Allied Irish Banks, plc

views updated May 18 2018

Allied Irish Banks, plc

Bank Centre
P.O. Box 452
Ballsbridge
Dublin 4
Ireland
Telephone: (353) 1-660-0311
Fax: (353) 1-660-9137
Web site:http://www.aibgroup.com

Public Company
Incorporated: 1966 as Allied Irish Banks Limited
Employees: 31,000
Total Assets: EUR 79,688 million (2000)
Stock Exchanges: Dublin London New York
Ticker Symbol: AIB
NAIC: 522110 Commercial Banking

Allied Irish Banks, plc (AIB) is the largest bank in Ireland, and its significant investments in the United States, Great Britain, and Europe make it important internationally. As the largest private sector employer in Ireland and the second largest public company, it is difficult to overstate AIB’s importance on its home turf: 40 percent of the banked population there are customers. The company’s assets are valued at approximately EUR 80 billion, making it one of the world’s 200 largest banks and placing it among the Financial Times 500 top Global Companies.

Origins

As the three points in the company’s old logo suggest, Allied Irish Banks Limited was formed in 1966 as an amalgamation of three banks: the Royal Bank of Ireland Ltd. (founded 1836), the Provincial Bank of Ireland Ltd. (founded 1825), and the Cork-based Munster and Leinster Bank Ltd. (founded in 1885 to take over the failed Munster Bank). Munster and Leinster Bank was the largest of the three independent banks remaining in Ireland and contributed more than half of the shares of the new holding company. (The heritage of these banks could be traced back even further; Munster and Leinster’s holdings included those of a private bank dating to the days of William of Orange.) The banks, when combined, provided thorough coverage of the island, both geographically and economically. Altogether, their combined assets were worth £250 million. After operating in a type of loose “Trinity” arrangement, in 1968 the banks began to trade as one company. This integration was fully completed in 1972.

Many industries in the British Isles faced consolidation during the 1960s. For the Irish banking industry, this reduction in numbers first affected the numerous private banks. The Economist reported the island had a thousand branch offices to serve less than five million people; it was felt that fewer, larger banks would be able to provide more modern and efficient service (the bank employees union, which had held a strike just before AIB’s creation, was another factor).

Both Allied Irish Banks and its slightly larger rival, the Bank of Ireland, entered this phase of consolidation under pressure from North American competitors, which first entered the Irish market in 1965, beginning with First National City Bank. Both the Bank of Ireland and AIB began offering new services and forming international strategic alliances; AIB showed itself to be more dedicated to merchant and industrial banking. In a March 1968 company statement, Chairman Edmond M.R. O’Driscoll reported on a newly formed alliance between AIB and Toronto-Dominion Bank, strengthening AIB’s international stance. At the same time, a recently devalued pound stimulated growth on the home front.

AIB continued to standardize its three families of branch offices, which in 1971 numbered 281 in the Irish Republic and 46 in Northern Ireland; only 11 branches had been closed after the merger. During this time, several subsidiaries specialized in various areas of business finance: the Hire-Purchase Company of Ireland and its Northern Ireland counterpart (brought to the group by the Munster and Leinster Bank); Mercantile Credit Co. of Ireland (a hire-purchase bank in which Provincial Bank had a 40 percent stake); Allied Irish Leasing Ltd, which financed industrial expansion; and the Allied Irish Investment Corporation, a merchant bank formed in association with Hambros Bank, Toronto-Dominion, and the Irish Life Assurance Company. In 1967, the group boasted assets of £318 million. The late 1960s were booming years for Irish industry, one of the fastest growing in Europe, and for AIB.

Changes in the 1970s

In the early 1970s, Allied Irish Banks, which formerly derived income only from interest on loans, began charging fees for services, such as 5p per transaction and 5p per £100 withdrawal of cash. The competitive situation inspired the new way of doing business.

Wages accounted for three-fourths of a bank’s costs; in the 1970s, bank employees, among the most highly paid workers in the country, lobbied for increases in salaries. The Irish Bank Officials Association, spurred by staff alienation after the merger, called a devastating, eight-month strike in 1970, which sent customers scrambling to the smaller, nonassociated banks. Two other strikes were called during the decade. As Mary Campbell reported in The Banker, “[The Union’s] strength is reflected … in the incredible facts that these banks cannot employ married women or take on new staff (except in certain specialized cases) who are 21 years of age; starting salaries are the same at all ages.” To make matters more expensive, the banks often sent promising staff members to earn an M.B.A. Both AIB and the Bank of Ireland succeeded in reforming staff grades in 1989, resulting in some cost savings and better utilization of specially skilled employees without significant layoffs. As AIB Chief Executive Gerald Scanlan told The Banker: “We’re no longer paying people IR £24,000 for an IR £8,000 job.” At the same time, AIB continued to fight for longer hours; its Irish branches were open only half the hours of its American ones.

