Summary
2003 was the Bank's strongest year to date. Pre-tax profits increased by 33% to €346.5m following record earnings in 2002. These results were achieved against the backdrop of moderate economic growth in our key markets. The performance underscores the strength of our focused business model. Financial highlights for the year include:
- Pre-tax profits increased by 33% to €346.5m
- Basic EPS rose by 34% to 78.03 cent
- Dividends increased by 50% to 18.80 cent per share
- Lending grew by 34% on a constant currency basis
- Non inter-bank funding increased by 47% on a constant currency basis
- Cost/income ratio: 29.3%
- Return on equity: 31%
- Tier One Capital: 8.5%
Our results in 2003 bring the five-year compound annual growth rate in earnings per share to 41% and extend to 18 years the Bank's record of uninterrupted profit growth.
Dividends
In recognition of our performance over recent years, our capital position and our confidence for the future, the Board is on this occasion recommending the establishment of a higher base from which to continue our progressive dividend policy. Accordingly, the Board recommends a final dividend of 13.93 cent per share, an increase of 67%. This brings total dividends for the year to 18.80 cent per share, an increase of 50% over 2002. Our dividend cover remains strong at 4.2 times.
It is proposed that the final dividend be paid on 30 January 2004 to shareholders on the Bank's register as at the close of business on 5 December 2003. Withholding tax may apply on the dividend, depending on the tax status of each shareholder. Shareholders will again be offered the option of receiving dividends in the form of cash or shares.
Operations
Business Lending
The Bank's earnings continue to be driven by its lending activities which account for nearly 80% of total profits. We have continued to make very strong inroads into our target sectors and these have delivered a record €4.6Bn of net new business in the year. This clearly reflects the strength of our franchise across our markets.
Loan balances in both of our core lending markets - Ireland and the UK - grew by in excess of 30%. Boston continues to perform very strongly, albeit from a much smaller base. Total group lending now exceeds €18Bn, an increase of 34% over 2002 on a constant currency basis. Margins continue to be strong and asset quality, the cornerstone of year on year quality profit growth, remains robust.
Treasury & Wealth Management
Your Board considers the increase in pre-tax profits of 34% to be an excellent result.
The record growth in lending was complemented by a significant increase in funding - the primary objective of our Treasury Division. Excluding the impact of currency movements, non inter-bank sources grew by €6.1Bn, an increase of some 47% over 2002. We continue to diversify our funding, thereby enhancing overall quality.
Furthermore, the fees generated by our Treasury and Wealth Management divisions provide a valuable and substantial source of income to the Bank. Treasury has developed a successful, targeted and growing franchise in each market in which it operates. Similarly, the positioning of our Wealth Management division with operations in Dublin, Geneva, UK, Vienna, and Isle of Man, was further strengthened during the year with the acquisition of Ernst & Young Trust Company Limited. This enables it to take advantage of an improving economic environment and strengthening equity markets. Both divisions performed strongly in 2003, accounting for some 20% of total Group profits.
Our cost/income ratio remains below 30% - €70 of every €100 of incremental revenues accrues to profit before bad debt provisions. This demonstrates the inherent strength of our business model which continues to generate significant operational leverage and delivers superior returns.
People
At the heart of our performance over the years has been the skill, professionalism and dedication of all our people. They have been the single most important ingredient in our success. 2003 is no exception and I thank them on behalf of all stakeholders.
As a Board we recognise the strength of the Bank's culture which is reinforced by the fact that a very high proportion of employees are also shareholders who participate in the Bank's success. Their interests are aligned with those of their fellow shareholders and our customers are well served.
In September 2003, Ronan Murphy retired as Group Secretary, a position he held since 1986 having joined the Bank in 1972. The Directors are immensely grateful to Ronan for his commitment to the Board and the real contribution he made to the Bank. Bernard Daly has been appointed as Ronan's replacement.
As I reported to you in my interim statement, Patricia Jamal was appointed to your Board as a Non-Executive Director in January 2003. Patricia was a former Senior Executive at Barclays Bank plc and we welcome her to the Board.
Performance
A key metric applied by the Board in assessing performance is total shareholder return (TSR). Our TSR (growth in share value assuming reinvestment of gross dividends) over the past five-year period is 440%. Against any benchmark, Anglo Irish Bank has significantly outperformed its peers. For example, the comparative cumulative five-year performance for the FTSE 350 Banks index was 69%, while the S&P; 500 Banks index returned 35%.
Strategy
Implementing our strategy has enabled the Bank to consistently deliver market leading profit growth throughout the past 18 years. We firmly believe that the Bank's significant core advantages distinguish us in the market place and position us for continued success.
A key element of our strategy remains our very clear focus. We operate in sectors and markets where our structure enables us to provide a tailored, differentiated service. We will continue to generate strong lending growth - both in terms of volume and asset quality. Income diversification will be achieved through our growing Treasury and Wealth Management operations. Most importantly, the Bank's growth will be delivered with full regard for all issues concerning risk. The successful international application of our business model is now well recognised.
Our strategy and objectives are based on organic growth. We will continue to look at acquisition opportunities as they arise but will only proceed with those which match our long-term strategic objectives and meet the stringent criteria we impose.
Outlook
We are confident of your Bank's future prospects. It is our belief that the implementation of our strategy will enable us to achieve strong, high quality growth across each of our operations and that we will continue to significantly outperform the market.
Your Bank begins its new year from a position of unprecedented strength. Lending work in progress is in excess of €3Bn, the highest level in the Bank's history. Both our Treasury and Wealth Management businesses have developed strong franchises delivering an important contribution to our profits. The proposed step up in dividend is a real and tangible reflection of this strength and our belief in the future.
Your Bank has achieved a considerable amount in a relatively short period. It is well placed to take advantage of the opportunities that continue to arise in each of its markets and your Board is confident that these opportunities will translate into real value for shareholders.
Peter C. Murray
Chairman
25 November 2003
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