring businesses with afull years commission expense recorded in 2007.Trading income was a negative 104 million

301、due in part to the cost of cross currency swaps used to manage liquidity(offset innet interest income as stated on the previous page)and also reflecting the fair value impacts on bond assets in difficult tradingconditions.Trading income excludes interest payable and receivable arising from hedging a

302、nd the funding of trading activities,whichis included in net interest income.Accordingly,the above trading income does not reflect the full extent of trading activities,whichare mainly in Global Treasury.The trading income out-turn also included valuation charges in the structured securities portfol

303、io(36million).In addition there was a charge to income of 17 million in the CDO portfolio arising from the disposal of the onlytransaction that contained an element of subprime in this portfolio.Other operating income of 206 million in 2008 includes profit of 71 million on available for sale debt se

304、curities and profiton disposal of available for sale equity shares of 75 million,including the profit on Visa and MasterCard shares.Other operatingincome of 89 million in 2007 includes 40 million profit on the sale of a trade investment in Investment Banking.2007 v 2006In the year ended 31 December

305、2007 other income was 1,450 million,compared with 1,327 million for the year ended 31 December 2006,an increase of 123 million.The increase included the impact of currency factors of 5 million,excluding thisfactor,other income increased by 118 million,or 9%.This growth was resilient in the face of t

306、urbulent market conditions in thesecond half of the year.Dividend income increased by 35%mainly reflecting growth in dividends from investments held by the Polish business.Financial review-3.Management report28Total fee and commission income increased by 18%,with banking fees and commissions up 12%a

307、nd investment banking and assetmanagement fees up 35%.The 12%increase in banking fees and commissions reflects increased business and transaction volumes inAIB Bank Republic of Ireland and Corporate Banking and good growth in credit card revenue in Ireland.Investment banking andasset management fees

308、 increased by 35%driven by particularly strong performances in Asset Management in Poland and BZWBKsbrokerage operation and very good growth in Goodbody Stockbrokers.Trading income was affected by global market dislocation effects.Asset value writedowns in markets have been widespread withcurrent ma

309、rk to market values less than their par values.Where assets are deemed or classified as trading,the accounting convention isto fair value these assets,using bid prices,through other income in the income statement.The market dislocation particularlyimpacted the traded credit portfolio in Global Treas

310、ury with writedowns of 92 million recorded in the second half of 2007.Alsoreflected in trading income is a mark to model charge to income of 25 million(US$35 million)in relation to positions held insubprime(portfolio US$483 million/328 million),a further 11 million in relation to Collateralised Debt

311、 Obligation(“CDO”)and Collateralised Loan Obligation(“CLO”)exposures and 3 million for other asset backed securities(39 million for the totalstructured securities portfolio)which by their nature require writedowns in value to be reflected through fair value to other incomein the income statement rat

312、her than by provisioning.In summary,values ascribed to the structured securities(39 million charge toincome)and trading portfolios(92 million writedown in the second half of 2007)have resulted in a mark to model/marketreduction for 2007 of 131 million.Trading income excludes interest payable and rec

313、eivable arising from trading activities,which is included in net interest income.Accordingly,the above trading income does not reflect the full extent of trading activities,which are largely in Global Treasury.Interest income in Global Treasury increased slightly compared with 2006.The increase in o

314、ther operating income mainly relates to a 40 million gain on the sale of a trade investment in InvestmentBanking.Other income as a percentage of total income was 29.8%compared with 30.7%for 2006.Total operating expensesThe following table shows operating expenses for the years ended 31 December 2008

315、,2007 and 2006.200820072006Operating expenses m m mPersonnel expenses1,4121,6151,502General and administrative expenses775761672Depreciation(1)/amortisation(2)170145140Total operating expenses2,3572,5212,314(1)Depreciation of property,plant and equipment.(2)Impairment and amortisation of intangible

316、assets.2008 v 2007In the year ended 31 December 2008,operating expenses were 2,357 million,compared with 2,521 million for the year ended31 December 2007,a decrease of 164 million.This decrease included the impact of currency factors of 34 million,excluding thisfactor,operating expenses decreased by

317、 130 million,or 5%.This reflects a focus on cost management in a period of slowereconomic conditions and slower revenue generation.There was a significant decrease in variable compensation and other costreductions were achieved across a number of expense categories reflecting the Groups ability to p