A common language and a history of Irish immigration made America an attractive overseas market. AIB’s first New York branch opened in 1978, specializing in serving companies from the British Isles. In 1983, AIB Group invested in a 43 percent share of America’s First Maryland Bancorp, with its 1820s roots making it even more venerable than the original three Allied Irish Banks. After increasing its stake in First Maryland to 49.7 percent in 1988, AIB offered to buy the rest of the shares and, by March 1989, the company had, for a total investment of US $522 million. At the end of 1991, AIB’s subsidiary First Maryland Bancorp bought The York Bank and Trust Company, entering AIB in the southern Pennsylvania market. First Maryland Bancorp offered credit cards through another subsidiary, First Omni Bank NA.

AIB restructured itself in 1986. It became a stockbroker in 1987 with the opening of Allied Irish Securities, a few weeks before the market collapsed on infamous Black Monday. Two years later, after agreeing to buy Ireland’s second largest stockbroker, Goodbody James Capel (the Bank of Ireland owned 49 percent of the largest, J&E Davy), it formed the Capital Markets division to manage all of its treasury, international, corporate banking, and investment banking operations. Insurance and stock brokering interested both AIB and its chief rival.

Expansion in the 1990s

Early in 1991, AIB merged with TSB Northern Ireland plc. The company’s operations in Northern Ireland, known as First Trust Bank, numbered nearly 100 branches with 1,400 employees. Although AIB spent much effort in developing its successful overseas business, it (like the Bank of Ireland) seemed to fare best in its home territory. This is largely because of the Irish economy, which performed relatively well, with a less intense downturn early in the 1990s than that of Britain, where AIB also had a long-established presence. In 1992, Allied Irish lost IR £26 million in Britain; the next year it succeeded in reclaiming a profit of IR £7 million. Unfortunately, Ireland, quite dependent on England for trade, suffered its own recession a couple of years later, enduring high unemployment and high interest rates.

In the mid-1990s, Ireland accounted for just under half of the group’s income and the United States accounted for about 30 percent. Besides its subsidiary First Maryland Bancorp, the group maintained an AIB branch in New York City. Other locations included Brussels, the Cayman Islands, the Channel Islands, Frankfurt, and the Isle of Man. In addition, the company obtained a 16.3 percent shareholding (worth about IR £13 million) in the Polish bank Wielkopolski Bank Kredytowy. AIB had been advising the 63-branch bank since 1991. Neither AIB nor the Bank of Ireland appeared especially optimistic about continental prospects, with the exception of Eastern Europe. In 1994, AIB bid for the state-owned Budapest Bank; AIB would later concentrate its Eastern European expansion efforts on Polish markets alone.

The Pacific Rim was also an important venue. By the late-1980s, offices were operational in Singapore, Sidney, and Tokyo. In 1995, the company’s partnership with Phillip Securities in Singapore was mirrored by a new Malaysian partnership involving both Phillip and Grand Care. Both ventures shared the name Allied Phillip Capital Management and offered investment management services in the emerging Pacific market.

AIB earned admiration for its innovative management and quality assurance practices. In the late 1980s, it implemented an “action learning” program to set management priorities in the large and evolving market in Great Britain. Although Ireland, with a population (3.5 million) not much larger than South Carolina’s, seemed to provide only limited opportunities for growth, Allied Irish Banks was one of the few foreign banks to expand successfully into the United States. Its conservative approach, cultivated in light of its size and regional origins, seemed sure to offer similar returns in the future. AIB’s balance sheet remained healthy as the company continued to orchestrate its international growth, in its reserved manner, while also maintaining its loyal domestic customer base. Its three main divisions, AIB Banking, USA, and Capital Markets, gained strength and vitality.

Company Perspectives:

AIB, wherever we operate, will be the leading Irish banking group, creating superior value for our customers and shareholders. Our success will be determined by: the level of customer satisfaction; the return to our shareholders; the contribution of individuals and teams; our performance as a good corporate citizen.

