ANNUAL REPORT `05_3e

Transcription

COVER ARTWORK_l
12/9/05
9:44 AM
Page 1
EXPERIENCE THE DIFFERENCE
Dublin
Cork
Galway
Limerick
Waterford
London
Banbury
Birmingham
Glasgow
Manchester
Isle of Man
Geneva
Prague
Annual Repor t & Accounts 2005
Belfast
2005
Twenty years of uninterrupted profit growth
Vienna
Boston
New York
Dubai
Anglo Irish Bank
Business Lending
Treasur y
Wealth Management
www.angloirishbank.com
COVER ARTWORK_l
12/9/05
9:44 AM
Page 2
2005 was a year of record growth and investment for the
Group. The Bank continues to leverage and strengthen its
franchise in all target markets through the execution of
its focused strategy. We are confident that by consistently
delivering for our customers, the Group will create and
sustain superior returns for shareholders into the future.
20 years of uninterrupted profit growth
Contents
01
Financial highlights
38 Consolidated profit and loss account
02 Group profile
39 Consolidated balance sheet
04 Chairman’s statement
40 Company balance sheet
10
41
Group Chief Executive’s review
Consolidated cash flow statement
18 Board of Directors
42 Statement of total recognised gains and losses
20 Senior Executive Board
42 Reconciliation of movements in shareholders’ funds
24 Corporate social responsibility
43 Notes to the financial statements
30 Report of the Directors
100 Consolidated profit and loss account (USD, GBP, CHF)
31
101 Consolidated balance sheet (USD, GBP, CHF)
Statement of Directors’ responsibilities
32 Corporate governance statement
102 Shareholder information
36 Independent Auditors’ report
104 Anglo Irish Bank locations
Front cover, left to right: 222 East 41st Street, New York; Head Office, St. Stephen’s Green, Dublin;
Reception, Head Office, St. Stephen’s Green, Dublin;Warrenmount Secondary School, Dublin.
Back cover:The Whitgift Centre, Croydon, London.
Designed and produced by Designbank Ltd. Tel: 6604177.
01
685.2
An excellent year
73.21
13.54
11.28
57.26
504.1
Five year compound annual
growth rate in pre-tax profits
and customer lending of 39%
and 33% respectively
9.40
39.02
346.5
6.27
29.07
261.3
5.22
4.35
21.59
194.8
16.78
Profit before taxation (€m)
Earnings per share (cent)
48,264
2005
2004
2003
2002
2001
2000
2005
2004
2003
2002
2001
2000
2005
2004
2003
2002
2001
2000
133.6
Dividends per share (cent)
41,716
34,421
34,340
24,390
29,096
22,426
25,520
11,522
13,844
Total funding (€m)
2005
2004
Profit before taxation
685.2
504.1
Earnings per share
73.21c
57.26c
Dividends per share
13.54c
11.28c
34%
35%
Total assets
48,264
34,340
Advances to customers*
34,421
24,390
Total funding
41,716
29,096
4,647
3,873
Total capital resources
*Including securitised assets
2005
2004
2003
Advances to customers* (€m)
€m
Return on ordinary equity
2002
2005
2004
2003
2002
2001
2000
2005
2004
2003
2002
2001
Total assets (€m)
2001
8,304
9,852
11,058
2000
15,771
2000
14,297
16,853
19,412
Financial highlights
18,077
02
ANGLO IRISH BANK Annual Report & Accounts
Group profile
Anglo Irish Bank, with total assets in excess of €48 billion, is Ireland’s third largest bank and fourth largest
company listed on the Irish Stock Exchange.Through the consistent application of a focused strategy, the
Group has been one of the best performing banks globally over the past ten years.
We operate in three core areas – business lending, treasury and wealth management. Not a universal bank, we
focus on providing tailored, differentiated products where we can deliver superior service to our customers.
The success of our offering is firmly based upon the commitment of our people, now in excess of 1,400
across eight countries.
The Bank’s centralised business model is a key factor enabling consistent delivery for our customers and
successful risk management. It also provides significant operational leverage resulting in an efficient cost income
ratio of below 30%, delivering €70 of every €100 of incremental revenue to profits.
Business Lending
Secured term lending is the Bank’s core area of
expertise and main driver of income and
profitability. We lend principally to the midcorporate and professional sectors.
Lending services are offered in three core markets:
Ireland, the United Kingdom and North Eastern USA
– where the Bank has built strong, indigenous client
franchises. The Group has extensive experience and
expertise in assisting customers in both local and
cross border transactions in these markets and in
Europe.
The Bank’s model is identical across all regions.
We seek to build relationships with strong people,
where cashflows are secure and supported by
collateral. Lending transactions are approved at the
Group’s centralised credit committee in Dublin.The
regular participation of all lenders at credit
committee, either physically or by video
conference, uniquely empowers them in their
dealings with customers whilst ensuring consistent,
high quality underwriting.
Products
• Corporate lending
• Commercial mortgages
• Asset finance
• Invoice discounting
• Film finance
Treasury
Treasury’s primary responsibility is the origination
of funding and management of the Bank’s liquidity
and interest rate risk. It also contributes significant
income through its trading, international finance and
corporate treasury sales activities.
Group funding, liquidity and risk management are
co-ordinated centrally, with funding primarily
sourced through the Bank’s personal and corporate
deposit taking operations in Ireland, the United
Kingdom, the Isle of Man and Austria.The Bank has
also developed an excellent franchise in the
international capital markets, enhancing its funding
profile and capital base.
The Bank is also a significant participant in the
international interbank markets, managing a treasury
relationship with over 350 banks.
Our Corporate Treasury Sales Division is positioned
as a specialist provider of foreign exchange and
interest rate management services.These are
provided in Ireland, the United Kingdom,Austria
and through our representative office in Boston.
Trade finance business is conducted in Ireland and
the United Kingdom.
Products
• Interest rate risk management
• Foreign exchange risk management
• Corporate deposits
• Personal deposits
• International finance
• Capital markets
03
USA
Ireland
Isle of Man
UK
Switzerland
Austria
Czech
Republic
UAE
Boston
New York
Dublin
Cork
Galway
Limerick
Waterford
Douglas
London
Banbury
Belfast
Birmingham
Glasgow
Manchester
Geneva
Vienna
Prague
Dubai
Wealth Management
Wealth Management provides private banking, funds
management and retirement planning services from
offices in Ireland, the United Kingdom, the Isle of
Man, Austria, Switzerland and most recently, the UAE.
Operating as a single cohesive division, we are
positioned as a niche provider of tailored investment
opportunities to a high net worth client base. Our
emphasis is on the protection and creation of
wealth through financial planning and asset
diversification. In addition,Anglo Irish Assurance
Company, an integral part of Wealth Management,
provides a range of investment and retirement
solutions.
Products
• Investment products
• Deposits
• Funds management
• Inheritance planning
• Retirement planning
04
Chairman’s
statement
Sean FitzPatrick Chairman
05
Anglo Irish Bank had an impressive year with your
Group producing its best results to date. This
demonstrates the continuing ability of our focused
strategy and business model to deliver strong profit
growth and excellent returns to shareholders.
Pre-tax profits increased by 36% to €685 million.
EPS and profit attributable to ordinary shareholders
grew by 28% and 29% to 73.21 cent and €491
million respectively, generating a return on ordinary
equity of 34%. Your Bank’s performance in 2005 has
contributed to a five-year total shareholder return
in excess of 800%, making it the leader amongst
its peers.
Dividend
Your Board recommends a final ordinary dividend
of 9.03 cent per share, bringing the total dividends
for the year to 13.54 cent, an increase of 20%. The
total amount payable to shareholders in the form
of ordinary dividends for 2005 is €91.4 million.
Dividend cover remains strong at 5.4 times as the
Bank retains significant capital directed at future
growth opportunities in each of our markets.
It is proposed that the final ordinary dividend be
paid on 13 February 2006 to shareholders on the
Bank’s register as at the close of business on
2 December 2005. 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.
People
Our success is firmly based upon the skill,
professionalism and commitment of our people.
On behalf of all stakeholders, I thank them for once
again delivering this year.
The Bank invests significantly in the recruitment,
training and development of talented professionals.
We will continue to benefit from this important
investment in future years.
Board
We announced recently the appointment of
Declan Quilligan as Chief Executive Designate of
the Group’s UK operations, succeeding John Rowan
who retires from the Bank at the end of 2005. John
joined the Bank in 1985 and was appointed to the
Board in 1998. Over the last 20 years he has played
a very significant role in the successful building of
our franchise in the UK and in the overall
management of the Group. On behalf of the Board,
I thank John for all he has given to Anglo Irish Bank
and wish him every success for the future.
I look forward to welcoming Declan to the Board
in December. A member of the Senior Executive
Board since 1999, Declan joined the Bank in 1990
and has held a variety of senior management
positions, most recently as Director of the Banking
Ireland Division. Your Board is confident that under
Declan’s leadership our UK team will take full
advantage of the significant opportunities available
to the Bank to grow its franchise in this major
market over the coming years.
The scale of opportunities available to the Bank remains very significant. I believe
the strength, flexibility and scalability of our centralised business model will enable
the Bank to capitalise on these opportunities, thereby delivering strong returns for
our shareholders.We look forward to a strong performance in 2006 and beyond.
06
Corporate Social Responsibility (‘CSR’)
Leading successful financial services companies
around the world are those that not only deliver
superior investor returns and excellent customer
service, but who also consider ethical, social and
environmental issues for all stakeholders. The Bank
recognises its wider obligations to society and the
community it serves and believes there is a strong
link between CSR and long-term success. The
annual report includes details of the Group’s
activities and achievements in the CSR area.
Strategy
The Bank is well positioned and the fundamentals
of our business model and strategy remain as
relevant today as ever before. Business lending will
continue to be the key driver of the Group’s
growth. We will seek to further deepen our lending
franchise with new and existing clients in Ireland,
the UK and North America.
The success of Treasury provides an excellent
platform to deliver the Group’s funding needs
whilst also providing a highly efficient and valuable
source of revenue diversification. Our Wealth
Management Division’s aim is to become the
leading niche provider of financial management
services to high net worth clients. This makes it a
natural and complementary offering to the Bank’s
wider customer base.
Our organically focused growth will be delivered
with full regard for all matters concerning risk.
Outlook
Your Board is confident of the Bank’s future
prospects. The seamless management transition is
reflected in the current year’s record performance
across all businesses.
Economic growth during 2005 was strong in the
key regions in which we operate and that trend is
expected to continue into next year.
The scale of opportunities available to the Bank
remains very significant. I believe the strength,
flexibility and scalability of our centralised business
model will enable the Bank to capitalise on these
opportunities, thereby delivering strong returns for
our shareholders. We look forward to a strong
performance in 2006 and beyond.
Sean FitzPatrick
Chairman
22 November 2005
07
Anglo Irish Bank
Head Office is located
at St. Stephen’s Green,
Dublin 2, Ireland.
08
Anglo arranged and structured the syndicated project finance and long-term facilities for
the development of Dundrum Town Centre in Dublin. Located just south of Dublin’s city
centre, it is Ireland’s largest shopping complex, and is let to many well-known Irish and UK
tenants on long-term leases. As part of the transaction structuring, our Treasury Division
provided a comprehensive interest rate risk management solution to our customer.
Dundrum Town Centre,
Dublin
09
10
Group
Chief Executive’s
review
David Drumm Group Chief Executive
11
2005 was a year of record growth and investment
for the Group. This excellent performance was
achieved across all our divisions and geographies.
The Bank continues to leverage and strengthen its
franchise in all target markets through the
consistent execution of its focused strategy.
The performance highlights for the period include:
Profitability
• Pre-tax profits of €685 million, an increase
of 36%
• Record EPS of 73.21 cent, an increase of 28%
Shareholder Value
• Return on ordinary equity of 34%
• 20% increase in ordinary dividends to
13.54 cent per share
Operational Performance
• Record growth in lending of €9.8 billion, an
increase of 40%
• Excellent asset quality with non-performing
loans representing 0.54% of closing loan
balances
• Total funding increased by 43% to €41.7 billion
• Strong Tier 1 Capital Ratio at 8.4%
• Employee numbers grew to 1,411, a
17% increase year-on-year
• Cost income ratio highly efficient at 27%
• Lending work in progress of €6.0 billion
at year-end
Operations
Business Lending
Focused business lending remains the Bank’s core
activity and key profit driver. The 2005 results are
based on record net loan growth of €9.8 billion
bringing year-end loan balances to €34.4 billion.
This represents an increase of 40% on a constant
currency basis.
The record performance has been achieved right
across our chosen markets and sectors. Despite the
continuing competitive nature of the sector, our
lending margins remain stable. This reflects the
Bank’s unique service offering, distinguished by a
consistent delivery and ability to execute for
customers. Strong levels of repeat business in each
market bear testament to this.
Our Bank’s model of backing proven operators
with secure cash flows supported by collateral
ensures consistent underwriting. Asset quality is
paramount. Every loan is individually assessed and
stress tested to ensure the transaction would
survive tougher conditions. As demonstrated by the
Bank’s growth, our centralised model has the
capacity to continue delivering for customers while
maintaining effective risk management.
Non-performing loans represent just 0.54% of total
Group lending, continuing the improving trend of
the last number of years.We acknowledge that the
economic climate in 2005 remained benign. The
current high quality of the book leaves the Bank
well positioned to move forward with confidence.
Lending – Ireland
Irish business lending grew very strongly from
€13.3 billion to €19.4 billion, an increase of 46%.
Each of our offices; Cork, Dublin, Galway, Limerick
and Waterford contributed to this performance.
The consolidation of our lending operations into a
single Ireland Lending Division from the beginning
of the year has worked well and ensures consistent
service delivery to our clients across the entire
market.
The level of growth evidences the continued
strength of the Bank’s Irish franchise. During the
year deals were completed across the spectrum of
12
small through to larger ticket transactions,
highlighting the Bank’s ability to deliver to the
needs of all our clients.
Over the past number of years certain Irish clients
have sought high quality investment opportunities in
the UK, USA and Europe. Often working in close
collaboration with local market incumbents, these
clients bring valuable expertise to particular
opportunities, whilst achieving selective diversification
in their asset portfolio.
We have now placed an experienced team on the
ground in Prague, to work with all our clients who
choose to invest in Europe. Unlike in our core
markets, we are not seeking to build an indigenous
European lending franchise. However, we see this as
an excellent opportunity to further deepen and
enhance relationships with some key longstanding
clients of the Group. More importantly, given our
visibility of cash flows and cross collateralisation of
the client’s total asset base, we can undertake such
business on a low risk basis.
We look forward to significant growth opportunities
in future years. The outlook for the Irish economy
remains positive. Strong GDP and employment
growth, significant infrastructural investment, buoyant
consumer demand, low inflation and favourable
demographics all combine to support this sentiment.
We expect interest rates to increase from current
historical low levels, but in a measured and controlled
manner. This environment will assist our customers
and I am confident that the Bank will continue to
enhance and capitalise on the strength of our
existing business and relationships.
Lending – UK
Loan growth generated by our UK Division
continued to flourish with a 27% net increase in
loan balances to €12.5 billion. This represents a
strong performance in a highly liquid market.
The Bank’s franchise is now well recognised in its
target market and we are experiencing significant
growth from our existing customers as well as a
steady increase in high quality new referrals.
Our footprint has expanded in the UK during 2005.
We moved to new and larger premises in both
Birmingham and Manchester to facilitate expansion
of our teams on the ground in these markets. The
Bank recruited experienced lenders at all levels in
the UK. This investment reflects our strong belief
that there is significant potential across key urban
regions in the UK.
Amongst the larger European economies, the UK
has performed strongly. The upward movement in
interest rates would appear to have peaked. We
believe that the continuing positive outlook for
employment should provide a sound platform for
economic activity going forward.
We are confident in our UK business and believe
that it will be a key growth engine of the Group in
the future.
Lending – North America
The Bank has continued to build on the foundations
established over the last seven years with loan
balances increasing 81% from 2004 levels to almost
€2.5 billion, on a constant currency basis.
During the year we invested significantly in both
people and infrastructure. Our team in Boston
has grown to in excess of 40 people today. In
December the Bank moved to new and larger
premises to facilitate our planned future growth.
Our North American business demonstrates the
international mobility of our business model. As a
response to clients’ needs we have established a
13
Looking out further, our unique service offering to customers, based on a secured
lending model, has proven to be both transportable and scalable and provides
long-term potential to build upon our existing franchises in all our key markets.
representative office in New York. All credit
decisions and business support remain at head
office in Dublin which ensures the consistent
quality of loans and client service.
Ireland, the UK and Austria. In addition, we have
begun to replicate the success of our established
retail funding activities in Ireland and the Isle of
Man into the UK.
The regional economy in the North East of the
USA continues to perform well having absorbed
the continuing increase in interest rates to more
normal levels. Growth in employment and real
incomes continues to be strong. Our small position
makes correlation with the wider economy of less
relevance. However, the general strength of the
market is beneficial.
Corporate Treasury Sales recorded strong revenue
growth, particularly in the UK and North American
markets, by providing innovative solutions to corporate
customers in managing their interest rate and
foreign exchange exposures. All treasury activity is
channelled through our centralised trading desk in
Dublin enabling highly effective risk and cost control.
Growth levels in the USA during this period were
clearly exceptional. However, the Bank does expect
to generate high quality organic growth through
repeat business and a widening client base, as we
build upon the strong foundations now in place.
Treasury
Our Treasury Division had an exceptional year. It
continued to provide a strong and well-diversified
funding base to facilitate the Bank’s controlled asset
growth and also generated record fee income
through corporate treasury sales.
Total funding increased by a record €12.5 billion
on a constant currency basis to €41.7 billion, an
increase of 43%. Retail and corporate customer
deposits increased 29% to €25.2 billion
demonstrating the inherent ability of the Bank to
deliver in such a competitive environment. The
Bank has a strong corporate funding franchise in
Wealth Management
Wealth Management had an excellent year with a
particularly strong performance by our Irish Private
Bank. The Division has operations in Austria, Ireland,
Isle of Man, Switzerland, the UK and most recently
the UAE with the opening of a representative office
in Dubai.
The growth potential of this business is significant.
