Allied Irish Banks, p.l.c. Trading Update

Allied Irish Banks, p.l.c. Trading Update

Allied Irish Banks, p.l.c. (”AIB”) [NYSE:AIB] is issuing this update ahead of the announcement on 2nd March 2009 of Group results for the year ended 31st December 2008. The figures quoted in this statement are preliminary estimates and unaudited.

In our Interim Management Statement (IMS) of 5th November 2008 we said that our 2008 earnings per share target was around Eur 120c. We also said that we expected to incur a bad debt charge of c.75 basis points (bps) of average loans in 2008. Since issuing the IMS key trends have changed. These trends and their likely effect on our 2008 results can be summarised as follows:

-There have been both income and cost benefits due to management focus and cheaper funding conditions. Sustained income growth and a reduction in costs will create a materially positive gap between their respective rates of change.

-Asset quality has further deteriorated as economic conditions have worsened. Consequently the bad debt provision requirement has materially increased. We have taken two distinct steps in assessing that requirement

(i) - A charge of c. 100 bps of average loans has been determined. This comprises c. 63 bps of a specific charge and c. 37 bps of an incurred but not reported (IBNR) charge. This increased charge is relative to the c. 75 bps (c. 45 bps specific, c. 30 bps IBNR) previously guided and this increase, partly offset by the already mentioned better operating performance, would have resulted in 2008 earnings per share of around Eur 114c.

(ii) - We have also taken a further IBNR charge of €500m, c. 37 bps of average loans. This charge is directly related to a portfolio of identified cases, of which c. 75% relates to our Irish property development loan book. Although not currently impaired, this portfolio is showing significant and growing signs of stress as a result of the adverse conditions at the end of 2008. Accordingly, we deem it likely that some of these cases will emerge as requiring specific provisions in 2009 and this further IBNR charge has been created for them and taken in our 2008 accounts.

- The bad debt charge for 2008 will therefore total c. 137 bps of average loans. Earnings per share for that year are now expected to be around Eur 66c.

- Core tier one capital ratio at the end of 2008 is now estimated at c. 5.7%. This figure reflects our prudent decision to incur the aforementioned additional IBNR of €500m which reduces the ratio by around 30 bps or from 6%. The recently announced Government recapitalisation of €3.5bn increases the ratio, on a pro forma basis at the end of 2008, to c. 8.2%

Further details of our 2008 performance and outlook will be provided at our results announcement on 2nd March.

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