Allied Irish Banks, p.l.c Interim Mnagement Statement

DUBLIN, UK, May 11 (MARKET WIRE) --

In advance of its Annual General Meeting on 13th May, Allied Irish Banks,
p.l.c. ("AIB") (NYSE: AIB) is issuing the following update on business
and key performance trends. Please note that all trends in the update are
in constant currency terms.

The economic environment prevailing at the time of our 2008 results
announcement has continued to deteriorate in the intervening period. Key
features of our overall performance in the year to date are:

* A resilient operating profit before bad debt provisions
* Increased provisions as asset quality continues to weaken
* Continued focus on funding our business in markets that
remain dislocated

In the US, M&T continues to outperform its peers and achieved net
income of $64m in the first quarter of 2009 despite increasing its
impairment and provision charges.

OPERATING PROFIT

Profit before bad debt provisions has been good in the year to date and
up on the corresponding period in 2008. However, this outcome benefited
from base period effects, most notably higher costs in the early part of
2008. The outcome reflects the very strong performance of Capital Markets
and Global Treasury in particular, driven by interest rate management
activities. This performance is continuing and will be a positive factor
for the full year. Performance in our other operating divisions is in
line with our expectations and therefore down relative to the same period
last year. For the group overall, both costs and income are down in the
year to date. Costs are being very actively managed and are down by a
higher percentage rate than income at this point. Downward pressure on
income is expected as the year progresses due to a continuation of poor
economic conditions and dislocated funding markets.

* Loan and deposit volumes

Demand for credit remains weak and loan balances remain broadly in line
with the end of last year in each division. In our Republic of Ireland
business there has been a recent pick up in home mortgage applications
but no material increase as yet in drawdowns. This increased activity
reflects an attractive customer offering and very weak competitor
presence in the market

Customer deposits have stabilised in recent weeks following some outflows
earlier in the year. In the current recessionary conditions balances in
current (money transmission) accounts have reduced. In Poland, our
deposits are broadly stable and continue to exceed our loans.

Customer resources, which include deposit and current accounts, are down
by around 10% in the first four months of this year. This mainly reflects
seasonal factors and outflows from our foreign institutional deposit base
earlier in the year and a reduction from what was a very strong position
at the end of 2008. Customer resources were up c. 9% year on year at the
end of the first quarter.

* Margins

In highly competitive markets and a low interest rate environment,
customer deposit margins continue to contract. The elevated price of
wholesale market funding is also having an adverse effect on the net
interest margin. Though negative effects are being partly offset by
better margins on our lending, overall the net interest margin is
expected to reduce this year.

* Non-Interest Income

Lower fees from banking activity, investment banking and asset management
and the cost of the Government Guarantee Scheme are expected to adversely
affect non-interest income for the full year.

* Costs

Cost management is a key priority in the current difficult revenue
environment. All expense categories across our business are being closely
monitored and controlled. The successful drive to reduce costs in 2008 is
continuing; costs are significantly down in the first quarter of this
year relative to the corresponding period in 2008 and we are also
targeting a reduction for the full year 2009.

ASSET QUALITY

At our 2008 results announcement on 2nd March we outlined a base case and
a stress scenario. The bad debt charge in the first quarter of 2009 of
close to EUR 800m was a little ahead of the upper end of that base case.
Conditions across our markets have worsened and there will be further
pressure on the bad debt provision charge for full year 2009. All
commentators broadly concur on the significant downward revisions to
expectations for Irish economic activity and employment that have issued
since the beginning of March. Therefore our key macro assumptions for
Ireland are now more negative than in the stress scenario presented at
our results announcement. The pace of change is increasing loan
impairment and bad debt charges. This continuing factor means that the
previous stress scenario charge is likely to be exceeded and we now
expect our bad debt charge for 2009 to be around EUR 4.3 bn, c. 325 basis
points of average loans.

Group criticised loans (watch, vulnerable and impaired) have increased in
the first quarter to c. EUR 24.3 bn, an increase of close to EUR 9 bn.
Republic of Ireland division represents over 70% of the increase and c.
75% of the group bad debt charge. Increases continue to be heavily
influenced by downgrades in the property, building and construction
sector. When established and implemented, the National Asset Management
Agency (NAMA) will seek to address problems in this sector. Informed by
the deteriorating environment and evidenced by the increase in criticised
loans, we are aggressively recognising impairment as it arises.