It also provides a compelling entrée to new
potential customers of the Group while deepening
relationships with existing clients, thereby protecting
the Bank’s franchise. Our core objective remains to
position the business as a niche provider of financial
wealth management services for a high net worth
client base.
14
Capital
Record profit retentions in the year helped bring
the Bank’s ordinary equity base to nearly €1.7
billion. This represents an increase of 36% in the
period. Driven primarily by strong retentions, our
ordinary equity base has expanded fivefold since
2000.
In June, the Bank further enhanced its capital base
with the issue of Stg£300 million Tier 1 eligible
preference shares. The issue was well received by
the market. This followed the issue of €600 million
Tier 1 eligible securities in September 2004. These
transactions, together with the significant internal
capital generation, provide an excellent foundation
for future growth. The Bank’s Tier 1 and Total
Capital ratios now stand at 8.4% and 11.8%
respectively.
International Financial Reporting
Standards (IFRS)
Our results for the year ended 30 September
2005 are prepared under Irish generally accepted
accounting practices (Irish GAAP). In line with all
listed entities in the European Union,Anglo Irish
Bank is required to adopt IFRS for accounting
periods commencing after 1 January 2005.
Accordingly, the Bank’s first full reporting period under
IFRS will be the year ended 30 September 2006.
In June this year, we provided our assessment of
the anticipated impact of the change to IFRS on the
Bank.We indicated that EPS for the six months
ended 31 March 2005 would have been circa 4%
lower than under Irish GAAP and that the impact
on our Tier 1 regulatory capital was expected to be
marginally positive. We estimate that the impact on
our full year numbers to 30 September 2005 will
be of a similar magnitude.
It is our intention to provide restated IFRS 2005
comparative numbers to the market in March 2006.
It is important to recognise that this change in
reporting requirements has no impact on the
economics, cash flows or strength of the business.
It mainly reflects timing differences in the recognition
of income and expense and presentation changes to
the income statement and balance sheet.
Investment
This year was one of significant investment in our
people base, growing staff by 17% to just over
1,400. Investment was well spread throughout
divisions and geographies with about two thirds in
direct client management and the remainder in
Finance, IT, Risk and other key support functions.
We continued to devote sizeable resources to
people development and training during the year.
Considerable infrastructural investment has also
been undertaken with the implementation of a
single platform, multi-location Wealth Management
back office support system, and the ongoing
development of a new bespoke banking engine.We
also engaged in the further enhancement of certain
Treasury systems. In addition, the Bank undertook
moves to new office space in Birmingham, Boston,
Manchester, New York and Waterford during the
year providing flexible expansion solutions for the
future.
These ongoing investments provide an excellent
structural platform for the Bank to underpin future
business growth opportunities in an efficient and
controlled manner.
Notwithstanding this level of investment, the Bank’s
cost income ratio is 27%, demonstrating the
inherent efficiency of our model.
15
Board
I wish to echo the sentiments of our Chairman and
thank John Rowan for his significant contribution
over the past 20 years. John’s greatest legacy is
undoubtedly the strong team and franchise which
the Bank has established in the UK. I am confident
that Declan Quilligan’s appointment as Chief
Executive – UK will enable the Bank to further
exploit the undoubted opportunity that this major
market offers.
Strategy
The Bank will retain its focus on our core business
of secured senior debt financing in our three
established markets of Ireland, the UK and the
USA. The diverse sources of funding and capital
available to the Bank provide ample scope to
exploit the significant growth opportunities
available to us. As always, asset quality will remain
the cornerstone of our lending model.
Our Treasury and Wealth Management businesses
enjoyed another excellent year and we look
forward to further growth.
Given the considerable opportunities available to us
in our key markets the Board’s strategy continues
to be based on organic growth. However, we will
consider acquisition opportunities as they arise
where they meet the stringent criteria we impose.
The Bank’s ability to deliver upon its strategy is
predicated on the commitment and talent of our
people. I thank them for their continued
outstanding contribution during 2005. We will
further invest in our people to enable us execute
this clear and focused strategy.
Outlook
I am confident of the Bank’s future prospects.
Our record lending growth of €9.8 billion in 2005,
together with a sizeable pipeline at 30 September
of €6.0 billion, mean we enjoy a strong start to the
2006 financial year. Looking out further, our unique
service offering to customers, based on a secured
lending model, has proven to be both transportable
and scalable and provides long-term potential to
build upon our existing franchises in all our key
markets.
Accordingly, I believe the Bank will continue to
create and sustain superior returns for shareholders
into the future.
David Drumm
Group Chief Executive
22 November 2005
16
The Whitgift Centre, one of the UK’s busiest shopping centres comprising over one million
square feet of prime retail and office space, is situated in Croydon, London’s largest
borough. Several leading national retailers anchor the centre with the UK Government
occupying 75% of the office space. In addition to financing the acquisition debt, our Wealth
Management Division raised significant equity from private clients, providing them with the
opportunity to invest alongside a professional investment property customer of the Bank.
The transaction was structured through our 100% subsidiary, Anglo Irish Assurance
Company and our Treasury Division provided an interest rate risk management solution
in respect of the long-term debt.
The Whitgift Centre,
Croydon, London
17
18
Board of
Directors
Sean FitzPatrick (57)
David Drumm (39)
Lar Bradshaw (45)
was appointed Chairman in January 2005,
having been Chief Executive of Anglo Irish
Bank Corporation plc since 1986. A
Chartered Accountant, he also serves as
Non-executive Director of the Dublin
Docklands Development Authority,
Greencore plc, Aer Lingus, Gartmore Irish
Growth Fund plc and as a member of the
Council of the Institute of Chartered
Accountants in Ireland.
was appointed Group Chief Executive in
January 2005, having been Divisional
Director and Head of Lending Ireland
since 2003. A Chartered Accountant, he
joined the Bank in 1993 following a
number of years in corporate finance.
After working initially in the Banking
Division in Dublin, he established the
North American Division in 1998.
who joined the Board in October 2004,
is a former Director of McKinsey Inc. and
Managing Director of McKinsey Ireland.
He holds an MBA degree from the
International Institute for Management
Development in Switzerland and has
been Chairman of the Dublin Docklands
Development Authority since 1997.
Patricia Jamal (62)
William McAteer (55)
Gary McGann (55)
joined the Board in January 2003. She
is a former Managing Director and Head
of Global Financial Institutions in
Barclays Capital.
a Chartered Accountant, was appointed
Finance Director of the Group in June
1992. He was previously Managing
Director of Yeoman International Leasing
Limited, prior to which he was a Partner
with Price Waterhouse.
who joined the Board in January 2004,
is Chief Executive Officer of the Jefferson
Smurfit Group. He is Chairman of the
Dublin Airport Authority and is President
of IBEC. He is also a Director of Aon
McDonagh Boland Group and United
Drug plc. He holds a BA degree from
University College Dublin, a Masters
degree in Management Science and is a
Fellow of the Association of Chartered
Certified Accountants.
19
Executive Director
An independent Non-executive Director
A member of the Audit Committee
A member of the Nomination and Succession Committee
A member of the Remuneration Committee
A member of the Risk and Compliance Committee
Tom Browne (43)
Fintan Drury (47)
Michael Jacob (60)
who joined the Board in January 2004, is
responsible for lending operations in
Ireland and the Bank’s Wealth
Management Division. He joined the Bank
in 1990 and was appointed Head of Dublin
Banking in 1997. He holds MBS and BBS
degrees and is a member of both the
Institute of Bankers and the Institute of
Marketing in Ireland.
who joined the Board in May 2002, is
Chairman of the RTE Authority, Paddy
Power plc and Platinum One, a sports,
sponsorship and event management
agency. He is a former news journalist
with RTE and in 1988 founded Drury
Communications, a corporate
communications consultancy from
which he retired in 1999.
has been a Director since 1988 and
is a Fellow of the Chartered Institute
of Management Accountants. He is
Chairman of the Lett Group of
Companies, Deputy Chairman of SIAC
Construction Limited, President of the
Royal Dublin Society and a Director
of other companies.
John Rowan (47)
Ned Sullivan (57)
Patrick Wright (64)
joined the Board in October 1998. A
Chartered Accountant, he joined the Bank
in 1985 and is Chief Executive of the
Bank’s operations in the United Kingdom.
who joined the Board in November 2001,
is Chairman of Greencore plc and
McInerney Holdings plc. He is the former
Chairman of the President's Award –
Gaisce, former Group Managing Director
of Glanbia plc and previously held a
number of senior management positions
in Grand Metropolitan plc. He holds
B.Comm and MBS degrees.
joined the Board in February 2000. He is
Chairman of Aon McDonagh Boland
Group and former Chairman of the RTE
Authority. He is an Honorary Fellow of
the National College of Ireland and a
Fellow of the Irish Management Institute.
20
Senior Executive
Board
Pat Whelan
Declan Quilligan
David Drumm
William McAteer
Bernard Daly
joined the Bank in
1989 and has held a
number of senior
management
positions in our
lending operations.
He is currently
Director of Group
Risk and Operations.
joined the Bank in
1990. Previously
Director of Lending
Ireland, he was
appointed Chief
Executive Designate
of the Group’s UK
operations in
September 2005.
joined the Bank in
1993. After working
initially in Lending
Ireland, he
established the US
Banking Division in
1998. He returned to
head up Lending
Ireland in 2003 and
was appointed Group
Chief Executive in
January 2005.
has been with the
Bank since 1992.
He holds the position
of Group Finance
Director.
joined the Bank in
1993 having spent
15 years in various
executive positions in
the Central Bank of
Ireland. He became
Director of Treasury
in 2001 and assumed
his current role as
Group Company
Secretary in
September 2003.
21
John Rowan
Peter Butler
Brian Murphy
Tom Browne
Tony Campbell
has been with the
Bank since 1985 and
is due to retire from
his position as Chief
Executive – UK at the
end of 2005.
joined the Bank in
1987 and assumed his
current role as
Managing Director of
Wealth Management
Ireland Division in
January 2005.
is Director of Group
Treasury. He joined
the Bank in 2003
after 20 years in
senior banking roles
both in Ireland and
overseas.
joined the Bank in
1990. He is Managing
Director for lending
operations throughout
Ireland and the Bank’s
Wealth Management
Division.
joined the Bank in
1991. He held
several senior
management
positions in Lending
before moving on to
establish Private
Banking in Ireland.
He is now Chief
Executive of the
Bank’s North
American Division.
22
In 2005 the Bank provided a facility to refinance the acquisition debt of Earls Court and
Olympia. A world famous London icon with an exceptionally powerful brand, it attracts
millions of visitors each year to exhibitions, conferences, concerts and other large events.
This prominent transaction, where the Bank provided a combined debt finance and
interest rate risk management solution to our client, reflects the broadening and
strengthening of the Bank’s UK franchise.
Earls Court and
Olympia, London
23
24
Corporate social
responsibility
Leading companies are those that not only deliver superior shareholder returns and excellent customer
service but also consider ethical, social and environmental issues for all stakeholders.The Bank recognises its
wider obligations to its employees, society and the community it serves and believes there is a strong link
between Corporate Social Responsibility (‘CSR’) and long-term success.
The Bank aspires to a set of values which recognises the interests of all stakeholders and the contributions
they make.To this end, we adopt the highest standards of integrity, corporate governance, environmental
awareness and community support.We recognise that being a good corporate citizen not only involves
achieving our business aims but embraces a wider contribution to the interests of all our stakeholders.
The Market Place
Our customers are fundamental to the Bank’s
growth and our ability to continue to develop the
business. Financial services is an intensely
competitive market. If we do not offer the highest
standards of product and service then our
customers will take their business elsewhere.
Anglo Irish Bank does not adopt a ‘one size fits all’
approach to the service we provide our customers.
Each client has individual needs and our aim is to
provide a personalised approach which responds to
those specific requirements.
To ensure that we continue to provide the highest
quality service and commitment, our customer
support staff are divided into specialised and highly
focused teams who understand the individual needs
of our customers. Each team provides a point of
contact for a specified group of customers and this
personalised approach allows us to respond
efficiently and effectively to their specific
requirements. Moreover we have a comprehensive
internal complaints procedure which is structured to
deal comprehensively with any instance of customer
dissatisfaction.
At a corporate level, we adopt the highest standards
of compliance with regulatory requirements and
aim to operate to the spirit and not just the letter
of regulations.
We aim to treat our suppliers with the same
courtesy with which we treat our customers.We
have service level agreements with all our major
suppliers which ensure, amongst other things, that
they are paid for their goods and services promptly
and efficiently.
The Workplace
The Bank is its people.Without a talented,
dedicated and motivated staff, the Bank cannot
aspire to provide the excellent level of service
which our customers deserve. For this reason, staff
recruitment, training and development are given the
highest priority. Our people, who now number over
1,400 in 19 locations in 8 countries, are the key to
the Bank’s success over the past 20 years.
The Bank is fully committed to equal opportunities
recruitment and employment. Our strategy is to
recruit the best, whatever the level and provide
them with comprehensive training and support to
allow them maximise their long-term potential.
25
Anglo Irish Bank volunteers
and students from
Warrenmount Secondary
School.
This is achieved through:
• Regular communication on the performance of
the Bank’s various divisions and of our future
plans and strategies;
• Ensuring staff are challenged, supported and
empowered and those with ambitions to rise
within the organisation have the opportunity to
do so; and
• Adopting a meritocratic approach which ensures
that high achievers are motivated and adequately
rewarded.
It is the policy of Anglo Irish Bank that our people
share in the Bank’s success. Employee share
ownership, which fosters a proprietorial approach
among staff, is actively encouraged. Since 2000, a
Save As You Earn scheme has allowed staff in
applicable locations to acquire shares at a discount
to the prevailing market price.The scheme was
further extended in 2005 to include our staff in
Vienna and will be offered to staff in Geneva and
North America before the end of this year.
It is a source of great strength to the Bank that a
very significant number of staff now hold shares.
The Bank also recently announced its intention to
further invest in its people through the introduction
of enhanced pension benefits, recognising the
importance of making adequate provision for
retirement. Staff who participate in the Bank’s
Defined Contribution Plan will be incentivised to
make additional voluntary contributions (‘AVCs’).
The Bank will match AVCs on a one-for-one basis
up to predefined levels.This places the Group at the
forefront of pensions best practice.We believe this
new initiative will greatly assist in attracting new
people to the Bank while underpinning our strong
record of staff retention.
26
The Community
CSR extends beyond the work place and the
market place and this has been endorsed and
promoted at the highest level within the Bank.
We strongly believe that CSR in the community
does not simply mean making passive financial
contributions to charities and other organisations.
To this end, the Bank and many of our employees
are actively engaged in assisting a number of social
development projects, not least our involvement
since 2000 in a mentoring programme for
secondary level pupils of Warrenmount School in
the heart of Dublin’s historic Liberties district.
Our involvement with Warrenmount has been
recognised by the Chambers of Commerce of
Ireland in its CSR Awards.
To date the Bank has supported more than 70 staff
members’ participation in the Warrenmount
initiative which has the ultimate aim of encouraging,
motivating and supporting students to reach their
full potential by helping them to develop their
social, interpersonal, communication and workplace
skills. The Bank has also made a financial
commitment to the school over the seven year
period of the programme.
In the UK the Bank is also a member of Business in
the Community and we will be embarking on a
volunteer programme with schools in the Tower
Hamlets area of London.
For the past two years, the Bank has been involved
in a Give As You Earn (‘GAYE’) scheme with
Children Direct, a partnership of five respected
childrens’ charities:Temple Street Childrens’
Hospital; the ISPCC; Enable Ireland; Focus Ireland
and ACTIONAID Ireland.
Under this programme employees make donations
to the GAYE scheme by monthly deduction from
salary and the contributions are matched euro for
euro by the Bank. On average, more than one third
of the Bank’s employees donate to the GAYE
scheme resulting in an annual contribution to
Children Direct of almost €100,000.
In all locations staff are encouraged to nominate
charities towards which the Bank will make
donations. During the year the Bank made substantial
contributions to a wide range of Irish, UK and
worldwide charities.
Community life is enriched by cultural and sporting
activities and support for these activities is a core
part of the Bank’s CSR programme.
In the past year, the Bank has continued its long
time association with the Abbey Theatre through
our sponsorship of the Writer-in-Association
award. Playwright and director, Conor McPherson is
the recipient of this year’s award, following in the
footsteps of such theatrical luminaries as Tom
Murphy, Frank McGuinness, Bernard Farrell and
Thomas Kilroy. The Bank has also continued its
long standing sponsorship of the RTE National
Symphony Orchestra’s (‘NSO’) annual concert
series.
We feel that the Abbey Theatre, the NSO and
other cultural organisations contribute to social
and cultural life in Ireland and we remain fully
committed to maintaining and strengthening the
links between business and the arts.
27
The Bank’s involvement in supporting sporting
activities is highlighted by our sponsorship of the
Irish Sailing Association and the Anglo Irish Bank
Munster National steeplechase at Limerick
Racecourse. But we believe that our commitment
to both cultural and sporting activities must extend
beyond high profile sponsorships and to this end
the Bank has contributed directly to some 250 local
sports clubs and community based cultural activities.
The Environment
The Bank adopts environmentally aware practices
throughout all its operations.We believe that if
employees adopt an environmentally sensitive
approach at work then they can adopt that same
approach outside the workplace.
The Bank has implemented a waste management
and recycling initiative across the Group. Staff are
encouraged to maximise electronic communication
and reduce paper usage. A range of energy saving
measures have been introduced and all computer
consumables are recycled in line with our
environmental policies.
Summary
Corporate Social Responsibility may be seen by
some as a cost factor with no discernible return on
the investment involved. At Anglo Irish Bank
however, we have no doubt that the initiatives we
have implemented in the market place, in the work
place and in the community will benefit the Bank,
its shareholders, customers, employees and the
community at large and we look forward to further
developing our CSR initiatives in the years ahead.
Below: maintaining the link between
business and the arts – the RTE National
Symphony Orchestra and The Abbey
Theatre. (L to R) David Drumm, Conor
McPherson and Fiach MacConghail.
28
222 East 41st Street is a prime, recently renovated office building located in central
Manhattan, New York. It is occupied on long-term leases by well established tenants in the
professional service and government sectors.The acquisition of this property was led by
our Private Bank in Dublin, whose clients provided the equity.They worked closely with the
New York office, who provided local market expertise, a suitable debt structure for the
transaction and appropriate interest rate risk management.
