AIB looks for UK acquisition: Irish bank waits for buying opportunity after 40% advance at half time

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ALLIED Irish Banks, which has 40 per cent of the Irish market, is on the acquisition trail for either a UK regional building society or a US retail bank with a maximum price tag of Ir pounds 3bn ( pounds 3.03bn).

AIB yesterday reported a 13.6 per cent rise in half-year profits to Ir pounds 162m. Hugh Feeley, general manager in Britain, said: 'The Lloyds/Cheltenham & Gloucester deal has renewed our interest in buying a UK society.

'We have have built up our capital to position ourselves for acquisitions. But the society has to want to be acquired. They're not rushing out to say 'acquire me' at the moment.'

Any approach will probably have to wait for the C&G deal to go through, and for the Treasury review of building society rules due in December.

AIB's UK operations led the way with a massive recovery in profits from pounds 2.3m to pounds 14.5m, with interest income up and bad debts down. AIB is adding to its 36 British branches with new offices in Birmingham and north London. It aims to have up to 50.

The bank is also increasing its lending to small businesses in the UK, where its pounds 1.7bn loan book grew by 10 per cent in the half- year. The UK high street banks have not seen an increase in loan demand, and Mr Feeley said AIB was gaining dissaffected customers from them.

Earnings per share grew 5.3 per cent to Ir pounds 14p and the interim dividend was raised 12.2 per cent to Ir pounds 4.6p. The shares rose 4p at one point and finished the day unchanged at 261p.

AIB's key Tier 1 capital ratio stands at 8.1 per cent.

Mr Feeley said the healthy Irish economic recovery had led to an annual growth rate in lending volumes of 10 per cent, again in stark contrast with UK stagnation. Profits in Ireland grew 16.4 per cent to Ir pounds 80.2m.