Increases in the levels of criticised loans in other sectors are now more
evident in the Republic of Ireland. Mortgage arrears stand at c. 2.0% of
total mortgages at the end of March up from c. 1.5% in December 2008 and
impaired loans have increased to EUR 234m. Pressure on employment is a
key factor in these increases although the levels of arrears and
impairment remain well below available industry average comparatives.

In our UK division, growth in impaired loans also primarily relates to
the property, building & construction sector. That sector accounted for
close to 90% of the bad debt charge for the first quarter. There is also
deterioration in other portfolios in tough economic conditions with
increasing pressure evident in the leisure sector.

In Capital Markets there has been some negative grade migration across
portfolios though there are no material adverse trends in any particular
sector or geography. Our Treasury portfolios continue to be subject to
regular and intensive review and we remain satisfied that they will
redeem at par.

There is some deterioration evident in our Polish loan book, most notably
in the property and consumer cash loan portfolios. There is little
current activity in the property market, as is the case in other
countries, but the Polish market fundamentals remain relatively strong.

CAPITAL

Our capital remains well in excess of regulatory requirements. Our core
tier one capital ratio was c. 5.5% at the end of March and will be
strengthened in the event that the EUR 3.5 bn Government recapitalisation
proposal is approved at the Extraordinary General Meeting on 13th May. We
have previously announced our aim to further increase our core tier one
capital by EUR 1.5 bn and will advise progress on this initiative as it
takes place.

The creation of NAMA will be a key event for the bank and the industry.
We support this Government initiative and will work with the Government
to expedite its implementation. It is premature at this point to estimate
its effect on our capital.

FUNDING

Despite challenging wholesale funding market conditions, we continue to
source funds across currencies, geographies and products through a range
of programmes. Our level of qualifying liquid assets / contingent funding
continues to be above the regulatory requirement. We continue to develop
contingent collateral and liquidity facilities to further support our
funding agenda. Market conditions improved during April and we
successfully increased our existing Government guaranteed issue maturing
in September 2010 by EUR 1 bn to EUR 3 bn. There was good demand for the
issue and overseas investors subscribed for 78% of the additional amount.
We have also recently seen very good demand for private placements.

Over time, we continue to target a reducing loan to deposit ratio
although the already referred to reduction in customer resources since
the end of 2008 has subsequently increased that ratio.

Further details
of our performance and outlook will be provided at our 2009 Interim
Results announcement on 5th August.

Forward-looking statements

This document contains certain forward-looking statements within the
meaning of the United States Private Securities Litigation Reform Act of
1995 with respect to the financial condition, results of operations and
business of the Group and certain of the plans and objectives of the
Group. In particular, certain statements with regard to management
objectives, trends in results of operations, margins, risk management,
competition and the impact of changes in Financial Reporting Standards
are forward-looking in nature. These forward-looking statements can be
identified by the fact that they do not relate only to historical or
current facts. Forward looking statements sometimes use words such as
'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan',
'goal', 'believe', or other words of similar meaning. Examples of
forward-looking statements include among others, statements regarding the
Group's future financial position, income growth, business strategy,
projected costs, capital position, estimates of capital expenditures, and
plans and objectives for future operations. Because such statements are
inherently subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking
information. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances
that will occur in the future. There are a number of additional factors
that could cause actual results and developments to differ materially
from those expressed or implied. These factors include, but are not
limited to, changes in economic conditions globally and in the regions in
which the Group conducts its business, changes in fiscal or other
policies adopted by various governments and regulatory authorities, the
effects of competition in the geographic and business areas in which the
Group conducts its operations, the ability to increase market share and
control expenses, the effects of changes in taxation or accounting
standards and practices, acquisitions, future exchange and interest rates
and the success of the Group in managing these events. Any
forward-looking statements made by or on behalf of the Group speak only
as of the date they are made. The Group cautions that the foregoing list
of important factors is not exhaustive. Investors and others should
carefully consider the foregoing factors and other uncertainties and
events when making an investment decision based on any forward-looking
statement. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Report may not occur. The Group
does not undertake to release publicly any revision to these
forward-looking statements to reflect events, circumstances or
unanticipated events occurring after the date hereof.

This
announcement was originally distributed by Hugin. The issuer is solely
responsible for the content of this announcement.

Copyright
Copyright Hugin AS 2009. All rights reserved.

For further information please contact:

Alan Kelly
General Manager, Group Finance
AIB Group
Dublin 4
Tel: +353-1-6600311 ext. 12162

Catherine Burke
Head of Corporate Relations
AIB Group
Dublin 4
Tel: +353-1-6600311 ext. 13894

Copyright 2009, Market Wire, All rights reserved.

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