318、roactively respond to changingeconomic conditions.The decrease in costs was achieved notwithstanding the investment in branch network expansion in BZWBK(with 95 branches opened since 31 December 2007).Personnel expenses decreased by 13%compared with 2007,reflecting a decrease in variable staff compe

319、nsation costs and tightmanagement of all expense categories.General and administrative expenses were 2%higher,mainly due to 21 million(Stg 17million)of UK Financial Services Compensation Scheme(“FSCS”)costs and business expansion in Poland.Depreciation/amortisation increased by 17%compared with 2007

320、 due to project and investment spend in recent years and animpairment charge of 15 million in relation to the investment in AmCredit.Productivity improved with the cost income ratio reducing from 51.8%in 2007 to 46.5%in 2008.2007 v 2006In the year ended 31 December 2007 operating expenses were 2,521

321、 million,compared to 2,314 million for the year ended31 December 2006,an increase of 207 million.The increase included currency factors of 3 million.Excluding this item,operating expenses increased by 204 million or 9%.The increase in costs reflects normal inflationary increases and continuing29inve

322、stment in various programmes to develop capabilities to benefit from the ongoing business opportunities and to position thebusiness for long-term growth and development.This has included investment in people,locations and the continuation of ourprogramme to build common operating systems in line wit

323、h our single enterprise agenda.Significant progress has been made on our single enterprise approach to operations and technology and we have reached a pointat which the level of further investment spending will moderate.The Group has addressed major regulatory changes(includingSarbanes Oxley and Bas

324、el II)and the completion of the preparation for these regulatory changes is expected to slow the rate of futurecost growth.Cost growth decelerated in the second half-year due to the non-recurrence of the step up in regulatory driven andperformance related remuneration costs incurred in the second ha

325、lf of 2006.In 2007,personnel expenses were 1,615 million compared to 1,502 million for the year ended 31 December 2006,anincrease of 113 million.The increase includes currency factors of 1 million.Excluding currency factors personnel expensesincreased by 8%due to the introduction of new salary struc

326、tures,normal wage increases and investment in developing our operatingsystems.In 2007,general and administrative expenses were 761 million compared to 672 million for the year ended 31 December2006,an increase of 89 million.The increase reflects currency factors of 1 million.Excluding these factors,

327、general andadministrative expenses were up 13%including costs associated with preparation for AIBs Basel II application to the FinancialRegulator,costs relating to the building of common operating systems,rental costs arising from the sale and leaseback arrangementsfor the Bankcentre and branch netw

328、ork(22 branches sold in 2007,11 sold in 2006)and normal inflationary increases.In 2007,depreciation/amortisation was 145 million,compared with 140 million for 2006,an increase of 5 million.Theincrease includes currency factors of 1 million.Excluding this item depreciation/amortisation increased by 3

329、%.Productivity improved with the cost income ratio reducing by 1.7%to 51.8%from 53.5%in 2006.ProvisionsThe following table shows the provision for impairment for the years ended 31 December 2008,2007 and 2006.200820072006Provisions m m mProvisions for impairment of loans and receivables1,822106118Pr

330、ovisions for liabilities and commitments(2)(8)(15)Amounts written off financial investments available for sale2911Total provisions1,84999104The global economic downturn has contributed significantly to the substantial increase in the provision charge for loans andreceivables for the year to December

331、 2008.The provision for impairment for loans and receivables of 1,822 million or 1.37%of average customer loans compares with 106 million or 0.09%of average customer loans in 2007 reflecting the serious deterioration in the construction and property sectorwhich impacted particularly on AIB Bank ROI

332、and AIB Bank UK.The provision included 848 million in specific provisions(0.64%of average loans)and 974 million in IBNR provisions(0.73%of average loans)compared with 73 million or 0.06%and33 million or 0.03%respectively in 2007.The increase in the IBNR charge acknowledges the heightened level of in

333、curred loss inthe performing book.As%of average Impairment expensecustomer loans 200820072006200820072006Divisional impairment charges m m mbpsbpsbpsAIB Bank Republic of Ireland1,298104781741615Capital Markets160(18)560(8)2AIB Bank UK2571826111813Central&Eastern Europe 10729126323AIB Group1,822106118137912In AIB Bank Republic of Ireland the provision charge increased to 1.74%of average customer lo