Allied Irish Banks, plc - Company Profile, Information, Business Description, History, Background Information on Allied Irish Banks, plc



Bank Centre
P.O. Box 452
Ballsbridge
Dublin 4
Ireland

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.

History of Allied Irish Banks, plc

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.

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.

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.

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).

Principal Divisions: AIB Bank; USA Division; AIB Capital Markets.

Principal Operating Units: Republic of Ireland; Northern Ireland; Britain; Group Treasury & International; Investment Banking; Corporate Banking.

Additional Details

Further Reference

AIB Group Public Affairs, The AIB Group, Dublin: AIB Group, September 1995."Banks Face Squeeze on Profits," The Banker, February 1979, pp. 87-92.Barrow, G. L., The Emergence of the Irish Banking System 1820-1845, New York: Gill and Macmillan, 1975.Bee, Robert N., "Buying into a US Bank: The Allied Irish Experience," The Banker, July 1986, pp. 32-35.Blanden, Michael, "Back to the Home Turf," The Banker, February 1990, pp. 61-62.------, "Celtic Tiger on the Prowl," The Banker, February 1995, pp. 35-38.------, "Green, Green Grass of Home," The Banker, February 1992, pp. 19+.Bourke, Kevin J., "Implementing a Marketing Action: A Programme for AIB Group," Long Range Planning, December 1992.Bray, Nicholas, "Allied Irish Banks Looking To Resume International Expansion Begun in '80s," The Wall Street Journal, February 3, 1995, p. B6.------, "Analysts Point to Bank of Ireland, A.I.B. as Top Choices Among European Stocks," The Wall Street Journal, May 16, 1994, p. A11.Campbell, Mary, "Irish Banking Today," The Banker, November 1972, pp. 1,388-1,394.Gilbart, James William, The History of Banking in Ireland, London: Longman, 1836.Kimbell, Lucy, and Smosarski, Grog, "Wielkopolski Grows with Polish Economy," Central European, April 1994, p. 37.McRae, Hamish, "Irish Banks Consolidate," The Banker, August 1968, pp. 707-13.Murphy, Paul, "Gloves Off and Come Out Fighting," The Banker, February 1989, pp. 43-48.------, "Seconds Out, Round One," The Banker, February 1988, pp. 42-49."New Head Sought for WBK," Finance East Europe, May 12, 1995, p. 8.O'Hara, Terrence H., "Perpetual To Sell Credit Card Unit to Irish Bankers," Washington Business Journal, April 1, 1991, p. 4.Panday, Mark, "Irish Banks Set Priority Markets," Euromoney, July 1989, pp. 99-100."Ready for a New Brew," The Banker, February 1993, pp. 13-16."The Second Group," The Economist, August 27, 1966, pp. 848-49.Seekings, David, "Allied Irish Banks in Britain: Organisational and Business Development Through Action Learning," Leadership and Organization Development Journal, 1987, pp. 26-31.Shapiro, Stacy, "Irish Government Takes Control of Insurer," Business Insurance, March 25, 1985."Small Is Beautiful," Euromoney, January 1990, pp. 29, 32.Spender, Barnabas, "De Buitleir Sees an Allied Vision," International Tax Review, July/August 1993, pp. 44-46.Stewart, Kathryn, "Corporate Identity: A Strategic Marketing Issue," International Journal of Bank Marketing, 1991, pp. 32-39.Thackray, John, "Curate's Egg for Foreign Bankers," Euromoney, November 1989, pp. 121-37.Wills, Gordon, "What Manager Doesn't Study at Home?" European Journal of Marketing, 25, no. 4, 1991, pp. 128-132.Wilson, Brian, "Organisation and Business Development Through Action Learning," International Journal of Bank Marketing, 1988, pp. 57-66.

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