CHAIRMAN'S STATEMENT
In 2007 Anglo Irish Bank delivered its 22nd consecutive year of uninterrupted earnings growth, with underlying profits increasing by 44% to €1,221 million.
This excellent performance is grounded in the Group's disciplined and focused business model, prudent risk appetite and very limited exposure to areas affected by current credit market issues. These results reflect controlled organic growth with all divisions contributing strongly. Key highlights of the Bank's performance include:
Positive earnings momentum
- Record underlying profit before tax of €1,221 million, a rise of 44%
- 46% increase in profit before tax to €1,243 million, including a €22 million profit on the disposal of our Isle of Man trust activities
- 41% increase in underlying earnings per share to 131.7 cent
- Cost to income ratio of 22.3%, an improvement of 4.2 percentage points
- Specific impairment charge unchanged on 2006 at 9 basis points
- Continued strong return on equity of 30%
- Total dividend of 19.49 cent, an increase of 20%
Significant balance sheet strength
- Growth in lending of €18.0 billion1, an increase of 37%
- Continued robust asset quality with impaired loans representing only 0.50% of closing loan balances
- Record growth in funding of €25.5 billion1 with customer deposits alone up by €16.7 billion1 or 46%
- Strongest capital position in the Bank's history - core equity grew by €1.4 billion to in excess of €4 billion. Tier 1 and Total Capital ratios now stand at 8.6% and 12.0% respectively
David Drumm will provide further details of the performance and key drivers in his Group Chief Executive's review.
I pay tribute to all our people whose talent and commitment are central to the quality of the Bank's success and ongoing development.
Dividend growth
Your Board proposes a final ordinary dividend for 2007 of 13.01 cent per share, bringing the total dividends for the year to 19.49 cent, an increase of 20%. Dividend cover remains exceptionally strong at 6.8 times.
Total shareholders' equity has grown to in excess of ?4 billion from just ?1 billion in 2003. The annuity and low volatility nature of the Group's income stream and its highly efficient operating structure will sustain significant incremental capital generation year on year. Accordingly, the Bank is well placed to maintain its progressive dividend policy in 2008 and future years.
We propose to pay the final dividend on 14 February 2008 to all ordinary shareholders on the Bank's register as at the close of business on 7 December 2007. Withholding tax may apply on the dividend depending on the tax status of the individual shareholder. As in previous years, shareholders will be offered the option of receiving dividends in the form of either cash or shares.
Board of Directors
Further to our recent announcement, Tom Browne will shortly retire from the Board. Tom joined the Bank in 1990 and held various senior roles, most recently as Managing Director of Lending Ireland. I thank Tom for his immense contribution to the Bank and wish him every success for the future.
In the first half of 2007 Paddy Wright retired from the Board and Noël Harwerth joined us as a Non-executive Director. I reiterate my thanks to Paddy and again welcome Noël.
Corporate Responsibility
We consistently pursue the highest standards of conduct in managing the business in the interests of all stakeholders as we believe that this is critical to our continuing success. Details of our activities and achievements in this regard are featured later in the Annual Report.
Outlook - maintaining earnings guidance
We expect growth in the economies in which we operate to moderate during 2008, reflecting recent uncertainty in the wider capital markets. This is likely to be counterbalanced in part by a more benign outlook for base interest rates. Overall fundamentals support continued economic growth in Ireland and the UK. We are strongly positioned across all markets with experienced, well capitalised borrowers with robust cash flows - factors which are particularly relevant in our North American business given a slower US economy. Whilst it is difficult to assess when the dislocation in capital markets will settle, we expect that the forthcoming releases of full year audited bank results will be an important step in this direction.
Our adherence to a strategy of controlled organic growth will enable the Bank to take good advantage of potential opportunities to increase market share, particularly in the UK and the US, and to meet successfully any challenges arising in the future. We are confident that our stringent risk management standards will maintain the high quality of our asset base. Our proven lending model, a diverse funding franchise, excellent liquidity and a robust capital base combined with a uniquely efficient operating structure will underpin continuing strong earnings performance.
Your Board anticipates underlying earnings per share growth in excess of 15% in 2008 and looks forward with confidence to the sustained delivery of above market returns in subsequent years.
Sean FitzPatrick
Chairman
27 November 2007
1On a constant currency basis
