Declan McSweeney, the bank's finance director said that with the Irish economy continuing to boom, the 0.25 per cent fall in margins after Irish rates came down to the euro-zone levels was offset by strong volume growth. Since June 1998 interest rates in the Republic of Ireland have come down from 6.34 per cent to 2.64 per cent.
Mr McSweeney said that while rates had clearly bottomed in the euro zone, the margin erosion had been partly hedged and would still be unwinding itself in the second half. Loans in the first half were up 15 per cent and the bank expects to see loan growth of 25 per cent in the full year.
Profits for the first half were up 7 per cent to 542m euros - in the middle of analysts' expectations. Mr McSweeney also pointed out that last year's first-half figures were flattered by a one-off $40m windfall from securities trading in the United States and with that stripped out, profits would have shown a 13 per cent gain this time.
Ian McEwan, banks analyst at Lehman Brothers said: "There was no disappointment. But you have to bear in mind that this is a company which has surprised on the upside for the last three to four years.... This is just a pause for growth."
Mr McSweeney said any slowdown in the Irish economy will be modest. "We are expecting growth to slow from 7.5-8 per cent this year to 6-7 per cent next year and 5-6 per cent the year after. This is a softish landing."
AIB shares closed down 1.1 euros at 11.41 euros.Reuse content