222 East 41st Street,
Manhattan, New York
29
30
Report of the Directors
The Directors present their report and the audited financial
statements for the year ended 30 September 2005.
Results
The Group profit on ordinary activities before taxation for the
year amounted to €685.2 million and has been dealt with as
shown in the consolidated profit and loss account on page 38.
Review of activities
The principal activity of the Group is the provision of banking
services. The Chairman’s statement and the Group Chief
Executive’s review on pages 4 to 15 report on developments
during the year, on events since 30 September 2005 and on likely
future developments. The financial statements for the year ended
30 September 2005 are set out in detail on pages 38 to 99.
Dividends
An interim dividend of 4.51c per share was paid on 18 July 2005.
Subject to shareholders’ approval, it is proposed to pay a final
dividend on 13 February 2006 of 9.03c per share to all registered
shareholders at the close of business on 2 December 2005.
Dividend withholding tax (‘DWT’) may apply on the proposed
final dividend depending on the tax status of each shareholder.
Shareholders will be offered the choice of taking new ordinary
shares in lieu of the proposed final dividend, after deduction of
DWT where applicable.
Capital resources
Details of changes in capital resources during the year are
included in notes 28 to 34 of the financial statements.
Directors and Secretary
The names of the current Directors appear on pages 18 and 19,
together with a short biographical note on each Director.
Tiarnan O Mahoney retired from the Board on 2 December
2004. Peter Murray and Anton Stanzel retired as Directors on
28 January 2005. John Rowan will retire from the Board on
31 December 2005. Sean FitzPatrick and Fintan Drury retire by
rotation as Directors in accordance with the articles of
association and, being eligible, offer themselves for re-election.
Michael Jacob offers himself for re-election as, having served
more than nine years on the Board, he is subject to annual
re-election under the Combined Code. Declan Quilligan will be
co-opted to the Board on 31 December 2005. Bernard Daly
served as Secretary throughout the year. The interests of the
current Directors and Secretary in the share capital of the
Company are shown in the Remuneration Committee’s report
on behalf of the Board set out in note 46 to the financial
statements.
Substantial shareholdings
Details of interests in excess of 3% of the ordinary share capital
which have been notified to the Company are shown on page 102.
Group undertakings and foreign branches
Particulars of the principal subsidiary undertakings within the
Group required to be declared under Section 16 of the
Companies (Amendment) Act, 1986 are shown in note 17. The
Company has established branches, within the meaning of EU
Council Directive 89/666/EEC, in Austria and the United
Kingdom.
Corporate governance
The Directors’ corporate governance statement appears on
pages 32 to 35.
Books and accounting records
The Directors are responsible for ensuring that proper books
and accounting records, as outlined in Section 202 of the
Companies Act, 1990, are kept by the Company. To ensure
compliance with these requirements the Directors have
appointed professionally qualified accounting personnel with
appropriate expertise and have provided adequate resources to
the finance function. These books and accounting records are
maintained at the Company’s registered office at Stephen Court,
18/21 St. Stephen’s Green, Dublin 2.
Auditors
The Auditors, Ernst & Young, have expressed their willingness to
continue in office.
Directors: Sean FitzPatrick, David Drumm,William McAteer.
Secretary: Bernard Daly.
22 November 2005
Statement of Directors’ responsibilities
The following statement, which should be read in conjunction
with the Auditors’ report on pages 36 and 37, is made with a
view to distinguishing for shareholders the respective
responsibilities of the Directors and of the Auditors in relation
to the financial statements.
Irish company law requires the Directors to prepare financial
statements for each financial year which give a true and fair view
of the state of affairs of the Company and of the Group as at the
end of the financial year and of the profit or loss of the Group
for that year.With regard to the financial statements on pages 38
to 99, the Directors have determined that it is appropriate that
they continue to be prepared on a going concern basis and
consider that in their preparation:
• suitable accounting policies have been selected and applied
consistently;
• judgements and estimates that are reasonable and prudent
have been made; and
• applicable accounting standards have been followed.
The Directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time the
financial position of the Company and which enable them to
ensure that the financial statements are prepared in accordance
with accounting standards generally accepted in Ireland and
comply with the Companies Acts, 1963 to 2005 and the European
Communities (Credit Institutions:Accounts) Regulations, 1992.
They also have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company
and of the Group and to prevent and detect fraud and other
irregularities.
31
32
Corporate governance statement
The Directors of the Company are committed to maintaining the
highest standards of corporate governance and, in particular, have
regard to the principles set out in ‘The Combined Code on
Corporate Governance’ published in July 2003.
This Corporate Governance statement describes how the
Company applies the principles of the Combined Code and
comments also on its compliance with the Code’s provisions.
Except where stated, the Directors believe that the Group has
complied fully with the provisions of the Combined Code
throughout the financial year ended 30 September 2005.
Board of Directors
The Board provides leadership and control for the Bank. It
delegates the management and day-to-day running of the Bank to
the Group Chief Executive and senior management but keeps
reserved specific items for its decision. These include agreement
of strategic objectives, annual plans and performance targets,
monitoring and control of operations, review of the performance
of Board Committees and approval of specific senior appointments.
The Board consists of twelve Directors, eight of whom are
Non-executive Directors. A short biographical note on each
Director is set out on pages 18 and 19. Michael Jacob is the
senior independent Non-executive Director.
The Non-executive Directors have varied backgrounds, skills and
experience and are independent of management. All Directors
bring their independent judgement to bear on issues of strategy,
performance, resources, key appointments and standards of
conduct.
The Board meets at least nine times annually. Additional meetings
are arranged if required. It has a formal written schedule of
matters reserved to it for decision. The Board receives regular
management reports and information on corporate and business
issues to enable reviews of performance against business targets
and objectives to be undertaken. Details of attendance by
Directors at scheduled meetings of the Board and its Committees
during the year ended 30 September 2005 are set out on page 35.
Roles of Chairman and Group Chief Executive
The roles of the Chairman and Group Chief Executive are
distinct and separate, with a clear division of responsibilities.
These responsibilities are set out in writing and have been
approved by the Board.
The Chairman is responsible for the leadership and effectiveness
of the Board and the Non-executive Directors. He promotes
continuing high standards of corporate governance and ensures
there is effective communication with shareholders.
The Group Chief Executive has the responsibility to ensure that
the strategic direction agreed by the Board is followed and
formulates policy proposals for the Board’s consideration. He
provides leadership, both through his advice to the Board and his
management of the day-to-day operations of the Bank, including
the management of human, financial and physical resources. He
has the central role in maintaining and enhancing a culture of high
performance and motivation in the Bank. Together with the
Finance Director, he has responsibility for ongoing relationships
with shareholders.
Independence of the Board
The Board has determined that each of the Non-executive
Directors is independent. In reaching that conclusion, the Board
took into account a number of factors that might appear to affect
the independence of some of the Directors, including length of
service on the Board and cross-directorships. In each case the
Board is completely satisfied that the independence of the
relevant Directors is not compromised.
Appointments to the Board
The Board has put in place a rigorous and transparent procedure
for the appointment of new Directors. Directors are appointed
initially for a three year term and may be appointed for further
three year terms. New Directors are proposed for election at
the Annual General Meeting following their appointment.
Appointments to the Board are made based on merit and using
objective criteria. The terms and conditions of appointment of
Non-executive Directors are available for inspection at the
registered office during normal business hours, and at the Annual
General Meeting.
Induction is provided to all Directors on appointment and
Directors regularly update and refresh their skills and knowledge.
The induction process includes provision of an opportunity for
new Non-executive Directors to meet major shareholders.
The Directors have access to the advice and services of the
Group Company Secretary who is responsible for ensuring that
Board procedures are followed and that there is compliance with
applicable rules and regulations. The Directors also have access
to independent professional advice, at the Group’s expense, if and
when required. Committees of the Board have similar access.
Performance evaluation
The Board and its Committees undertake an annual evaluation of
their performance. The Committees report their findings and any
resulting recommendations to the Board. In addition, the
Chairman conducts evaluations of the performance of the Board,
individual Directors and Board Committees annually.
An evaluation of the performance of the Chairman is conducted
by the senior independent Non-executive Director, taking into
account the views of the other Directors.
The Chairman meets at least once a year with the Non-executive
Directors without the Executive Directors and has a private
discussion at least once a year with every Director on a wide
range of issues affecting the Group, including any matters which
the Directors, individually, wish to raise. Each Director discusses
his or her own performance with the Chairman.
The Board discusses the results of the evaluation and uses the
process to constructively improve the effectiveness of the Board.
Re-election
Any term of office for a Director beyond six years (two three
year terms) is subject to rigorous review and terms longer than
nine years (three terms) are subject to annual re-election.
All Directors must submit themselves for re-election every three
years. The names of Directors submitted for election or
re-election are accompanied by biographical and other details
in order to allow shareholders to make an informed decision.
Board Committees
There are four Board Committees and each has specific terms of
reference, which are reviewed periodically.
Remuneration Committee
Members: Michael Jacob (Chairman), Sean FitzPatrick and
Ned Sullivan.
All members of the Remuneration Committee are Non-executive
Directors. The Committee is responsible for the formulation of
the Group’s policy on remuneration in relation to all Executive
Directors and other senior executives. The Committee’s terms of
reference are available, on request through the Group Company
Secretary, and on the Bank’s website. The Committee’s report on
behalf of the Board on Directors’ remuneration and interests is
set out in note 46 to the financial statements.
Audit Committee
Members: Ned Sullivan (Chairman), Lar Bradshaw, Gary McGann
and Patrick Wright.
The Audit Committee receives reports on various aspects of
control, reviews the Group’s financial statements, determines as
to whether proper books of account have been kept in
accordance with the Companies Acts and ensures that no
restrictions are placed on the scope of the statutory audit or on
the independence of the Internal Audit function.
The Audit Committee has unrestricted access to both the Group
internal and external Auditors. It meets with the external
Auditors at least once each year. The independence and
objectivity of the external Auditors is considered periodically
together with the scope and results of the audit and its cost
effectiveness.The Committee’s terms of reference are available,
on request through the Group Company Secretary, and on the
Bank’s website.
Risk and Compliance Committee
Members: Michael Jacob (Chairman),Tom Browne, Fintan Drury
and Patricia Jamal.
The Risk and Compliance Committee’s role is to oversee risk
management and compliance. It reviews, on behalf of the Board,
the key risks and compliance issues inherent in the business and
the system of internal control necessary to manage them and
presents its findings to the Board. The Committee meets at least
five times during the year and reviews its processes and
effectiveness annually. The Committee’s terms of reference are
available, on request through the Group Company Secretary, and
on the Bank’s website.
Nomination and Succession Committee
Members: Sean FitzPatrick (Chairman), David Drumm, Fintan
Drury, Michael Jacob, Ned Sullivan and Patrick Wright.
This Committee is responsible for recommending the
appointment of Directors to the Board and for reviewing senior
management succession plans. Its key roles are recommending to
the Board all appointments to and removals from the Board as
well as re-appointments; ensuring a suitable induction programme
is in place for all new Directors; regularly reviewing the Board’s
structure, size, composition and balance; ensuring adequate
succession planning is in place, particularly for the Chairman and
Group Chief Executive; reviewing all appointments to and
departures from the Senior Executive Board; encouraging the
establishment of formal management development programmes.
External search consultants have been used in the past for the
appointment of Non-executive Directors. The Committee’s terms
of reference are available, on request through the Group
Company Secretary, and on the Bank’s website.
Internal controls
The Directors acknowledge their overall responsibility for the
Group’s system of internal control and for reviewing its
effectiveness. The system is designed to manage rather than
eliminate the risk of failure to achieve the Group’s business
objectives and provides reasonable but not absolute assurance
against material financial misstatement or loss.
33
34
Corporate governance statement
continued
Such losses could arise because of the nature of the Group’s
business in undertaking a wide range of financial services that
inherently involve varying degrees of risk.
establishing that appropriate action is being taken by management
to address issues highlighted. The Audit Committee also meets
with and receives reports from the external Auditors.
The Board confirms that during the year under review and up to
the date of approval of the annual report and financial statements
there was in place an ongoing process for identifying, evaluating
and managing the significant risks faced by the Group and that
this process is regularly reviewed by the Board and accords with
the Code.The key elements of the procedures established by the
Board to provide effective internal control include:
Following each meeting of the Audit Committee and the Risk and
Compliance Committee, the Committee Chairmen report to the
Board and minutes of such meetings are circulated to all members
of the Board.
• An organisation structure with clearly defined authority limits
and reporting mechanisms to higher levels of management and
to the Board, which supports the maintenance of a strong
control environment.
• A Group Risk Management function and a Group Compliance
function with responsibility for ensuring that risks are
identified, assessed and managed throughout the Group. The
Group Credit Committee together with the Group Asset and
Liability Committee provide support to the Audit Committee
and the Risk and Compliance Committee in ensuring that
efficient procedures are in place to manage risk.
• An annual budgeting and monthly financial reporting system
for all Group business units which enables progress against
plans to be monitored, trends to be evaluated and variances
to be acted upon.
• A comprehensive set of policies and guidelines relating to
capital expenditure, computer security, business continuity
planning, asset and liability management (including interest,
currency and liquidity risk), operational risk management,
credit risk management and compliance.
The Group Internal Audit function reports to the Group Chief
Executive and the Audit Committee. It helps the Group
accomplish its objectives by bringing a systematic and disciplined
approach to evaluating and improving the effectiveness of the risk
management, control and governance processes.
Group Internal Audit also systematically reviews the controls
listed above, which are embedded within the operations of the
Group. Emphasis is focused on areas of greatest risk as identified
by risk analysis. In addition, the systems of internal control are
subject to regulatory supervision by the Irish Financial Regulator
and other regulators overseas.
The Audit Committee and the Risk and Compliance Committee
review the effectiveness of the Group’s internal controls annually.
This involves reviewing the work and the reports of the Internal
Audit, Risk Management and Compliance functions and
The Directors confirm that, with the assistance of reports from
the Audit Committee and the Risk and Compliance Committee,
they have reviewed, in accordance with the Combined Code, the
effectiveness of the systems of internal control in existence in the
Group for the year ended 30 September 2005 and for the period
up to and including the date of approval of the financial statements.
The review undertaken covers all aspects of control including
financial, operational and compliance controls and risk management.
Going concern
The Directors confirm that they are satisfied that the Company
and the Group have adequate resources to continue to operate
for the foreseeable future and are financially sound. For this
reason, they continue to adopt the going concern basis in preparing
the financial statements.
Relations with shareholders
The Group gives relations with shareholders a high priority. The
Directors are kept informed on shareholder relations through
regular reports to the Board by the Group Chief Executive and
Finance Director and through feedback from shareholders,
brokers and investment bankers. There is regular dialogue with
individual institutional shareholders, financial analysts and brokers.
Presentations are given at the time of major announcements and
these provide opportunities for Directors to hear the views of
shareholders directly.
All shareholders are encouraged to attend the Annual General
Meeting and notice is sent to shareholders at least twenty one
working days in advance of the meeting. At the Annual General
Meeting separate resolutions are proposed on each substantially
separate issue.When an issue has been determined at the
meeting on a show of hands, the Chairman indicates to the
meeting the number and proportion of proxy votes for and
against that resolution. The Chairmen of the Remuneration
Committee,Audit Committee, Risk and Compliance Committee
and Nomination and Succession Committee are available to
answer relevant questions at the Annual General Meeting.
The Group uses its internet site (www.angloirishbank.com) to
provide investors with the full text of each annual and interim
report, and copies of presentations to analysts and investors.
The website also provides detailed financial data, Company
information, information on credit ratings and all Stock Exchange
and other press releases.
Shareholders can access annual reports and accounts and interim
reports for the previous five years. The website allows shareholders
to subscribe to automatic e-mail alerts for the above mentioned
information.
Attendance at scheduled meetings during the year ending 30 September 2005
Name
Board
Audit
Remuneration
Risk and
Compliance
Nomination
and Succession
A*
B*
A*
B*
A*
B*
A*
B*
A*
B*
Sean FitzPatrick,
Chairman
10
10
-
-
2
2
-
-
3
3
David Drumm,
Group Chief Executive
10
10
-
-
-
-
-
-
3
3
Lar Bradshaw
10
10
7
4+
-
-
-
-
-
-
Tom Browne
10
10
-
-
-
-
6
1 ++
-
-
Fintan Drury
10
9
-
-
-
-
6
4
3
3
Michael Jacob
10
10
-
-
2
2
6
6
3
3
Patricia Jamal
10
10
-
-
-
-
6
6
-
-
William McAteer
10
10
-
-
-
-
-
-
-
-
Gary McGann
10
7
7
6
-
-
-
-
-
-
Peter Murray
(Retired 28/01/2005)
10
3
-
-
2
-
-
-
3
1
Tiarnan O Mahoney
(Retired 2/12/2004)
10
2
-
-
-
-
6
1
-
-
John Rowan
10
9
-
-
-
-
-
-
-
-
Ned Sullivan
10
10
7
7
2
2
-
-
3
3
Anton Stanzel
(Retired 28/01/2005)
10
3
7
3
-
-
-
-
-
-
Patrick Wright
10
5
7
5
-
-
-
-
3
3
* Column A indicates the number of scheduled meetings held and Column B indicates the number of scheduled meetings attended during the period the Director was a member of the Board or
Committee and was eligible to attend.
+ Lar Bradshaw was appointed to the Audit Committee on 25 February 2005.
++ Tom Browne was appointed to the Risk and Compliance Committee on 22 March 2005.
35
36
Independent Auditors’ report to the members of
Anglo Irish Bank Corporation plc
We have audited the Group’s financial statements for the year
ended 30 September 2005, which comprise the consolidated
profit and loss account, consolidated balance sheet, company
balance sheet, consolidated cash flow statement, statement of
total recognised gains and losses, reconciliation of movements in
shareholders’ funds and the related notes 1 to 49. These financial
statements have been prepared on the basis of the accounting
policies set out therein.