The United States division continued to expand throughout the Mid-Atlantic region through strategic acquisitions and investments of First Maryland Bancorp, and by the late 1990s, had added National Bank of Maryland, Dauphin Deposit Corporation, The York Bank, Farmers Bank, Bank of Pennsylvania, and Valley bank to the family. The acquisition of Dauphin Deposit in 1997 transformed First Maryland Bancorp into one of America’s top 50 banks. In 1999, the entire Mid-Atlantic group was renamed Allfirst Financial Inc and given a new logo; by 2000, Allfirst’s assets climbed to US $18.4 billion. AIB’s own brand operations, located in New York, Philadelphia, Los Angeles, Chicago, and San Francisco, reported a net income of US $184.4 million in 2000, representing a 7 percent increase from 1999. AIB added to its portfolio Community Counseling Service Co., a privately-owned consulting firm to the not-for-profit (NFP) sector, to complement its existing array of financial services already dedicated to non-profit organizations. In all, the United States division profits grew 10 percent in 2000.

The Capital Markets division, comprised of three main units, Corporate Banking, Investment Banking, and Treasury and International, also enjoyed steady profits. In 1999, AIB secured the rights to acquire a 24.9 percent equity stake in Singapore-based Keppel Tatlee Bank Limited (KTL), an alliance that would enhance the positioning of both AIB and KTL as key players in Singapore’s financial market; AIB’s private banking and treasury operations in Singapore were sold to KTL as well.

Pacing Itself in the New Millenium

In preparation for the 2002 conversion to the European Monetary Unit (EMU), AIB invested heavily in systems development, communications, and education programs, and began offering Euro-based banking services well in advance. While Ireland enjoyed a more buoyant economy than most of its European neighbors, the combination of a somewhat decelerated European market and the imminent arrival of a single currency fueled speculation of cross-border mergers that would affect banks throughout Europe.

Profits from AIB’s Banking division grew 19 percent in 2000, with retail and commercial outlets numbering 300 in Ireland, 70 in Northern Ireland, and 35 in Great Britain. In addition to its traditional services, AIB also offered online banking services, including home mortgaging. Banking services in the UK focused on small to medium sized business and professional markets as the company successfully endeavored to cultivate long-lasting relationships with its customers. In 2000, AIB paid Eur 114.33 million to the Irish Revenue Commissioners to settle its portion of a banking scandal involving falsified nonresident savings accounts that enabled account holders to avoid paying the Deposit Interest Retention Tax, which was otherwise collected from resident account holders. Other Irish banks were implicated as well; the scandal was not confined to AIB.

A fourth division was formed in the late 1990s to support AIB’s Eastern European interests and specifically, its investments in Poland’s banking sector. In 1996, AIB acquired an additional 20 percent interest in Wielkopolski Bank Kredytowy; by 1997, AIB had attained majority (60.14 percent) ownership. Allied Irish also acquired majority ownership (80 percent) of a second Polish bank, Bank Zachodni S.A. in 1999. AIB’s banking operations in Poland gained momentum with the merger of Wielkopolski Bank Kredytowy and Bank Zachodni, which, when completed in June 2001, established Bank Zachodni WBK as the fifth largest bank in Poland. AIB retained majority (70.5 percent) holding of the newly formed bank. As one of the largest banks quoted on the Warsaw Stock Exchange, Bank Zachodni WBK would be attractive to both domestic and international investors as it streamlined and expanded banking services to meet traditional and high-tech customer needs in an emerging market.

As an increasingly international company, over half of its profits and assets in 2000 were either made or held outside the Republic of Ireland. With a domestic economy stronger than the European average, AIB eagerly anticipated achieving growth projections and continued to thrive amid increasing competition and rising costs from accelerating business programs, technology, and e-business services. Its commitment to customer satisfaction and conservative approach to expansion enabled the company to maintain its healthy balance sheet and deliver long-term shareholder value. Although limited geographically, AIB’s domestic presence remained a strong and steadfast anchor to its international operations. Boasting over five million retail, corporate and commercial customers, AIB found itself consistently winning consumer accolades, such as the “Best Business Bank in Great Britain,” and steadily advancing in the Financial Times rankings of Europe’s largest companies.

