Investment Column: AIB profits from Ireland's boom

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The Independent Online
ALLIED Irish Banks has traditionally been the poor cousin in the banking sector, with investors favouring UK-based banking stocks. But with Barclays et al looking increasingly expensive, attention has turned to the Irish bank, pushing the share price up by a third since the autumn.

Yesterday, AIB shares closed at 734p, up 11.5p following a surprisingly strong set of annual results. In the year to December, pre-tax profits rose 38 per cent to Irpounds 580m (pounds 480m).

Part of the reason was the inclusion of proceeds from a recent US disposal - analysts had expected this to fall into the current financial year. But even after stripping this out, AIB still beat most expectations by 6 to 7 per cent, partly because of stronger-than-expected new lending growth in the booming Irish economy. With the economy forecast to keep up its 8 to 9 per cent growth rate during 1998, AIB should continue to see new lending powering ahead.

After Ireland, which accounts for 41 per cent of AIB's business, the next biggest business area is the US. Here AIB owns a strong regional brand - First Maryland Bancorp - strengthened further last year by the acquisition of Dauphin Deposit Corporation.

AIB has also seemed to avoid the common pitfalls of investment banking and Asia. It has only a negligible Asian exposure and its investment banking arm is relatively small and tightly focused.

Analysts' forecasts put the bank on a forward p/e of around 15, which looks relatively good value given AIB's solid growth prospects. There are also more chances of acquisition activity. The bank has dropped heavy hint about a Polish purchase, and has also signalled it might bolster its US franchise

Those wanting to buy into the increasingly pricey banking sector could do far worse than have a look at AIB.