This report is made solely to the Company’s members, as a body,
in accordance with Section 193 of the Companies Act, 1990. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an Auditors’ report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
The Directors’ responsibilities for preparing the annual report
and the financial statements in accordance with applicable Irish
law and accounting standards are set out in the statement of
Directors’ responsibilities.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements,
Auditing Standards issued by the Auditing Practices Board for use
in Ireland and the United Kingdom and the Listing Rules of the
Irish Stock Exchange.
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared in
accordance with the Companies Acts.We also report to you our
opinion as to: whether proper books of account have been kept
by the Company; whether proper returns adequate for our audit
have been received from branches not visited by us; whether at
the balance sheet date there exists a financial situation which may
require the convening of an Extraordinary General Meeting of
the Company; and whether the information given in the
Directors’ report is consistent with the financial statements. In
addition, we state whether we have obtained all the information
and explanations necessary for the purposes of our audit and
whether the Company’s balance sheet is in agreement with the
books of account and returns.
We also report to you if, in our opinion, any information specified
by law or the Listing Rules regarding Directors’ remuneration and
transactions with the Group is not given and, where practicable,
include such information in our report.
We review whether the corporate governance statement reflects
the Company’s compliance with the nine provisions of the 2003
Financial Reporting Council’s Code specified for our review by
the Listing Rules of the Irish Stock Exchange and we report if it
does not.We are not required to consider whether the Board’s
statements on internal control cover all risks and controls, or
form an opinion on the effectiveness of the Group’s corporate
governance procedures or its risk and control procedures.
We read other information contained in the annual report and
consider whether it is consistent with the audited financial
statements. This other information comprises the Directors’
report, Chairman’s statement, Group Chief Executive’s review and
the corporate governance statement.We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other
information.
37
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the Group’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
In our opinion the information given in the Directors’ report is
consistent with the financial statements.
In our opinion the Company balance sheet does not disclose a
financial situation which, under Section 40(1) of the Companies
(Amendment) Act, 1983, would require the convening of an
Extraordinary General Meeting of the Company.
Ernst & Young
Registered Auditors
Dublin
22 November 2005
Opinion
In our opinion the financial statements give a true and fair view
of the state of affairs of the Company and of the Group as at 30
September 2005 and of the profit of the Group for the year then
ended and have been properly prepared in accordance with the
provisions of the Companies Acts, 1963 to 2005 and the European
Communities (Credit Institutions:Accounts) Regulations, 1992.
We have obtained all the information and explanations we
consider necessary for the purposes of our audit. In our opinion
proper books of account have been kept by the Company and
proper returns adequate for the purpose of our audit have been
received from branches not visited by us. The Company’s balance
sheet is in agreement with the books of account and returns.
The following two notes have been added to the Auditors’ report in compliance with the guidance issued by the Auditing Practices
Board in bulletin 2001/1 ‘The electronic publication of auditors’ reports’.
Notes:
1.
The maintenance and integrity of the Anglo Irish Bank website is the responsibility of the Directors; the work carried out by the
Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were initially presented on the website.
2.
Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
38
Consolidated profit and loss account
FOR THE YEAR ENDED 30 SEPTEMBER 2005
Notes
Interest receivable and similar income
Interest receivable and similar income arising from
Debt securities and other fixed income securities
Other interest receivable and similar income
Interest payable and similar charges
Net interest income
Other income
Fees and commissions receivable
Fees and commissions payable
Dealing profits
Other operating income
Total operating income
Operating expenses
Administrative expenses
Depreciation and goodwill amortisation
Provisions for bad and doubtful debts - specific
2
13
2005
€m
2004
€m
110.2
1,966.6
(1,356.8)
720.0
50.4
1,402.5
(929.4)
523.5
241.5
(22.3)
16.0
21.8
977.0
183.9
(16.3)
12.8
19.3
723.2
247.2
15.2
29.4
291.8
185.4
14.6
19.1
219.1
Group profit on ordinary activities before taxation
3
685.2
504.1
Taxation on profit on ordinary activities
Group profit on ordinary activities after taxation
4
(140.2)
545.0
(107.7)
396.4
Minority interests
Dividends on preference shares
Group profit attributable to ordinary shareholders
5
6
7
(45.8)
(8.2)
491.0
(17.0)
379.4
8
34
(91.4)
399.6
(75.2)
304.2
Basic earnings per €0.16 ordinary share
9
73.21c
57.26c
Diluted earnings per €0.16 ordinary share
9
71.74c
56.19c
Dividends per €0.16 ordinary share
8
13.54c
11.28c
Dividends on €0.16 ordinary shares
Group profit retained for year
Consolidated balance sheet
A S AT 3 0 S E P T E M B E R 2 0 0 5
Notes
Assets
Cash and balances at central banks
Loans and advances to banks
Loans and advances to customers
Securitised assets
Less: non-returnable proceeds
10
11
12
14
14
363.2
5,847.4
23,723.8
666.0
(634.8)
31.2
2,534.4
26.1
69.6
59.4
577.7
439.4
33,672.2
667.6
34,339.8
7,150.7
25,159.7
9,405.1
61.0
433.1
457.3
5.3
42,672.2
2,605.9
19,546.0
6,944.5
50.1
255.6
392.0
5.4
29,799.5
1,181.7
661.1
692.4
2,535.2
108.9
600.2
2.4
1,400.6
2,112.1
4,647.3
47,319.5
944.1
48,263.6
1,133.3
656.2
843.4
2,632.9
107.1
157.6
0.9
974.2
1,239.8
3,872.7
33,672.2
667.6
34,339.8
36
2,169.5
910.4
36
6,011.0
4,055.0
15
16
18
19
20
Life assurance assets attributable to policyholders
Total assets
22
Capital resources
Subordinated liabilities
Perpetual capital securities
Equity and non-equity minority interests
23
24
25
8
26
27
28
29
30
Called up share capital
Share premium account
Other reserves
Profit and loss account
Total shareholders’ funds including non-equity interests
31
32
33
34
Life assurance liabilities attributable to policyholders
Total liabilities and capital resources
22
Memorandum items
Contingent liabilities
Guarantees
Commitments
Commitments to lend
2004
€m
566.7
6,253.6
34,099.0
322.0
(307.0)
15.0
4,933.1
46.7
65.5
88.9
776.7
474.3
47,319.5
944.1
48,263.6
Debt securities
Equity shares
Intangible fixed assets - goodwill
Tangible fixed assets
Other assets
Prepayments and accrued income
Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Proposed ordinary dividends
Other liabilities
Accruals and deferred income
Provisions for liabilities and charges
2005
€m
39
40
Company balance sheet
A S AT 3 0 S E P T E M B E R 2 0 0 5
Notes
Assets
Securitised assets
Debt securities
Equity shares
Investments in Group undertakings
Other assets
Total assets
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Other reserves
10
11
12
14
14
345.3
4,844.8
22,495.7
666.0
(634.8)
31.2
2,523.4
3.2
602.0
0.4
20.5
236.9
350.1
31,453.5
9,667.5
22,320.5
9,226.2
61.0
397.6
398.0
0.2
42,071.0
4,629.0
17,437.8
6,748.9
50.1
235.2
267.2
0.2
29,368.4
28
1,181.7
1,133.3
31
32
33
34
108.9
600.2
1.3
1,088.4
1,798.8
107.1
157.6
1.3
685.8
951.8
2,980.5
2,085.1
45,051.5
31,453.5
36
2,140.1
873.1
36
4,837.4
3,098.3
15
16
17
18
19
20
23
24
25
8
26
27
2004
€m
558.2
4,693.0
33,392.2
322.0
(307.0)
15.0
4,921.6
11.4
612.9
0.4
28.2
398.5
420.1
45,051.5
Memorandum items
Guarantees
Commitments
Commitments to lend
2005
€m
Consolidated cash flow statement
Note
Reconciliation of operating profit to net operating cash flows
Operating profit
Increase in accruals and deferred income
Increase in prepayments and accrued income
Financing costs of subordinated liabilities
Financing costs of perpetual capital securities
Interest earned on debt securities and other fixed income securities
Amortisation of premiums and discounts on debt securities
Provisions for bad and doubtful debts
Loans and advances written off net of recoveries
Profit on disposal of debt securities and equity shares
Net cash flow from trading activities
Net increase in deposits
Net increase in loans and advances to customers
Net increase in loans and advances to banks
Net increase in other assets
Net increase/(decrease) in other liabilities
Exchange and other movements
Net cash flow from operating activities
Returns on investment and servicing of finance
Tax paid
Capital expenditure and financial investment
Acquisitions and disposals
Equity dividends paid
Financing
Decrease in cash
37
37
37
37
37
2005
€m
2004
€m
685.2
56.7
(27.3)
45.7
53.2
(101.5)
(8.7)
29.4
(10.2)
15.2
(6.8)
730.9
504.1
124.8
(178.6)
32.2
52.8
(48.3)
(2.1)
19.1
(11.7)
14.6
(0.3)
506.6
12,619.1
(10,378.2)
(667.6)
(195.9)
174.6
12.0
2,294.9
6,670.8
(6,463.0)
(1,561.3)
(160.1)
(8.2)
(1.6)
(1,016.8)
(50.7)
(134.2)
(2,442.5)
(5.8)
(51.2)
331.6
(57.9)
(57.2)
(104.1)
(1,225.2)
(49.9)
1,303.7
(1,149.5)
41
42
Statement of total recognised gains and losses
2005
€m
2004
€m
491.0
1.5
492.5
379.4
379.4
2005
€m
2004
€m
Preference shares issued
Ordinary shares issued in lieu of cash dividends
Ordinary share options exercised
Investment properties revaluation
Net movement in own shares
Net addition to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
491.0
(91.4)
399.6
431.6
29.3
12.8
1.5
(2.5)
872.3
1,239.8
2,112.1
379.4
(75.2)
304.2
21.0
4.2
(0.8)
328.6
911.2
1,239.8
Equity interests
Non-equity interests
Closing shareholders’ funds
1,680.5
431.6
2,112.1
1,239.8
1,239.8
Investment properties revaluation
Total recognised gains since last annual report
Reconciliation of movements in shareholders’ funds
Dividends on ordinary shares
Note of historical cost profit and loss
There is no significant difference between the results as disclosed in the profit and loss account and the results on an unmodified
historical cost basis.
Notes to the financial statements
1. Accounting policies
These financial statements have been prepared under the historical cost convention as modified by the revaluation of financial
instruments held for dealing purposes, assets attributable to policyholders’ interests in the assurance business and investment
properties. The financial statements comply with applicable accounting standards issued by the Accounting Standards Board and
Statements of Recommended Practice issued by the British Bankers’ Association and the Irish Bankers’ Federation. Accounting
policies are reviewed regularly to ensure that they are the most appropriate to the circumstances of the Group for the purposes of
giving a true and fair view.
There have been no changes in accounting policies since last year. The principal accounting policies adopted are as follows:
a) Consolidation
The consolidated financial statements include the accounts of the Company and all its Group undertakings to 30 September 2005.
Where a subsidiary undertaking is acquired during the financial year, the consolidated accounts include the attributable results from
the date of acquisition up to the end of the financial year.
In order to reflect the different nature of the policyholders’ interests in the assurance business, the assets and liabilities attributable
to policyholders are classified separately in the consolidated balance sheet. All intergroup transactions and balances are eliminated on
consolidation with the exception of transactions and balances between the banking business and policyholders of the life assurance
business.
b) Provisions for bad and doubtful debts
Loans and advances are stated in the balance sheet after deduction of provisions for bad and doubtful debts. The provisions arise as
a result of a detailed appraisal of the lending portfolio. Specific provisions are made on a case-by-case basis to reduce the carrying
value of each case to its expected net realisable value after taking into account factors such as the financial condition of the
borrower, security held and costs of realisation. A general provision is also made to cover latent loan losses which are present in any
lending portfolio but which have not been specifically identified.
Loans and advances are written off when there is no longer any realistic prospect of recovery. The charge to the profit and loss
account reflects new provisions made during the year, plus write-offs not previously provided for, less existing provisions no longer
required and recoveries of bad debts already written off.
c) Income recognition
Interest on loans and advances is accounted for on an accruals basis. Interest is not taken to profit where recovery is doubtful.
Credit has been taken for finance charges on instalment credit and finance leasing accounts by spreading the income on each
contract over the primary period of the agreement by the sum of digits method, save that an amount equivalent to the set-up costs
on each agreement is credited to income at the date of acceptance. The finance charges on certain tax-based finance leases are
credited to income on an after-tax actuarial basis.
Lending arrangement fees are recognised as income when receivable except when they are charged in lieu of interest in which case
they are credited to income over the contractual life of the loan. Other fees arising on development loans are recognised upon
practical completion of the underlying development.
All other fees and commissions which represent a return for services provided or risk borne are credited to income over the period
during which the service is performed or the risk is borne as appropriate.
d) New business costs
Initial costs of obtaining new business have been charged in arriving at the profit for the year except in the case of introductory
commission paid on instalment credit and finance leasing agreements which is charged against revenue over the primary period of
each agreement by the sum of digits method.
43
44
Notes to the financial statements continued
1. Accounting policies continued
e) Debt securities
Debt securities are held for investment purposes. Premiums and discounts on debt securities having a fixed redemption date are
amortised over the period from the date of purchase to the date of maturity. These investments are included in the balance sheet at
amortised cost. Gains and losses arising on the realisation of debt securities, net of amortisation adjustments, are taken to the profit
and loss account as and when realised.
Debt securities may be lent or sold subject to a commitment to repurchase them. Securities sold are retained on the balance sheet
where substantially all the risks and rewards of ownership remain with the Group.
f) Tangible fixed assets and depreciation
Tangible fixed assets other than investment properties are stated at cost and depreciation is provided on a straight line basis over
their expected useful lives as follows:
Freehold properties
Fixtures and fittings
Computer equipment and software
Motor vehicles
2% per annum
12.5% to 25% per annum
25% per annum
20% per annum
Leasehold properties are depreciated on a straight line basis over the shorter of twenty years or the period of the lease or the
period to the first break clause date in the lease. Only external costs incurred on computer software development are capitalised.
Investment properties are included in the balance sheet at their open market value. No depreciation is charged on freehold
investment properties in accordance with the requirements of Statement of Standard Accounting Practice 19-‘Accounting for
Investment Properties’. This is a departure from the requirements of the European Communities (Credit Institutions:Accounts)
Regulations, 1992. The Directors consider that the depreciation policy adopted for investment properties is necessary for the
accounts to give a true and fair view.
g) Deferred taxation
Except as outlined below full provision is made for deferred taxation in respect of all timing differences that have originated but
not reversed. Deferred tax assets are recognised to the extent that they are expected to be recovered. Calculations are on an
undiscounted basis using taxation rates expected to apply when timing differences reverse.
Deferred taxation is not provided in respect of timing differences arising from the sale of investment properties at their revalued
amount unless, by the balance sheet date, there is a binding agreement to sell the revalued assets. Deferred taxation is not provided
on the potential additional tax that may be payable on the payment of a dividend by a subsidiary where no commitment has been
made to pay a dividend.
h) Foreign currencies
Assets and liabilities denominated in foreign currencies and commitments for the purchase and sale of foreign currencies are
translated into Euro at the appropriate spot and forward rates of exchange ruling at the balance sheet dates. Profits and losses in
foreign currencies are translated into Euro at the closing rates of exchange or at hedge rates where appropriate.
Exchange differences, net of hedging gains and losses, which arise from the application of closing rates of exchange to the opening
net assets held in foreign currencies are recorded as exchange translation adjustments on reserves.
All other exchange profits and losses, which arise from normal trading activities, are included in the profit and loss account.
i) Goodwill
Purchased goodwill represents the excess of the purchase consideration over the fair value ascribed to the net tangible assets
acquired. Purchased goodwill arising on acquisitions on or after 1 October 1998 is capitalised as an intangible asset and amortised
over the estimated useful economic lives of these acquisitions, subject to a maximum period of twenty years. Prior to that date
purchased goodwill had been written off against reserves in the year of acquisition. The carrying value of goodwill is reviewed for
impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.
j) Capital instruments
The issue expenses of capital instruments other than equity and non-equity shares are deducted from the proceeds of issue and,
where appropriate, are amortised in the profit and loss account so that the finance costs are allocated to accounting periods over
the economic life of these instruments at a constant rate based on their carrying amount. The issue expenses of equity and
non-equity capital instruments with an indeterminate economic life are not amortised.
Premiums arising on the issue of equity and non-equity shares are credited to the share premium account. Premiums and discounts
arising on the issue of other non-equity capital instruments are included as part of the balance sheet liability and are amortised in
the profit and loss account over the economic life of these instruments at a constant rate based on their carrying amount.
k) Derivatives
Derivative instruments used for trading purposes include swaps, futures, forwards, forward rate agreements and options in the
interest rate and foreign exchange markets. These derivatives, which include all customer and proprietary transactions together with
any associated hedges, are measured at fair value. Income earned on customer transactions is included in fees and commissions
receivable. Other gains and losses are included in dealing profits.Where market prices are not readily available internally generated
prices are used. These prices are calculated using recognised formulae for the type of transaction. Unrealised gains and losses are
reported gross in other assets or other liabilities after allowing for the effects of qualifying netting agreements where the Group has
the right to insist on net settlement that would survive the insolvency of the counterparty.
Derivative instruments used for hedging purposes include swaps, futures, forwards, forward rate agreements and options in the
interest rate, foreign exchange and equity markets. Gains and losses on these derivatives which are entered into for specifically
designated hedging purposes are taken to the profit and loss account in accordance with the accounting treatment of the underlying
transaction. Profits and losses related to qualifying hedges of firm commitments and anticipated transactions are deferred and taken
to the profit and loss account when the hedged transactions occur.
The criteria required for an instrument to be classified as a designated hedge are:
(i) Adequate evidence of the intention to hedge must be established at the outset of the transaction.
(ii) The transaction must match or eliminate a proportion of the risk inherent in the assets, liabilities, positions or cash flows being
hedged. Changes in the derivative’s fair value must be highly correlated with changes in the fair value of the underlying hedged
item for the entire life of the contract.
Where these criteria are not met transactions are measured at fair value.
Hedge transactions which are superseded, cease to be effective or are terminated early are measured at fair value. Any profit or loss
arising is deferred and reported in other assets or other liabilities. This profit or loss is amortised over the remaining life of the
asset, liability, position or cash flow which had previously been hedged.