Key Dates:

1966:: Company is founded upon the alliance of Royal Bank of Ireland, Provincial Bank of Ireland Ltd., and Munster & Leinster Bank.
1970:: Company introduces banking services in Great Britain.
1972:: Company adopts the name Allied Irish Banks, plc.
1978:: Opens first American branch in New York.
1987:: Company offers stockbroker services with the opening of Allied Irish Securities.
1989:: Company acquires full ownership of First Maryland Bancorp, forms Capital Markets division.
1991:: Acquires TSB Bank Northern Ireland, creating First Trust Bank.
1997:: Acquires majority ownership of Poland’s Wielko-polski Bank Kredytowy.
1999:: First Maryland Bancorp and mid-Atlantic holdings renamed Allfirst Financial Inc. Acquires majority ownership of Poland’s Bank Zachodni. Secures option to buy up to 25 percent of Keppel Tatlee Bank (KTL).
2001:: Bank Zachodni WBK forms by merger of two Polish subsidiaries.

Principal Subsidiaries

AIB Capital Markets-Corporate Finance Ltd.; AIB Custodial Services; AIB European Investments Ltd.; AIB Finance & Leasing; AIB Fund Management Ltd.; AIB International Consultants Ltd.; AIB International Financial Services Ltd.; AIB Investment Services Ltd.; AIB Securities Services Ltd.; Allied Irish Capital Management Ltd.; Ark Life Assurance Company Ltd.; CICM Ltd.; Goodbody Stockbrokers; AIB Bank Ltd. (Great Britain); AIB Bank (Channel Islands) Ltd. (Great Britain); AIB Bank (Isle of Man) Ltd. (Great Britain); AIB Fund Managers (Channel Islands) Ltd. (Great Britain); AIB Investment Managers Ltd. (Great Britain); AIB Trust Company (Isle of Man) Ltd. (Great Britain); AIB Trust Company (Jersey) Ltd. (Great Britain); AIB Unit Trust Managers Ltd. (Great Britain); AIB Investment Managers Ltd. (Northern Ireland); First Trust Bank (Northern Ireland); AIB Bank Ltd. (Belgium); AIB Bank Ltd. (Germany); Bank Zachodni WBK (70.5%)(Poland);AIB Bank Ltd. (Singapore); Allied Irish Banks (United States); Allfirst Financial Inc. (United States).

Principal Divisions

AIB Bank; USA Division; AIB Capital Markets; Poland Division.

Principal Operating Units

Republic of Ireland; Northern Ireland; Great Britain; Group Treasury and International; Investment Banking; Corporate Banking.

Principal Competitors

Bank of Ireland; Barclays PLC (UK); Lloyds TSB Group plc (UK).

Allied Irish Banks, plc

views updated May 17 2018

Allied Irish Banks, plc

Bank Centre
P.O. Box 452
Ballsbridge
Dublin 4
Ireland
(353) 1-660-0311
Fax: (353) 1-660-1474

Public Company
Incorporated: 1966 as Allied Irish Banks Limited
Employees: 15,105
Sales: IR £1.20 billion (1995)
Stock Exchanges: Dublin London New York
SICs: 6000 Depository Institutions; 6020 Commercial Banks

Allied Irish Banks, plc (AIB) is the largest bank in Ireland, and its significant investments in the United States, Great Britain, and Europe make it important internationally. As the largest private sector employer in Ireland and the second largest public company, it is difficult to overstate AIB’s importance on its home turf: 40 percent of the banked population there are customers. The company’s assets are valued at IR £21.8 billion, making it one of the world’s 200 largest banks and placing it mid-list in the Financial Times ranking of Europe’s 500 largest companies.

Origins

As the three points in the company’s old logo suggest, Allied Irish Banks Limited was formed in 1966 as an amalgamation of three banks: the Royal Bank of Ireland Ltd. (founded 1836), the Provincial Bank of Ireland Ltd. (founded 1825), and the Cork-based Munster and Leinster Bank Ltd. (founded in 1885 to take over the failed Munster Bank), the largest of the three independent banks remaining in Ireland, which contributed more than half of the shares of the new holding company. (The heritage of these banks could be traced back even further; Munster and Leinster’s holdings included those of a private bank dating to the days of William of Orange.) The banks, when combined, provided thorough coverage of the island, both geographically and economically. Altogether, their combined assets were worth £250 million. After operating in a type of loose“Trinity” arrangement, in 1968 the banks began to trade as one company; this integration was fully completed in 1972.