When the underlying asset, liability or position is terminated, or an anticipated transaction is no longer likely to occur, the hedging
transaction is measured at fair value and any profit or loss arising is recognised in full in dealing profits. The unrealised profit or loss
is reported in other assets or other liabilities.
45
46
1. Accounting policies continued
l) Operating leases
Rentals on operating leases are charged to the profit and loss account in equal instalments over the lease term.
m) Trading properties
Trading properties are held for resale and are stated at the lower of cost and net realisable value.
n) Securitised assets
Assets sold under securitisation arrangements whereby the Group retains significant rights to benefits but where its maximum loss is
limited to a fixed monetary amount are included in the balance sheet at their gross amount less the non-returnable proceeds
received on securitisation using a linked presentation. The contribution earned from securitised assets is included in other operating
income.
o) Equity shares
Investments in equity shares and other similar instruments are stated at cost less provisions for permanent diminution in value.The
Group has made investments where its interest is 20% or more. The results of these undertakings are not equity accounted in the
Group results as these interests form part of an investment portfolio.
p) Pensions
The Group’s contributions to defined benefit pension schemes are based on the recommendations of an independent qualified
actuary and are charged in the profit and loss account so as to spread pension costs over eligible employees’ service lives at stable
contribution rates.Variations from the regular cost are spread over the average remaining service life of the relevant employees. The
costs of the Group’s defined contribution pension schemes are charged in the profit and loss account in the year in which these
costs are incurred. Differences between the amounts funded and the amounts charged in the profit and loss account are treated as
either provisions or prepayments in the balance sheet.
q) Dividends
Dividends proposed after the year end are recorded as a liability at the balance sheet date in accordance with applicable Irish
legislation.
Scrip dividends are initially recorded at the cash amount as an appropriation in the profit and loss account.When scrip shares are
issued in place of dividends the cash equivalent, net of dividend withholding tax where applicable, is written back to retained profits.
Shares issued in lieu are set-off against the share premium account.
r) Share options
When share options are granted to employees the charge expensed to the profit and loss account is the difference between the
market value of the shares at the time the grant invitations are made and the payments due from employees. Under the terms of the
Group’s Save As You Earn (‘SAYE’) schemes employees may have the option to purchase shares at a discount to the market price at
the time these options are granted. In accordance with the exemption for SAYE schemes permitted by Urgent Issue Task Force 17
this discount to the market price is not expensed to the profit and loss account.
All non-SAYE options have been granted at the market price on the invitation date so no share option expense has occurred.
s) Own shares
The cost of shares in the parent Company held by employee share trusts which have not vested unconditionally in the employees is
deducted in arising at consolidated shareholders’ funds. Dividend income received on these shares is excluded in arriving at Group
profit before taxation and deducted from the aggregate of dividends paid and proposed. Shares held by these employee share trusts
are excluded from the earnings per share calculations.
t) Fiduciary and trust activities
The Group acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, unit
trusts, investment trusts and pension schemes. These assets are not consolidated in the accounts as the Group does not have
beneficial ownership. Fees and commissions earned in respect of these activities are included in the profit and loss account.
2. Administrative expenses
Staff costs:
Wages and salaries
Social welfare costs
Pension costs
Other staff costs
Other administrative costs
The average number of persons employed by the Group during the year,
analysed by geographic location, was as follows:
Republic of Ireland
United Kingdom and Isle of Man
Rest of the World
3. Group profit on ordinary activities before taxation
2005
€m
2004
€m
138.2
16.7
10.1
2.0
167.0
80.2
247.2
97.3
10.6
9.5
2.6
120.0
65.4
185.4
2005
2004
740
393
190
1,323
691
327
143
1,161
2005
€m
2004
€m
0.7
11.1
4.1
9.0
2.3
45.7
53.2
0.6
10.5
4.1
8.0
1.4
32.2
52.8
93.1
17.1
32.8
4.3
2.5
7.9
8.1
50.4
32.7
0.3
7.4
5.4
The Group profit on ordinary activities before taxation is arrived at
after charging:
Auditors’ remuneration
Depreciation of tangible fixed assets
Amortisation of intangible fixed assets – goodwill
Operating lease rentals – property
– equipment
Financing costs of subordinated liabilities
Financing costs of perpetual capital securities
and after crediting:
Income from listed investments
Income from unlisted investments
Finance leasing and hire purchase income
Profit on disposal of investment securities – debt securities
– equity shares
Dealing profits – interest rate contracts
– foreign exchange contracts
The Group profit on ordinary activities before taxation is not materially affected by the results of acquisitions or discontinued
operations during the year.
47
48
4. Taxation on profit on ordinary activities
Current tax
Irish Corporation Tax – current year
– prior years
Double taxation relief
Irish Bank Levy
Foreign tax – current year
– prior years
Deferred tax
Current year
2005
€m
2004
€m
80.1
(1.5)
(23.9)
5.2
85.3
(2.3)
142.9
56.2
0.1
(19.2)
5.2
65.8
(0.1)
108.0
(2.7)
140.2
(0.3)
107.7
Effective tax rate
20.5%
21.4%
The deferred tax credit arising from the origination and reversal of timing differences was
as follows:
2005
€m
2004
€m
(3.6)
0.9
(2.7)
0.7
(1.0)
(0.3)
85.7
63.0
50.6
5.2
3.6
(3.8)
1.6
142.9
38.5
5.2
(0.7)
2.0
108.0
Leased assets
Other timing differences
The reconciliation of current tax on profits on ordinary activities at the standard Irish
Corporation Tax rate to the Group’s actual current tax charge is analysed as follows:
Profit on ordinary activities before taxation at 12.5%
Effects of:
Foreign earnings subject to different rates of tax
Irish Bank Levy
Leasing rentals in excess of capital allowances
Prior years
Other
Current tax
In 2003 the Irish Government introduced a levy based on the domestic deposit taking business of Irish banks and building
societies. The Group’s share of this levy is €5.2m per annum for the three years to 31 December 2005. The Government
indicated that the levy will not be continued beyond 2005.
5. Minority interests
2005
€m
2004
€m
44.7
1.1
45.8
16.2
0.8
17.0
The profit attributable to minority interests is analysed as follows:
Non-equity interests (Note 30)
Equity interests
6. Dividends on preference shares
Accrued dividend on preference shares
2005
€m
2004
€m
8.2
-
7. Group profit attributable to ordinary shareholders
€465.1m (2004: €331.7m) of the Group profit attributable to ordinary shareholders is dealt with in the accounts of the parent
undertaking. As permitted by Regulation 5 (2) of the European Communities (Credit Institutions:Accounts) Regulations, 1992 a
separate profit and loss account for the parent undertaking has not been presented.
8. Dividends on €0.16 ordinary shares
Paid
Interim dividend of 4.51c per share (2004: 3.76c)
Proposed
Final dividend of 9.03c per share (2004: 7.52c)
2005
€m
2004
€m
30.4
25.1
61.0
91.4
50.1
75.2
In accordance with the scrip dividend scheme, shares to the value of €29.3m (2004: €21.0m) were issued in lieu of dividends.
This amount has been added to the profit and loss account reserve (Note 34). The comparative dividends per share have been
adjusted for the two-for-one share split on 22 April 2005.
9. Earnings per €0.16 ordinary share
The calculation of basic earnings per share is based on the Group profit of €491.0m (2004: €379.4m) which is after taxation,
minority interests and preference dividends and on the weighted average number of equity shares in issue of 670.7m (2004:
662.6m). In accordance with Financial Reporting Standard 14 – ‘Earnings per Share’, dividends arising on shares held by employee
share trusts (Note 35) are excluded in arriving at profit before taxation and deducted from the aggregate of dividends paid and
proposed. The weighted average number of shares held by the trusts are excluded from the earnings per share calculations. The
effect of options granted under the employee share option and SAYE schemes is to increase the weighted average number of
equity shares for the calculation of diluted earnings per share by 13.7m (2004: 12.6m) to 684.4m (2004: 675.2m). The
comparative earnings per share calculations have been adjusted for the two-for-one share split on 22 April 2005.
10. Cash and balances at central banks
These amounts include only those balances at central banks which may be withdrawn without notice.
11. Loans and advances to banks
Repayable on demand
Other loans and advances to banks
Analysed by remaining maturity:
Three months or less
One year or less but over three months
Five years or less but over one year
Amounts include:
Due from Group undertakings
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
682.1
943.5
554.6
868.9
3,649.1
1,599.4
323.0
6,253.6
3,574.5
1,106.6
222.8
5,847.4
2,224.3
1,610.3
303.8
4,693.0
2,920.7
845.3
209.9
4,844.8
40.2
-
49
50
12. Loans and advances to customers
Amounts receivable under finance leases
Amounts receivable under hire purchase contracts
Other loans and advances to customers
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
144.4
323.4
33,631.2
34,099.0
172.4
289.5
23,261.9
23,723.8
116.5
106.2
33,169.5
33,392.2
166.6
105.9
22,223.2
22,495.7
2,392.7
876.1
Amounts include:
Due from Group undertakings
Remaining maturity analysis:
Repayable on demand
Over five years
4,528.4
3,084.3
6,392.4
13,702.1
6,701.2
34,408.4
(309.4)
34,099.0
3,957.9
2,595.1
3,687.2
8,896.7
4,875.9
24,012.8
(289.0)
23,723.8
6,343.3
2,846.7
5,557.8
12,613.2
6,319.4
33,680.4
(288.2)
33,392.2
4,549.4
2,366.2
3,250.3
8,119.3
4,480.1
22,765.3
(269.6)
22,495.7
There are no significant concentrations of loans and advances to customers by individual sector or industry. A geographic
analysis is included in Note 40. The cost of assets acquired by the Group during the year for letting under finance leases and
hire purchase contracts amounted to €269.2m (2004: €286.6m).
13. Provisions for bad and doubtful debts
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
At beginning of year
Exchange movements
Charge against profits – specific
Write-offs
Recoveries of previous write-offs
At end of year
289.0
1.2
29.4
(12.6)
2.4
309.4
280.6
1.0
19.1
(12.3)
0.6
289.0
269.6
1.1
27.1
(11.9)
2.3
288.2
261.1
0.7
18.5
(11.1)
0.4
269.6
Specific
General
Total
77.0
232.4
309.4
57.8
231.2
289.0
73.7
214.5
288.2
56.2
213.4
269.6
Non-performing loans
186.8
148.3
172.5
137.2
Non-performing loans are loans and advances on which interest is no longer being credited to the profit and loss account.
14. Securitised assets
Securitised assets
2005
€m
322.0
(307.0)
15.0
2004
€m
666.0
(634.8)
31.2
Anglo Irish Bank Corporation plc (‘Anglo’) sold portfolios of commercial investment property loans from its United Kingdom
loan book to Monument Securitisation (CMBS) No. 1 plc and Monument Securitisation (CMBS) No. 2 Limited (‘the Monument
companies’) in September 2000 and June 2002 respectively. The Group does not own directly or indirectly any of the share
capital of the Monument companies or their parent companies.
Anglo receives fee income for continuing to administer the loans under the terms of servicing agreements with the Monument
companies. The Monument companies funded these transactions by issuing mortgage-backed notes, the lowest ranking of which
were purchased by Anglo. The issue terms of the notes include provisions whereby neither the Monument companies nor the
noteholders have recourse to the Group and no Group Company is obliged or intends to support any losses of the Monument
companies or the noteholders should they arise. Anglo is not obliged to repurchase any of the assets from the Monument
companies. The Monument companies entered into certain interest rate hedges to manage their interest rate positions. These
contracts were entered into with third party banks.
The contribution earned by the Group during the year in respect of securitised assets is included in other operating income and
is analysed as follows:
Interest receivable
Interest payable
Fee income
Operating expenses
Contribution from securitised assets
2005
€m
2004
€m
34.3
(30.2)
0.6
(1.6)
3.1
49.8
(41.7)
0.4
(2.0)
6.5
On 7 February 2005 the Group exercised its option to repurchase the remaining mortgages outstanding on Monument
Securitisation (CMBS) No. 1 plc. The balances on these mortgages had reduced to €122.2m at the time of repurchase.
51
52
15. Debt securities
The Group
Listed:
Government stocks
Other listed public bodies
Private sector investments
Unlisted:
Bank and building society certificates of deposit
Due within one year
Due one year and over
The Company
Listed:
Government stocks
Other listed public bodies
Private sector investments
Unlisted:
Bank and building society certificates of deposit
Due within one year
Due one year and over
2005
2004
Book
Value
€m
Market
Value
€m
Book
Value
€m
Market
Value
€m
224.6
10.0
4,097.3
4,331.9
233.1
10.0
4,117.5
4,360.6
166.4
12.4
2,355.6
2,534.4
177.3
12.5
2,378.4
2,568.2
601.2
4,933.1
601.7
4,962.3
2,534.4
2,568.2
1,986.1
2,947.0
4,933.1
669.5
1,864.9
2,534.4
215.7
10.0
4,094.7
4,320.4
224.1
10.0
4,114.4
4,348.5
156.8
12.4
2,354.2
2,523.4
167.2
12.5
2,376.9
2,556.6
601.2
4,921.6
601.7
4,950.2
2,523.4
2,556.6
1,977.3
2,944.3
4,921.6
666.6
1,856.8
2,523.4
Market value is market price for quoted securities and Directors’ estimate for unquoted securities. At 30 September 2005 the
amount of unamortised premiums net of discounts on debt securities held as financial fixed assets was €1.0m (2004: €8.5m net
discounts) for the Group and €1.1m (2004: €8.5m net discounts) for the Company. At 30 September 2005 debt securities held
by the Group and the Company subject to repurchase agreements amounted to €1,625.8m (2004: €379.7m).
16. Equity shares
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
46.7
26.1
11.4
3.2
Equity shares and other similar instruments
Unlisted investments at cost less amounts written off
Held as financial fixed assets
In the opinion of the Directors the value of the individual unlisted investments is not less than their book amount.
17. Investments in Group undertakings
Investments in subsidiary undertakings at cost less amounts written off
Principal subsidiary undertakings
Anglo Irish Asset Finance plc
Anglo Irish Asset Management Limited
Anglo Irish Assurance Company Limited
Anglo Irish Bank (Austria) A.G.
Anglo Irish Bank Corporation (I.O.M.) P.L.C.
Anglo Irish Bank (Suisse) S.A.
Anglo Irish Capital Funding Limited
Anglo Irish International Financial Services Limited
Anglo Irish Limited
Anglo Irish Property Lending Limited
Anglo Irish Trust Company Limited
Buyway Group Limited
CDB (U.K.) Limited
Irish Buyway Limited
Knightsdale Limited
Sparta Financial Services
Steenwal B.V.
Anglo Aggmore Limited Partnership
Anglo Irish Capital UK Limited Partnership
Principal activity
Finance
Fund management
Life assurance and pensions
Banking
Banking
Banking
Finance
Finance
Finance
Finance
Trust services
Investment holding
Investment holding
Finance
Finance
Finance
Investment holding
Property
Finance
2005
€m
2004
€m
612.9
602.0
Country of registration
United Kingdom
Republic of Ireland
Republic of Ireland
Austria
Isle of Man
Switzerland
Cayman Islands
Republic of Ireland
Isle of Man
United Kingdom
Isle of Man
Republic of Ireland
United Kingdom
Republic of Ireland
Republic of Ireland
Republic of Ireland
The Netherlands
United Kingdom
United Kingdom
All of the Group undertakings are included in the consolidated accounts. The Group holds 75% of the capital contributed to the
Anglo Aggmore Limited Partnership. The capital contributors earn a return of 10% per annum on their capital and thereafter the
Group is entitled to 50% of the remaining profits of this partnership. The Group is the general partner of Anglo Irish Capital UK
Limited Partnership.
The Group owns all of the issued ordinary share capital of each of the other subsidiary undertakings listed. Each subsidiary
undertaking operates principally in the country in which it is registered. A complete listing of Group undertakings will be
annexed to the annual return of the Company in accordance with the requirements of the Companies Acts. Investments in
certain subsidiary undertakings operating as credit institutions are not directly held by the parent undertaking.
53
54
18. Intangible fixed assets – goodwill
The
Group
€m
The
Company
€m
Cost
At 1 October 2004 and 30 September 2005
82.9
0.6
Accumulated amortisation
At 1 October 2004
Charge for the year
At 30 September 2005
13.3
4.1
17.4
0.2
0.2
Net book value
65.5
69.6
0.4
0.4
The goodwill arising on acquisitions completed after 30 September 1998 is amortised in equal instalments over its estimated
useful economic life of twenty years. The cumulative amount of positive goodwill which has been eliminated against reserves to
30 September 1998, net of goodwill attributable to disposed businesses, amounted to €47.2m. This goodwill was eliminated as a
matter of accounting policy [see Note 1(i)].
19. Tangible fixed assets
The Group
Cost or valuation
At 1 October 2004
Exchange movement
Additions
Disposals
Revaluation
Writedown
Accumulated depreciation
At 1 October 2004
Charge for the year
Disposals
Net book value
Freehold
investment
properties
€m
Equipment
and motor
vehicles
€m
Freehold
properties
€m
Leasehold
properties
€m
5.1
5.1
12.5
11.9
(0.3)
24.1
60.8
0.1
14.6
(1.3)
74.2
103.7
0.3
39.1
(1.6)
2.6
(1.0)
143.1
-
0.9
0.1
1.0
4.8
1.7
(0.3)
6.2
38.6
9.3
(0.9)
47.0
44.3
11.1
(1.2)
54.2
39.7
25.3
4.1
4.2
17.9
7.7
27.2
22.2
88.9
59.4
25.3
0.2
12.6
2.6
(1.0)
39.7
Total
€m
19. Tangible fixed assets continued
The Company
Leasehold
properties
€m
Equipment
and motor
vehicles
€m
Total
€m
Cost
At 1 October 2004
Exchange movement
Additions
Disposals
11.7
1.6
(0.3)
13.0
39.5
0.1
12.4
(1.0)
51.0
51.2
0.1
14.0
(1.3)
64.0
Accumulated depreciation
At 1 October 2004
Charge for the year
Disposals
4.6
0.9
(0.2)
5.3
26.1
5.0
(0.6)
30.5
30.7
5.9
(0.8)
35.8
7.7
7.1
20.5
13.4
28.2
20.5
Net book value
The open market value of the freehold investment properties is estimated by the Directors at €39.7m (2004: €25.3m). All of
the Group’s leasehold properties are in respect of leases with a duration of less than fifty years. The Group occupies properties
with a net book value of €16.0m (2004: €11.9m) in the course of carrying out its own activities. As at 30 September 2005 the
Group had annual commitments under non-cancellable operating leases as set out below.
Property
€m
Equipment
€m
2.0
8.2
10.2
0.2
2.0
1.0
3.2
Operating leases which expire:
Within one year
One to five years
Over five years
55
56
20. Other assets
Foreign exchange and interest rate contracts
Trading properties
Deferred taxation (Note 21)
Sundry debtors
The Group
2005
€m
2004
€m
2005
€m
2004
€m
371.2
366.1
37.6
1.8
776.7
214.6
326.4
34.5
2.2
577.7
362.0
35.5
1.0
398.5
207.4
28.3
1.2
236.9
2005
€m
2004
€m
2005
€m
2004
€m
34.5
2.7
0.4
37.6
33.9
0.3
0.3
34.5
28.3
4.8
2.2
0.2
35.5
27.2
0.8
0.3
28.3
44.2
(7.5)
0.9
37.6
43.9
(11.1)
1.7
34.5
39.8
(6.2)
1.9
35.5
39.6
(12.7)
1.4
28.3
21. Deferred taxation
Credit for year
Group transfer
Exchange movement and other adjustments
At end of year
Analysis of deferred taxation:
General bad debt provisions
Capital allowances on assets leased to customers
Other timing differences
The Company
The Group
The Company
It is estimated that a taxation liability of €0.4m would arise if the freehold investment properties were sold at their open
market value on 30 September 2005. This potential tax liability has not been recognised in the financial statements. No deferred
taxation has been provided on the unremitted profits of foreign subsidiaries. As these profits are continually reinvested by the
Group, no tax is expected to be payable on them in the foreseeable future.
22. Life assurance business
The assets and liabilities attributable to policyholders are classified separately in the consolidated balance sheet. The life
assurance assets attributable to policyholders consist of:
Property
Cash
Equities
Managed funds
2005
€m
2004
€m
413.0
241.3
147.9
141.9
944.1
255.9
228.1
125.1
58.5
667.6
At 30 September 2005 the above life assurance assets attributable to policyholders included 894,369 (2004: 682,880 after
adjusting for the two-for-one share split) ordinary shares in Anglo Irish Bank Corporation plc with a market value of €10.1m
(2004: €5.0m). The Group has no beneficial interest in these shares.
23. Deposits by banks
Repayable on demand
Other deposits by banks with agreed maturity dates
Over five years
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
21.3
21.4
291.4
302.3
6,975.6
133.9
19.9
7,150.7
2,534.1
30.5
19.9
2,605.9
9,091.2
263.8
21.1
9,667.5
4,244.1
30.5
49.2
2.9
4,629.0
2,537.1
2,033.2
Amounts include:
Due to Group undertakings
24. Customer accounts
Repayable on demand
Other deposits by customers with agreed maturity dates or
Periods of notice analysed by remaining maturity:
Over five years
Amounts include:
Due to Group undertakings
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
2,893.5
3,768.9
1,403.2
2,354.6
19,842.2
1,625.2
668.3
130.5
25,159.7
13,097.5
1,843.1
748.6
87.9
19,546.0
18,671.5
1,476.0
641.4
128.4
22,320.5
12,513.4
1,747.8
735.5
86.5
17,437.8
212.9
189.3
57
58
25. Debt securities in issue
Medium term note programme
Other debt securities in issue:
Commercial paper programme
Certificates of deposits
Other
Medium term note programme
Over five years
Other debt securities in issue
The Group
2005
€m
2004
€m
2005
€m
2004
€m
5,795.0
4,524.2
5,795.0
4,524.2
1,824.3
1,547.2
238.6
9,405.1
1,223.8
990.9
205.6
6,944.5
1,824.3
1,547.2
59.7
9,226.2
1,223.8
990.9
10.0
6,748.9
543.3
819.9
4,429.8
2.0
295.3
1,228.5
3,000.4
-
543.3
819.9
4,429.8
2.0
295.3
1,228.5
3,000.4
-
3,312.8
297.3
9,405.1
2,037.1
373.2
10.0
6,944.5
3,153.9
277.3
9,226.2
1,848.1
366.6
10.0
6,748.9
26. Other liabilities
Foreign exchange and interest rate contracts
Current taxation
Deferred acquisition consideration
Sundry liabilities
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
351.7
57.2
24.2
433.1
187.2
48.5
5.8
14.1
255.6
342.8
31.7
23.1
397.6
180.3
41.4
13.5
235.2
27. Provisions for liabilities and charges
Pension provisions
Other provisions for liabilities and charges
The Company
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
5.1
0.2
5.3
5.2
0.2
5.4
0.2
0.2
0.2
0.2
The pension provisions relate to an unfunded defined contribution plan for the Group’s Austrian employees. This scheme is
administered in accordance with best local practice and regulations in Austria.
28. Subordinated liabilities
US$20m 9.1% Subordinated Notes 2006
US$15m 9.05% Subordinated Notes 2009 (a)
US$100m 8.53% Subordinated Notes 2011 (b)
US$25m Floating Rate Subordinated Notes 2011 (c)
€150m Floating Rate Subordinated Notes 2011 (d)
€750m Floating Rate Subordinated Notes 2014 (e)
US$165m Subordinated Notes Series A 2015 (f)
US$35m Subordinated Notes Series B 2017 (g)
Stg£50m Undated Subordinated Notes (h)
Other subordinated liabilities
Repayable as follows:
One year or less
Between one and two years
Between two and five years
Over five years
2005
€m
2004
€m
16.6
149.9
747.0
136.7
29.0
73.3
29.2
1,181.7
16.1
12.1
80.5
20.1
149.7
746.2
72.7
35.9
1,133.3
28.8
7.7
9.3
1,135.9
1,181.7
6.7
28.3
29.1
1,069.2
1,133.3
All of the above issues have been issued by the Parent Bank and are unsecured and subordinated in the right of repayment
to the ordinary creditors, including depositors of the Bank.The prior approval of the Irish Financial Regulator is required to
redeem these issues prior to their final maturity date.There is no foreign exchange rate exposure as the proceeds of these
issues are retained in their respective currencies.
(a) The US$15m 9.05% Subordinated Notes 2009 were redeemed on 15 October 2004.
(b) The US$100m 8.53% Subordinated Notes 2011 were redeemed on 28 September 2005.
(c) The US$25m Floating Rate Subordinated Notes 2011 were redeemed on 28 September 2005 and bore interest at six
month LIBOR plus 1.5% per annum to 28 September 2005.
(d) The €150m Floating Rate Subordinated Notes 2011 bear interest at three month EURIBOR plus 1.7% per annum to
5 April 2006 and thereafter at three month EURIBOR plus 2.7% per annum.
(e) The €750m Floating Rate Subordinated Notes 2014 bear interest at three month EURIBOR plus 0.45% per annum to
25 June 2009 and thereafter at three month EURIBOR plus 0.95% per annum.
(f) The US$165m Subordinated Notes Series A 2015 were issued on 28 September 2005 and bear interest at 4.71% per
annum to 28 September 2010 and thereafter at three month LIBOR plus 0.92% per annum.
(g) The US$35m Subordinated Notes Series B 2017 were issued on 28 September 2005 and bear interest at 4.80% per
annum to 28 September 2012 and thereafter at three month LIBOR plus 0.93% per annum.
(h) Interest on the Stg£50m Undated Subordinated Notes is fixed at 9.875% per annum to 13 March 2006 and thereafter at the
then current five year gross redemption yield on United Kingdom government security plus 2.9% per annum, reset every
five years.
On 5 October 2005 the Parent Bank issued Stg£300m Cumulative Callable Fixed to Floating Rate Undated Subordinated
Securities (‘securities’).This issue raised Stg£296.2m net of discount and issue costs. Interest on these securities is fixed at 5.25%
per annum to 5 October 2015 and thereafter resets at three month LIBOR plus 1.68% per annum.
59
60
29. Perpetual capital securities
Stg£200m Step-up Callable Perpetual Capital Securities
Stg£250m Tier One Non-Innovative Capital Securities
The Group
2005
€m
2004
€m
291.6
369.5
661.1
289.2
367.0
656.2
On 28 June 2001 Anglo Irish Asset Finance plc (‘issuer’) issued Stg£200m 8.5325% Step-up Callable Perpetual Capital Securities
(‘securities’) at par value which have the benefit of a subordinated guarantee by Anglo Irish Bank Corporation plc (‘guarantor’).
The securities are perpetual securities and have no maturity date. However, they are redeemable in whole or in part at the
option of the issuer, subject to the prior approval of the Irish Financial Regulator and of the guarantor, at their principal amount
together with any outstanding payments on 28 June 2011 or on any coupon payment date thereafter.
The securities bear interest at a rate of 8.5325% per annum to 28 June 2011 and thereafter at a rate of 4.55% per annum above
the gross redemption yield on a specified United Kingdom government security, reset every five years. The interest is payable
semi-annually in arrears on 28 June and 28 December.
On 23 July 2002 Anglo Irish Asset Finance plc issued Stg£160m 7.625% Tier One Non-Innovative Capital Securities (‘TONICS’)
at an issue price of 99.362%. A further tranche of Stg£90m TONICS was issued on 21 March 2003 at an issue price of 106.378%
plus accrued interest. These issues also have the benefit of a subordinated guarantee by Anglo Irish Bank Corporation plc.
The TONICS are perpetual and have no maturity date. However, they are redeemable in whole but not in part at the option of
the issuer, subject to the prior approval of the Irish Financial Regulator and of the guarantor, at their principal amount together
with any outstanding payments on 23 July 2027 or on any coupon payment date thereafter.
Interest is payable annually in arrears on 23 July on the TONICS at a rate of 7.625% per annum until 23 July 2027. Thereafter,
the TONICS will bear interest at a rate of 2.4% per annum above six month LIBOR, payable semi-annually in arrears.
The rights and claims of the holders of the securities and the TONICS are subordinated to the claims of the senior creditors
of the issuer or of the guarantor (as the case may be) in that no payment in respect of the securities or the TONICS or the
guarantees in respect of them shall be due and payable except to the extent that the issuer or the guarantor (as applicable)
is solvent and could make such a payment and still be solvent immediately thereafter and the guarantor is in compliance with
applicable regulatory capital adequacy requirements. Upon any winding up of the issuer or the guarantor, the holders of the
securities and the TONICS will rank pari passu with the holders of preferred securities and preference shares issued by or
guaranteed by the issuer or the guarantor and in priority to all other shareholders of the issuer and of the guarantor.
30. Equity and non-equity minority interests
Equity interests in subsidiary undertakings
Non-equity interests in subsidiary undertakings:
€600m Perpetual Preferred Securities
US$125m Series A Preference Shares
€160m Series B Preference Shares
The Group
2005
€m
2004
€m
3.5
1.8
588.5
100.4
692.4
588.5
97.5
155.6
843.4
On 30 September 2004 the limited partners of the Anglo Irish Capital UK Limited Partnership (‘issuer’) contributed capital in
the form of 600,000 Non-Voting Non-Cumulative Perpetual Preferred Securities (‘preferred securities’) of €1,000 each issued at
par. The preferred securities have the benefit of a subordinate guarantee by Anglo Irish Bank Corporation plc (‘guarantor’). The
issuer is a limited partnership organised under the laws of England and Wales and its general partner is Anglo Irish Capital GP
Limited, a wholly owned subsidiary of the guarantor. The transaction raised €588.5m net of issue costs.
The preferred securities are perpetual and have no repayment date. However, they are redeemable in whole, but not in part, at
the option of Anglo Irish Capital GP Limited and subject to the prior approval of the Irish Financial Regulator, at their issue price
together with any outstanding payments on 30 March 2010 or on any distribution date thereafter.
Cash distributions to the limited partners are payable semi-annually in arrears on 30 March and 30 September. The distribution
rate on the preferred securities was fixed at 6% per annum to 30 September 2005 and thereafter resets every six months at a
rate linked to the Euro ten year constant maturity swap, subject to a cap of 9% per annum.
Anglo Irish Capital Funding Limited (‘issuer’) issued 5,000,000 Series A Floating Rate Non-Cumulative Guaranteed Non-Voting
Preference Shares of US$25 each on 4 June 1997. On 24 March 1999 a further 6,400,000 Series B 7.75% Non-Cumulative
Guaranteed Non-Voting Preference Shares of €25 each were issued which netted €155.6m after issue costs. Both these issues
have the benefit of a subordinate guarantee by Anglo Irish Bank Corporation plc (‘guarantor’). The 6,400,000 Series B 7.75%
Non-Cumulative Guaranteed Non-Voting Preference Shares of €25 each were redeemed at par on 31 December 2004.
The holders of the US$ preference shares are entitled to receive a non-cumulative preferential dividend in four quarterly
instalments in arrears on 4 March, 4 June, 4 September and 4 December in each year. The coupon rate is three month US
Dollar LIBOR plus 2.5% per annum. The holders of the Euro preference shares were entitled to receive a non-cumulative
preferential dividend of 7.75% per annum in four quarterly instalments in arrears on 31 March, 30 June, 30 September and 31
December in each year.
The US$ preference shares are redeemable at the option of the issuer, subject to the prior consent of the guarantor and the
Irish Financial Regulator, in whole or in part, at par on any dividend date from 4 June 2002.
Anglo Irish Bank Corporation plc has guaranteed the holders of the preferred securities and the US$ preference shares with
respect to their rights to distributions and on liquidation. These guarantees give, as nearly as possible, the holders of the
preferred securities and the US$ preference shares rights equivalent to those which the holders would be entitled to if they
held preferred securities or preference shares in Anglo Irish Bank Corporation plc itself. No distributions can be paid in respect
of the preferred securities or the US$ preference shares by the issuers or the guarantor if the guarantor is not in compliance
with applicable regulatory capital adequacy requirements.
The distribution entitlements on the preferred securities and the preference shares are accrued on a daily basis and the total
cost of €44.7m (2004: €16.2m) is included in minority interests in the profit and loss account (Note 5).
61
62
31. Called up share capital
Authorised
760,000,000 Ordinary shares of €0.16 each
50,000,000 Non-cumulative preference shares of €1 each
50,000,000 Non-cumulative preference shares of Stg£1 each
50,000,000 Non-cumulative preference shares of US$1 each
Allotted, called up and fully paid
Equity:
Ordinary shares of €0.16 each
Non-equity:
Non-cumulative preference shares of Stg£1 each
2005
€m
2004
€m
121.6
50.0
73.3
41.5
286.4
121.6
121.6
108.5
107.1
0.4
108.9
107.1
Ordinary shares
On 28 January 2005 the shareholders approved a resolution to sub-divide each existing ordinary share of €0.32 in the share
capital of the Company into two ordinary shares of €0.16 each, thereby doubling the number of ordinary shares in issue. The
resolution was brought into effect from the close of business on 22 April 2005. For ease of comparison all ordinary share
amounts and prices in this note have been adjusted to reflect the two-for-one share split.
During the year ended 30 September 2005 the allotted, called up and fully paid ordinary share capital was increased from
669,079,274 to 678,130,548 ordinary shares as follows:
In February 2005 2,227,220 ordinary shares were issued to those holders of ordinary shares who elected, under the terms of
the scrip dividend election offer, to receive additional ordinary shares at a price of €8.62 instead of all or part of the cash
element of their final dividend entitlement in respect of the year ended 30 September 2004.
In July 2005 1,077,457 ordinary shares were issued to those holders of ordinary shares who elected, under the terms of the
scrip dividend election offer, to receive additional ordinary shares at a price of €9.36 instead of all or part of the cash element
of their interim dividend entitlement in respect of the year ended 30 September 2005.
During the year 4,931,746 ordinary shares were issued to option holders on the exercise of options under the terms of the
employee share option scheme at prices ranging from €1.17 to €6.30 and 814,851 ordinary shares were issued to option
holders on the exercise of options under the terms of the SAYE scheme at prices ranging from €0.90 to €7.14.
The Company operates a number of share incentive plans. The purpose of these plans is to motivate Group employees to
contribute towards the creation of long-term shareholder value. Before being adopted all of the share incentive plans were
approved by shareholders and complied with the guidelines operated by the Irish Association of Investment Managers. Further
details are given below:
Employee Share Option Scheme
On 15 January 1999 the shareholders approved the establishment of the employee share option scheme which replaced the
scheme originally approved by shareholders in 1988.
Under the terms of the scheme all qualifying employees may be invited to participate in the scheme at the discretion of the
Directors. Options are granted at the middle market price on the day on which the shares were dealt in immediately preceding
the date of the invitation. During the continuance of the scheme each participant is limited to a maximum entitlement of
scheme shares equivalent to an aggregate value of four times that employee’s annual emoluments. Basic tier options may not be
transferred or assigned and may be exercised only between the third and tenth anniversaries of their grant, or at such earlier
time as approved by the Directors. Second tier options may not be transferred or assigned and may be exercised only between
the fifth and tenth anniversaries of their grant, or at such earlier time as approved by the Directors.
In the ten year period from 15 January 1999 the maximum number of basic and second tier options granted under the scheme
may not exceed 10% of the issued ordinary share capital of the Company from time to time. Both the basic and second tier
options which may be granted are each restricted to 5% of the issued ordinary share capital of the Company from time to time.
The exercise of basic tier options granted since 15 January 1999 is conditional upon earnings per share growth of at least 5%
compound per annum more than the increase in the Irish consumer price index. The exercise of second tier options granted
since 15 January 1999 is conditional upon earnings per share growth of at least 10% compound per annum more than the
increase in the Irish consumer price index and the Company’s shares must also rank in the top quartile of companies as regards
growth in earnings per share on the Irish Stock Exchange.
At 30 September 2005 options were outstanding over 18,516,000 (2004: 18,397,746) ordinary shares at prices ranging from
€1.17 to €10.93 per share. These options may be exercised at various dates up to September 2015. During the year options
over 5,170,000 shares were granted and options over 120,000 shares lapsed.