Many industries in the British Isles faced consolidation during the 1960s; for the Irish banking industry, this reduction in numbers first affected the numerous private banks of the 17th century until the Central Bank Act of 1942 left the country with eight major banks. Earlier in 1966, the Bank of Ireland (not to be confused with the Royal Bank) had bought the Irish interests of the National Bank. In the mid-1960s, The Economist reported the island had a thousand branch offices to serve less than five million people; it was felt that fewer, larger banks would be able to provide more modern and efficient service (the bank employees union, which had held a strike just before AIB’s creation, was another factor).

Both Allied Irish Banks and its slightly larger rival, the Bank of Ireland, entered this phase of consolidation under pressure from North American competitors, which first entered the Irish market in 1965, beginning with First National City Bank. Both the Bank of Ireland and AIB began offering new services and forming international strategic alliances; AIB showed itself to be more dedicated to merchant and industrial banking. In a March 1968 company statement, Chairman Edmond M. R. O’Driscoll reported on a newly formed alliance between AIB and Toronto-Dominion Bank, strengthening AIB’s international stance. At the same time, a recently devalued pound stimulated growth on the home front.

industrial expansion; and the Allied Irish Investment Corporation, a merchant bank formed in association with Hambros Bank, Toronto-Dominion, and the Irish Life Assurance Company. In 1967, the group boasted assets of £318 million. The late 1960s were booming years for Irish industry, one of the fastest growing in Europe, and for AIB.

Changes in the 1970s

Wages accounted for three-fourths of a bank’s costs; in the 1970s, bank employees, among the most highly paid workers in the country, lobbied for increases in salaries. The Irish Bank Officials Association, spurred by staff alienation after the merger, called a devastating, eight-month strike in 1970, which sent customers scrambling to the smaller, nonassociated banks. Two other strikes were called during the decade. As Mary Campbell reported in The Banker,”[The Union’s] strength is reflected . . . in the incredible facts that these banks cannot employ married women or take on new staff (except in certain specialized cases) who are 21 years of age; starting salaries are the same at all ages.” To make matters more expensive, the banks often sent promising staff members to earn an M.B.A. Both AIB and the Bank of Ireland succeeded in reforming staff grades in 1989, resulting in some cost savings and better utilization of specially skilled employees without significant layoffs. As AIB Chief Executive Gerald Scanlan told The Banker: ”We’re no longer paying people IR £24,000 for an IR £8,000 job.” At the same time, AIB continued to fight for longer hours; its Irish branches were open only half the hours of its American ones.

Expansion in the 1990s

The Pacific Rim was also an important venue. By the late 1980s, offices were operational in Singapore, Sidney, and Tokyo. In 1995, the company’s partnership with Phillip Securities in Singapore was mirrored by a new Malaysian partnership involving both Phillip and Grand Care. Both ventures shared the name Allied Phillip Capital Management and offered investment management services in the emerging Pacific market.

Company Perspectives

Principal Subsidiaries

AIB Capital Markets-Corporate Finance Ltd.; AIB Custodial Services; AIB European Investments Ltd.; AIB Finance & Leasing; AIB Fund Management Ltd.; AIB International Consultants Ltd.; AIB International Financial Services Ltd.; AIB Investment Services Ltd.; AIB Securities Services Ltd.; Allied Irish Capital Management Ltd.; Ark Life Assurance Company Ltd.; CICM (Ireland) Ltd.; Goodbody Stockbrokers; AIB Bank Ltd. (Great Britain); AIB Bank (Channel Islands) Ltd. (Great Britain); AIB Bank (Isle of Man) Ltd. (Great Britain); AIB Fund Managers (Channel Islands) Ltd. (Great Britain); AIB Investment Managers Ltd. (Great Britain); AIB Trust Company (Isle of Man) Ltd. (Great Britain); AIB Trust Company (Jersey) Ltd. (Great Britain); AIB Unit Trust Managers Ltd. (Great Britain); AIB Investment Managers Ltd. (Northern Ireland); First Trust Bank (Northern Ireland); AIB Bank Ltd. (Belgium); AIB Bank Ltd. (Germany); Allied Phillip Capital Management Sdh Bhd (Malaysia); Wielkopolski Bank Kredytowy SA (Poland; 16.3%); AIB Bank Ltd. (Singapore); Allied Phillip Capital Management Ltd. (Singapore); Allied Irish Banks (United States); First Maryland Bancorp; First National Bank of Maryland (United States); First National Bank of Maryland DC (United States); First Omni Bank NA (United States); The York Bank and Trust Company (United States).