SAYE Scheme
On 14 January 2000 the shareholders approved the establishment of the Anglo Irish Bank SAYE scheme. This scheme has Irish,
UK and Austrian versions in order to conform with relevant revenue legislation in these jurisdictions.
The Irish version permits eligible employees to enter into a savings contract with the Company for a three, five or seven year
period to save a maximum of €320 per month for the appropriate contract period and to use the proceeds of the savings
contract to fund the exercise of options granted under the scheme. At 30 September 2005 options were outstanding over
2,763,028 (2004: 3,213,778) ordinary shares at option prices ranging from €0.90 to €7.14, which represented a 25% discount to
the market price on the date that employees were invited to enter into these contracts. These options are exercisable, provided
the participants’ savings contracts are completed, at various dates between October 2005 and July 2012.
A variation of the Anglo Irish Bank SAYE scheme was introduced for all UK staff of the Group in 2001. This scheme permits
eligible employees to enter into a savings contract with an outside financial institution for a three, five or seven year period to
save a maximum of Stg£250 per month for the appropriate contract period and to use the proceeds of the savings contract to
fund the exercise of options granted under the scheme. At 30 September 2005 options were outstanding over 775,381 (2004:
791,094) ordinary shares at option prices ranging from Stg£1.05 to Stg£5.73, which represented a 20% discount to the average
market price over the week preceding the date that employees were invited to enter into these contracts. These options are
exercisable at various dates between September 2006 and April 2013.
63
64
31. Called up share capital continued
A further variation of the Anglo Irish Bank SAYE scheme was introduced during the year for all Austrian staff. This scheme
permits eligible employees to save up to a maximum of €320 per month for five years and to use the proceeds of the savings
contract to fund the exercise of options granted under the scheme. At 30 September 2005 options were outstanding over
138,830 ordinary shares at an option price of €7.13, which represented a 25% discount to the market price on the date that
employees were invited to enter into these contracts. These options are exercisable, provided the participants’ savings contract
are completed, between June 2010 and December 2010.
ESOP
On 14 January 2000 the shareholders also approved the establishment of the Anglo Irish Bank Employee Share Ownership Plan
(‘ESOP’). The plan’s trustee may purchase ordinary shares of the Company in the open market. Eligible employees may be
granted options to acquire shares held by the trustee on similar terms and exercise conditions as those applicable to basic tier
options under the employee share option scheme. At 30 September 2005 options were outstanding over 1,486,700 (2004:
422,008) shares at prices ranging from €1.20 to €10.93. During the year options over 1,240,000 shares were granted.
The total number of ordinary shares which may be the subject of ESOP options may not, when aggregated with the ordinary
shares the subject of options granted under the SAYE scheme, exceed 5% of the issued ordinary share capital of the Company
from time to time.
Preference shares
On 28 January 2005 the shareholders increased the authorised share capital by approving the creation of 50,000,000
non-cumulative preference shares of €1 each, 50,000,000 non-cumulative preference shares of Stg£1 each and 50,000,000
non-cumulative preference shares of US$1 each. On 15 June 2005 300,000 non-cumulative preference shares of Stg£1 each were
issued at a price of Stg£997.99 per share. The issue raised Stg£294.3m after issue expenses.
The holders of these preference shares are entitled to a non-cumulative preference dividend of 6.25% per annum based on a
principal amount of Stg£1,000 per share payable annually in arrears on 15 June in each year to 15 June 2015. Thereafter
dividends are due to be paid quarterly in arrears on 15 March, 15 June, 15 September and 15 December in each year based on a
principal amount of Stg£1,000 per share and on the three month LIBOR rate plus 1.66% per annum. No preference dividends
can be paid if the issuer is not in compliance with applicable regulatory capital requirements.
These preference shares are redeemable at Stg£1,000 per share in whole, but not in part, at the option of the issuer, subject to
the prior consent of the Irish Financial Regulator, on 15 June 2015 and on any dividend date thereafter.
Upon any winding up of the issuer these preference shares rank in priority to the ordinary shares in the Company and equally
among themselves and any other present and future Tier 1 capital issues of the Group. Holders of these preference shares are
not entitled to vote at any general meetings of the Company, except in certain restricted circumstances.
Treasury shares
Under resolutions approved by shareholders on 23 January 2004 and 28 January 2005 the Company has the authority to make
market purchases of any class of its own shares to the extent of 10% of its then issued share capital and to hold these shares as
treasury shares. This authority has not been exercised.
32. Share premium account
Premium arising on issue of preference shares
Premium on share option exercises
Final scrip dividend
Interim scrip dividend
At end of year
33. Other reserves
Non-distributable capital reserve
Investment properties revaluation reserve
Exchange translation reserve
2004
€m
157.6
431.2
12.0
(0.4)
(0.2)
600.2
154.7
3.5
(0.4)
(0.2)
157.6
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
1.3
1.5
(0.4)
2.4
1.3
(0.4)
0.9
1.3
1.3
1.3
1.3
2004
€m
2005
€m
2004
€m
685.8
373.3
29.3
1,088.4
408.7
256.1
21.0
685.8
34. Profit and loss account
The Group
2005
€m
Profit retained for year
Ordinary shares issued in lieu of cash dividends
Net movement in own shares
At end of year
2005
€m
974.2
399.6
29.3
(2.5)
1,400.6
The Company
649.8
304.2
21.0
(0.8)
974.2
35. Own shares
Ordinary shares in Anglo Irish Bank Corporation plc (‘own shares’) at cost
The Group
2005
€m
2004
€m
9.5
7.0
Own shares are held to satisfy share options granted or to be granted to employees under the Anglo Irish Bank Employee Share
Ownership Plan (‘ESOP’) which was approved by shareholders in January 2000 (Note 31) and also to honour conditional share
awards made to employees under the Anglo Irish Bank Deferred Share Scheme (‘DSS’).
The trustee of the ESOP borrowed funds from a Group subsidiary undertaking, interest free, to enable the trustee to purchase
own shares in the open market. At 30 September 2005 options were outstanding over 1,486,700 (2004: 422,008) own shares at
prices ranging from €1.20 to €10.93. These options may be exercised at various dates up to September 2015. The proceeds of
option exercises are used to repay the loan.
65
66
35. Own shares continued
At 30 September 2005 the trustee of the DSS held 956,661 (2004: 883,622) own shares to honour conditional share awards
granted between December 2002 and August 2005 to eligible Group employees as part of their remuneration package. These
shares were purchased in the open market and are also funded by interest free borrowings from a Group subsidiary
undertaking. These share awards are conditional on the relevant employees remaining in the Group’s employment for three
years from their grant date. The costs of providing these awards has been fully provided in the profit and loss account.When
the awards vest the trustee’s borrowings are fully reimbursed by the sponsoring Group employer.
As at 30 September 2005 the trustees held 3,103,783 (2004: 3,176,096) own shares with a market value of €35.2m (2004:
€23.4m). The dividend income received during the year on own shares of €0.4m (2004: €0.4m) is excluded in arriving at the
Group profit before taxation.
For ease of comparison all ordinary share amounts and prices in this note have been adjusted to reflect the two-for-one share
split on 22 April 2005.
36. Memorandum items
Guarantees and irrevocable letters of credit
Performance bonds,VAT guarantees and
Other transaction related contingencies
Commitments
Credit lines and other commitments to lend
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
2,095.6
819.9
2,066.2
782.6
73.9
2,169.5
90.5
910.4
73.9
2,140.1
90.5
873.1
6,011.0
4,055.0
4,837.4
3,098.3
Other contingencies
The Parent Company has given guarantees in respect of the liabilities of certain of its subsidiaries.
37. Notes to the cash flow statement
(i) Cash flows
Returns on investment and servicing of finance
Interest received on debt securities and other fixed income securities
Interest paid on subordinated liabilities
Interest paid on perpetual capital securities
Interest paid on perpetual preferred securities
Preference dividends paid to minority interests
Share of profits paid to minority interests
Capital expenditure and financial investment
Net purchases of debt securities
Purchase of tangible fixed assets
Net purchases of equity shares
Proceeds of tangible fixed asset disposals
Acquisitions and disposals
Payment of deferred consideration for trust services business
acquired in Isle of Man
Financing
Proceeds from issue of preference shares
Proceeds of subordinated bond issues
Proceeds of preferred securities issue in subsidiary
Redemption of preference shares in subsidiary undertakings
Redemption of subordinated bonds
Proceeds of equity share issues
Capital introduced by minority interest
(ii) Analysis of subordinated liabilities
New issues of subordinated bonds
Redemption of subordinated bonds
At end of year
(iii) Analysis of perpetual capital securities
At end of year
(iv) Analysis of cash movements
At end of year
Loans and advances to banks repayable on demand
Loans and advances to banks repayable on demand
Decrease in cash
2005
€m
2004
€m
93.9
(45.7)
(53.0)
(36.0)
(8.5)
(1.4)
(50.7)
44.1
(32.2)
(52.6)
(16.2)
(0.3)
(57.2)
(2,385.7)
(39.1)
(18.1)
0.4
(2,442.5)
(1,166.8)
(37.6)
(21.6)
0.8
(1,225.2)
(5.8)
-
431.6
165.7
(160.0)
(119.4)
12.8
0.9
331.6
746.2
588.5
(35.8)
4.2
0.6
1,303.7
1,133.3
165.7
(119.4)
2.1
1,181.7
429.0
746.2
(35.8)
(6.1)
1,133.3
656.2
4.9
661.1
645.0
11.2
656.2
682.1
566.7
943.5
363.2
(943.5)
(363.2)
(57.9)
(2,122.7)
(333.5)
(1,149.5)
67
68
38. Pensions
The Group operates three defined benefit non-contributory pension schemes in Ireland. The assets of these schemes are held
in separate trustee administered funds. These schemes have been closed to new members since January 1994. New Irish
employees after that date join a funded scheme on a defined contribution basis. There are also funded defined contribution
pension plans covering eligible Group employees in other locations as well as an unfunded defined contribution pension plan in
relation to the Group’s Austrian employees (Note 27).
The Group has continued to account for pensions in accordance with Statement of Standard Accounting Practice 24 ‘Accounting for Pension Costs’ (‘SSAP 24’). A new accounting standard on pensions was issued in November 2000 - Financial
Reporting Standard 17 (‘FRS 17’) and it was amended in November 2002. It requires additional transitional disclosures on a
phased basis in respect of defined benefit pension schemes.
SSAP 24 pension disclosures
The total pension costs for the Group for the year were €10.1m (2004: €9.5m) of which €3.9m (2004: €4.4m) represents the
costs of defined benefit schemes and €6.2m (2004: €5.1m) relates to defined contribution pension plans.
The pension costs relating to all defined benefit pension schemes have been assessed in accordance with the advice of an
independent qualified actuary. Full formal actuarial valuations are carried out triennially. The last such valuations were carried out
as at 1 October 2002 using the attained age method. The actuarial valuations are only available for inspection by members of
the schemes. The principal actuarial assumptions adopted in these valuations were that the investment returns would be 2%
higher than the annual salary increases and 3% higher than the annual pension increases.
At 1 October 2002 the market value of the schemes’ assets was €51.0m and this represented 99.2% of the schemes’ liabilities
at that date. The employer’s contribution rate over the average remaining service life of the members of the schemes takes
account of the current actuarial funding level. The contributions paid to the defined benefit schemes during the year were
€28.5m. There were €61.1m (2004: €36.5m) of prepaid contributions in respect of these schemes at the year end included in
prepayments and accrued income.
FRS 17 pension disclosures
For the purposes of the FRS 17 disclosures the latest full actuarial valuations have been updated by a qualified independent
actuary using the projected unit method mandated by FRS 17. Using this method the current service cost will increase as the
members of closed schemes approach retirement. The major assumptions used by the actuary at the financial year end
were as follows:
Discount rate for liabilities of the schemes
Rate of increase in salaries
Rate of increase in pensions
Inflation rate
2005
%
2004
%
2003
%
4.30
4.00
2.25 to 3.00
2.25
5.00
4.00
2.25 to 3.00
2.25
5.25
4.00
2.25 to 3.00
2.25
The assets in the schemes and the expected long-term rates of return at 30 September were:
Expected
return
2005
%
Equities
Bonds
Property
Hedge funds
Cash
Total
6.60
3.10
4.60
5.60
2.00
Market
value
of assets
2005
€m
55.0
6.5
3.6
6.6
35.4
107.1
Expected
return
2004
%
7.50
4.50
5.50
6.00
2.00
Market
value
of assets
2004
€m
Expected
return
2003
%
38.3
5.6
3.2
6.7
30.1
83.9
Market
value
of assets
2003
€m
7.75
4.75
6.25
3.50
31.0
6.7
3.1
24.6
65.4
2005
€m
2004
€m
2003
€m
107.1
(98.4)
8.7
(1.1)
7.6
83.9
(80.1)
3.8
(0.5)
3.3
65.4
(67.3)
(1.9)
0.2
(1.7)
The following amounts at 30 September were measured in accordance with the requirements of FRS 17:
Total market value of schemes’ assets
Present value of schemes’ liabilities
Surplus/(deficit) in the schemes
Related deferred tax
Net pension asset/(liability)
If FRS 17 had been implemented the effect on the Group’s financial statements would have been as follows:
Analysis of the amount that would have been charged to operating profit
Current service cost
Past service cost
Settlements and curtailments
Total operating cost
Expected return on assets of pension schemes
Interest on liabilities of pension schemes
Finance credit
Net charge before tax
Amount that would have been recognised in the statement of total recognised
gains and losses
Actual return less expected return on assets of the pension schemes
Experience losses on liabilities of the pension schemes
Change in assumptions underlying the present value of schemes’ liabilities
Actuarial loss in the statement of total recognised gains and losses
2005
€m
2004
€m
2.6
4.2
2.0
8.8
2.9
4.0
6.9
(4.3)
4.0
(0.3)
(3.8)
3.5
(0.3)
8.5
6.6
6.3
(4.3)
(17.1)
(15.1)
1.9
(0.8)
(3.2)
(2.1)
69
70
38. Pensions continued
2005
€m
2004
€m
3.8
(2.6)
(4.2)
(2.0)
4.3
(4.0)
28.5
(15.1)
8.7
(1.9)
(2.9)
(4.0)
3.8
(3.5)
14.4
(2.1)
3.8
Net assets
Net assets in consolidated accounts
Pension asset on SSAP 24 basis
Pension asset on FRS 17 basis
Net assets on FRS 17 basis
2,112.1
(61.1)
7.6
2,058.6
1,239.8
(36.5)
3.3
1,206.6
Profit and loss account in consolidated accounts
Pension asset on SSAP 24 basis
Pension asset on FRS 17 basis
Profit and loss account on FRS 17 basis
1,400.6
(61.1)
7.6
1,347.1
974.2
(36.5)
3.3
941.0
Movement in surplus during the year
Surplus/(deficit) at beginning of year
Current service cost
Past service cost
Settlements and curtailments
Expected return on assets of pension schemes
Interest on liabilities of pension schemes
Contributions paid
Actuarial loss during year
Surplus at end of year
History of experience gains and losses
Difference between actual and expected return on assets
Percentage of schemes’ assets at year end
Experience losses on liabilities
Percentage of schemes’ liabilities at year end
Total amount recognised in statement of total recognised gains and losses
Percentage of schemes’ liabilities at year end
2005
€m
6.3
5.9%
(4.3)
4.4%
(15.1)
15.3%
2004
€m
1.9
2.3%
(0.8)
1.0%
(2.1)
2.6%
2003
€m
(0.3)
0.5%
(6.5)
9.7%
(10.1)
15.0%
The three Irish defined benefit pension schemes were amalgamated into one scheme on 1 July 2005.
39. Related party transactions
Subsidiary undertakings
Details of the principal subsidiary undertakings are shown in Note 17. In accordance with Financial Reporting Standard 8 –
‘Related Party Disclosures’ (‘FRS 8’), transactions or balances between Group entities that have been eliminated on
consolidation are not reported.
Pension funds
The Group provides normal investment fund management and banking services to pension funds operated by the Group for the
benefit of its employees. These services are provided on similar terms as third party transactions and are not material to the
Group.
Directors
Details of transactions with Directors requiring disclosure under FRS 8 are included in the report of the Remuneration
Committee in Note 46.
40. Segmental analysis
The Group’s income and assets are principally attributable to banking activities. The analysis of gross income, profit before
taxation, loans and advances to customers and assets by geographic location is as follows:
2005
Republic
of Ireland
€m
UK & IOM
€m
Rest of
the World
€m
Group
€m
1,027.5
122.5
16.0
7.8
1,173.8
1,005.8
87.6
14.0
1,107.4
43.5
31.4
74.9
2,076.8
241.5
16.0
21.8
2,356.1
407.8
266.7
10.7
685.2
1,303.9
714.1
94.1
2,112.1
21,988.5
11,991.7
118.8
34,099.0
Gross assets
30,432.0
16,155.2
1,676.4
48,263.6
Gross income:
Interest receivable
Dealing profits
Total gross income
Profit on ordinary activities before taxation
Net assets
2004
Republic
of Ireland
€m
UK & IOM
€m
Rest of
the World
€m
Group
€m
Gross income:
Interest receivable
Dealing profits
Total gross income
792.4
82.0
12.8
2.7
889.9
627.0
72.2
16.6
715.8
33.5
29.7
63.2
1,452.9
183.9
12.8
19.3
1,668.9
Profit on ordinary activities before taxation
292.6
202.7
8.8
504.1
Net assets
730.0
424.5
85.3
1,239.8
14,686.7
8,916.2
120.9
23,723.8
Gross assets
20,886.5
11,949.3
1,504.0
34,339.8
The analysis by geographic segment is based on the location of the office recording the transaction. The loans and advances to
customers for the Republic of Ireland include €2,475.5m (2004: €1,328.5m) sourced in the USA. Income on capital is included
in the geographical results and reflects allocations from a Group capital pool rather than representing underlying income on
capital within individual operations.
71
72
41. Risk management and control
The Board of Directors approves Group policy on banking and treasury credit risk which is set out in a detailed credit policy
statement. The Board of Directors delegates its monitoring and control responsibilities to the Main Credit Committee for
credit matters, the Group Asset and Liability Committee for market risk and liquidity issues and the Board Risk and Compliance
Committee for operational risk issues. The members of these Committees include senior management from throughout
the Group.
The Board Risk and Compliance Committee currently comprises three Non-executive Directors and one Executive Director. Its
main role is to oversee risk management and compliance. It reviews, on behalf of the Board of Directors, the key risks and
compliance issues inherent in the business and the system of control necessary to manage them and presents its findings to the
Board of Directors.
Group Risk Management, Group Finance and Group Internal Audit are central control functions, independent of line
management, whose roles include monitoring the Group’s activities to ensure compliance with financial and operating controls.
The general scheme of risk, financial and operational control is designed to safeguard the Group’s assets while allowing sufficient
operational freedom for the business units to earn a satisfactory return for shareholders.
Credit risk
The Group’s policy on banking and treasury credit risk is set out in a detailed credit policy manual which has been reviewed by
the Board Risk and Compliance Committee and approved by the Board of Directors. The policy manual, which is regularly
updated, is provided to all relevant staff and forms the core of our credit risk ethos. Strict parameters for all types of credit
exposure are set down and all applications for credit are assessed within these parameters. The risk asset grading system allows
the Group to balance the level of risk on any transaction with the return generated by the transaction.
The Group operates a tiered system of discretions which ensures that all credit exposures are authorised at an appropriately
senior level. The Main Credit Committee, which is the most important forum for approving credit exposures, includes Executive
Directors and senior management. All credit Committees must come to a consensus before authorising a credit exposure and
each credit must be signed by a valid quorum. Additionally, a Non-executive Director must countersign all exposures over a
certain threshold.
Credit risk on all treasury clients and interbank facilities is regularly assessed. All such treasury lines must be formally reviewed
at least once a year.
All lending exposures are monitored on an ongoing basis with the senior executive responsible for Group Risk Management
regularly meeting each individual lender and examining their loan portfolio in detail. This ensures that potential problems are
identified promptly and appropriate remedial action taken.
An independent Group Risk Management function monitors credit risk on a portfolio-wide basis and, in particular, looks at the
entire Group’s exposure to geographic and industrial sectors. Sectoral guidelines are in place. Restrictions on sectoral exposures
are imposed when considered prudent.
Market risk
Market risk is the potential adverse change in Group income or the value of the Group’s net worth arising from movements in
interest rates, exchange rates or other market prices. Market risk arises from the structure of the balance sheet, the execution
of customer and interbank business and proprietary trading. The Group recognises that the effective management of market risk
is essential to the maintenance of stable earnings, the preservation of shareholder value and the achievement of the Group’s
corporate objectives.
The Group’s exposure to market risk is governed by policies prepared by Group Risk Management and Group Treasury and
approved by the Group Asset and Liability Committee. These policies set out the nature of risk which may be taken, the types
of financial instruments which may be used to increase or reduce risk and the way in which risk is controlled. In line with these
policies the Group Asset and Liability Committee approves all risk limits, which are also notified to the Board Risk and
Compliance Committee.
Exposure to market risk is permitted only in specifically designated business units and is centrally managed by Group Treasury in
Dublin. In other units market risk is eliminated by way of appropriate hedging arrangements with Group Treasury.
Market risk throughout the Group is measured and monitored by the Group Risk Management team, operating independently of
the risk-taking units.
Non-trading book
The Group’s non-trading book consists of personal and corporate deposits and the lending portfolio, as well as Group Treasury’s
interbank cash book and investment portfolio. In the non-trading areas interest rate risk arises primarily from the Group’s core
banking business. This exposure is centrally managed by Group Treasury in Dublin using interest rate swaps and other
conventional hedging instruments.
The Group’s non-trading book exposure is analysed by its maturity profile in each currency. Limits by currency and maturity are
formally approved by the Group Asset and Liability Committee and notified to the Board Risk and Compliance Committee.
These limits are then subject to independent monitoring by the Group Risk Management team.
Trading book – foreign exchange risk
Traded foreign exchange risk is confined to Group Treasury and arises from the Group’s lending and funding activities, corporate
and interbank foreign exchange business and from proprietary trading. It is monitored independently by Group Risk Management
by way of open position limits and stoploss limits on a daily, monthly and annual basis.
Trading book – interest rate risk
The interest rate trading book consists of Group Treasury’s mark to market interest rate book. The trading book consists of
interest rate swaps, currency swaps, interest rate futures, forward rate agreements and options. The risks arising from these
items are monitored through a combination of position and loss constraints. These limits are formally approved by the Group
Asset and Liability Committee, notified to the Board Risk and Compliance Committee and monitored daily by Group Risk
Management.
73
74
41. Risk management and control continued
Structural foreign exchange risk
Structural foreign exchange risk represents the currency risk arising from the translation of the Group’s net investments in
operations whose functional currency is not denominated in Euro. It is Group policy to eliminate this risk by matching all
material foreign currency investments in such operations with liabilities in the same currency. The Group’s structural foreign
exchange exposures at 30 September 2005 were as follows:
Functional currency
of operation
Sterling
US Dollars
Swiss Francs
Net investment
€m
Liabilities in
functional currency for
hedging purposes
€m
Remaining structural
currency exposure
€m
691.9
1.8
71.3
765.0
(691.9)
(1.8)
(71.3)
(765.0)
-
Liquidity risk
It is Group policy to ensure that resources are at all times available to meet the Group’s obligations arising from the withdrawal
of customer deposits or interbank lines, the drawdown of customer facilities and asset expansion. The development and
implementation of this policy is the responsibility of the Group Asset and Liability Committee. Group Treasury looks after the
day to day management of liquidity and this is monitored by Group Risk Management.
Limits on potential cash flow mismatches over defined time horizons are the principal means of liquidity control. The cash flow
mismatch methodology involves estimating the net volume of funds which must be refinanced in particular time periods, taking
account of the value of assets which could be liquidated during these periods. Limits are placed on the net mismatch in specified
time periods out to six months.
Operational risk
Operational risk represents the risk that failed or inadequate processes, people or systems, or exposure to external events
could result in unexpected losses. The risk is associated with human error, systems failure, and inadequate controls and
procedures.The Group operates such measures of risk identification, assessment, monitoring and management as are necessary
to ensure that operational risk management is consistent with the approach, aims and strategic goals of the Group and is
designed to safeguard the Group’s assets while allowing sufficient operational freedom to earn a satisfactory return to
shareholders.
The Group manages operational risk under an overall strategy which is implemented by accountable executives. Potential risk
exposures are assessed and appropriate controls are put in place. Recognising that operational risk cannot be entirely
eliminated, the Group implements risk mitigation controls including fraud prevention, contingency planning and incident
management.Where appropriate this strategy is further supported by risk transfer mechanisms such as insurance.
Derivatives
A derivative is an off-balance sheet agreement which defines certain financial rights and obligations which are contractually
linked to interest rates, exchange rates or other market prices. Derivatives are an efficient and cost effective means of managing
market risk and limiting counterparty exposures. As such they are an indispensable element of treasury management, both for
the Group and for many of its corporate customers. Further details are disclosed in note 43. The accounting policy on
derivatives is set out on page 45.
It is recognised that certain forms of derivatives can introduce risks which are difficult to measure and control. For this reason it
is Group policy to place clear boundaries on the nature and extent of its participation in derivatives markets and to apply the
industry regulatory standards to all aspects of its derivatives activities.
The Group’s derivatives activities are governed by policies approved by the Group Asset and Liability Committee. These policies
relate to the management of the various types of risk associated with derivatives, including market risk, liquidity risk and
credit risk.
75
76
42. Interest rate repricing
Interest rate repricing – Euro
Non-trading book
30 September 2005
Not more
than three
months
€m
Assets
Debt securities
Other assets
Total assets
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
Net amounts due from/(to)
Group units
Off-balance sheet items
Interest rate repricing gap
Cumulative interest rate
repricing gap
554
1,666
14,503
3,033
19,756
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
Total
€m
216
152
32
400
561
248
30
839
96
542
268
906
197
164
361
498
498
554
2,539
15,642
3,527
498
22,760
(20)
(585)
(176)
(17)
(798)
(108)
(108)
(474)
(1,681)
(2,155)
(4,860)
(11,447)
(4,683)
(474)
(3,195)
(24,659)
(1,657)
1,962
(63)
-
(4,729)
(10,260)
(4,225)
(900)
(20,114)
(22)
(260)
(224)
(591)
(1,097)
(89)
(234)
(58)
(6)
(387)
1,962
(1,333)
271
(120)
(817)
(216)
236
1,010
1,118
596
849
(546)
(310)
808
1,657
271
-
-
Interest rate repricing – Euro
Non-trading book
30 September 2004
Not more
than three
months
€m
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
Total
€m
Assets
355
1,786
Loans and advances to customers 9,691
Debt securities
1,566
Other assets
Total assets
13,398
290
122
167
579
82
95
59
236
77
708
160
945
307
84
391
1,122
1,122
355
2,235
10,923
2,036
1,122
16,671
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
(1,369)
(8,456)
(3,869)
(902)
(14,596)
(286)
(294)
(580)
(233)
(98)
(588)
(919)
(20)
(713)
(30)
(763)
(88)
(156)
(244)
(1,090)
(1,240)
(2,330)
(1,389)
(9,776)
(4,261)
(1,090)
(2,916)
(19,432)
Group units
16
(1,095)
(2,277)
2,126
(849)
1,276
(44)
186
(541)
147
1,894
2,223
161
219
527
(1,208)
2,406
355
-
repricing gap
(2,277)
(1,001)
(1,542)
681
1,208
-
-
77
78
42. Interest rate repricing continued
Interest rate repricing – Stg£
Non-trading book
30 September 2005
Not more
than three
months
€m
Assets
13
1,290
Loans and advances to customers 14,507
Securitised assets
276
(307)
(31)
Debt securities
322
Other assets
Total assets
16,101
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
344
466
1
1
431
1,242
148
3
3
154
305
440
41
41
7
488
211
1
1
12
224
802
802
13
1,634
15,772
322
(307)
15
926
802
19,162
Total
€m
(1,561)
(9,738)
(2,225)
(13,524)
(14)
(510)
(147)
(73)
(744)
(338)
(1)
(339)
(61)
(553)
(614)
(9)
(1,092)
(1,101)
(407)
(4)
(411)
(1,575)
(10,656)
(2,926)
(407)
(1,169)
(16,733)
Group units
(2,062)
(2,382)
(1,867)
51
549
169
135
554
428
1,241
364
391
(2,062)
(367)
-
repricing gap
(1,867)
(1,318)
(1,183)
(755)
(391)
-
-
Interest rate repricing – Stg£
Non-trading book
30 September 2004
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
Debt securities
Other assets
Total assets
8
1,469
9,578
544
(635)
(91)
130
11,094
116
698
6
6
12
832
117
110
10
10
237
570
97
97
6
673
256
9
9
7
272
562
562
8
1,702
11,212
666
(635)
31
155
562
13,670
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
(622)
(6,644)
(1,474)
(8,740)
(338)
(88)
(426)
(759)
(106)
(865)
(24)
(73)
(97)
(656)
(656)
(233)
(2)
(235)
(622)
(7,765)
(1,668)
(233)
(731)
(11,019)
Group units
(68)
(570)
1,716
(2,064)
(611)
(2,269)
20
292
(316)
49
(41)
584
35
307
(42)
327
(2,028)
(623)
-
repricing gap
1,716
(553)
(869)
(285)
(327)
-
-
Not more
than three
months
€m
Assets
Securitised assets
Total
€m
79
80
42. Interest rate repricing continued
Interest rate repricing – US$
Non-trading book
Assets
Debt securities
Other assets
Total assets
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
30 September 2005
Not more
than three
months
€m
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
Total
€m
1,015
2,204
305
3,524
255
137
9
401
159
11
22
192
197
168
34
399
117
16
133
75
75
1,626
2,637
386
75
4,724
(696)
(2,251)
(787)
(100)
(3,834)
(104)
(4)
(108)
(72)
(65)
(17)
(154)
(4)
(52)
(137)
(193)
(1)
(29)
(30)
(28)
(28)
(696)
(2,432)
(908)
(28)
(283)
(4,347)
Group units
39
(657)
(928)
4
297
43
81
221
427
(27)
76
47
repricing gap
(928)
(631)
(550)
(123)
(47)
-
39
(416)
-
-
Interest rate repricing – US$
Non-trading book
30 September 2004
Not more
than three
months
€m
Over three
months but
not more
than six
months
€m
Over six
months but
not more
than one
year
€m
Over one
year but
not more
than five
years
€m
Over
five
years
€m
Non
interest
bearing
€m
Total
€m
Assets
Debt securities
Other assets
Total assets
876
1,099
214
2,189
212
63
275
97
51
18
166
126
232
64
422
116
10
126
87
87
1,311
1,561
306
87
3,265
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Total liabilities
(444)
(1,602)
(223)
(98)
(2,367)
(24)
(15)
(41)
(20)
(100)
(14)
(96)
(80)
(190)
(2)
(28)
(30)
-
(33)
(33)
(468)
(1,633)
(360)
(33)
(226)
(2,720)
Group units
102
(679)
(755)
(115)
221
281
21
348
345
(193)
31
230
(186)
(95)
(155)
54
(371)
(174)
-
repricing gap
(755)
(474)
(129)
101
(54)
-
-
81
82
43. Derivative transactions
In the normal course of business the Group is party to various types of financial instruments used to generate incremental
income, to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest and exchange
rates and equity prices. These financial instruments involve to varying degrees exposure to loss in the event of a default by a
counterparty (‘credit risk’) and exposure to future changes in interest and exchange rates and equity prices (‘market risk’).
Details of the objectives, policies and strategies arising from the Group’s use of financial instruments, including derivative
financial instruments, are presented in Note 41 on risk management and control.
In respect of interest rate, exchange rate and equity contracts, underlying principal amount is used to express the volume of
these transactions, but the amounts potentially subject to credit risk are much smaller. Replacement cost provides a better
indication of the credit risk exposures facing a bank. Replacement cost is the gross cost of replacing all contracts with external
parties that have a positive fair value, without giving effect to offsetting positions with the same counterparty. The underlying
principal amount and replacement cost, by residual maturity, of the Group’s over the counter and other non-exchange traded
derivatives at 30 September 2005 were as follows:
2005
Underlying principal amount
Exchange rate contracts
Interest rate contracts
Equity contracts
Replacement cost
Equity contracts
2004
Within
one year
€m
One to five
years
€m
Over five
years
€m
Total
€m
Total
€m
17,489.8
12,316.5
19.9
1,169.1
31,313.0
89.4
4.0
14,842.1
136.4
18,662.9
58,471.6
245.7
27,724.3
48,884.7
136.6
86.7
66.9
5.6
5.6
253.4
23.0
293.1
12.3
92.3
613.4
40.9
148.7
224.1
35.8
The replacement cost of the Group’s over the counter and other non-exchange traded derivatives as at 30 September 2005
analysed into financial and non-financial counterparties for exchange rate, interest rate and equity contracts were as follows:
2005
Equity contracts
2004
Financial
€m
Nonfinancial
€m
Total
€m
Total
€m
69.6
402.0
40.9
512.5
22.7
211.4
234.1
92.3
613.4
40.9
746.6
148.7
224.1
35.8
408.6
The Group maintains trading positions in derivatives. Most of these positions are as a result of activity generated by corporate
customers while others represent trading decisions of the Group’s derivative and foreign exchange traders with a view to
generating incremental income. The following table represents the underlying principal amount and fair value by class of
instrument utilised in the trading activities of the Group at 30 September 2005.
30 September 2005
Trading book
Interest rate swaps
in a favourable position
in an unfavourable position
Forward rate agreements
Interest rate futures
Interest rate caps, floors and options held
Interest rate caps, floors and options written
Exchange traded options held
Exchange traded options written
Foreign exchange contracts
Forward foreign exchange
Foreign exchange options
Currency swaps
Underlying
principal
amount
€m
Fair
value
€m
38,962.3
430.6
(417.7)
987.9
0.2
(0.2)
4,099.8
4,147.5
18.7
4,344.8
(18.2)
1,553.1
1,148.4
10,921.6
75.5
(68.3)
3,623.8
23.0
(22.1)
4.0
(0.3)
83
84
43. Derivative transactions continued
The following table represents the underlying principal amount, weighted average maturity and fair value by class of
instrument utilised in the trading activities of the Group at 30 September 2005.
Trading book
Interest rate swaps-receive fixed
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
Interest rate swaps-pay fixed
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
Interest rate swaps-pay and receive floating
1 year or less
1 to 5 years
5 to 10 years
Forward rate agreements-loans
1 year or less
1 to 5 years
Forward rate agreements-deposits
1 year or less
1 to 5 years
1 year or less
1 to 5 years
5 to 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 year or less
1 year or less
1 to 5 years
1 year or less
1 to 5 years
Currency swaps
5 to 10 years
Underlying
principal
amount
€m
Weighted
average
maturity
in years
Fair
value
€m
3,110.5
10,358.1
4,270.4
682.8
0.5
2.9
7.6
16.9
19.9
149.1
184.2
25.7
5,428.5
9,743.0
4,573.1
693.3
0.4
2.9
7.6
16.6
(57.8)
(133.2)
(156.8)
(17.6)
29.1
73.5
-
0.8
1.4
-
(0.2)
(0.4)
-
294.6
100.0
0.6
1.2
(0.2)
-
393.3
200.0
0.4
1.2
0.2
2,606.4
1,493.4
-
0.7
1.5
-
-
529.6
3,313.1
300.5
4.3
0.5
2.9
6.6
13.8
1.1
13.5
3.9
0.2
606.1
3,427.1
307.3
4.3
0.5
2.8
6.5
13.8
(1.1)
(13.1)
(3.9)
(0.1)
1,553.1
0.3
-
1,148.4
0.3
-
10,194.0
727.6
0.2
1.4
6.5
0.7
3,485.0
138.8
0.3
1.5
0.8
0.1
4.0
5.7
(0.3)
The following table represents the underlying principal amount and fair value by class of instrument utilised in the trading
activities of the Group at 30 September 2004.
30 September 2004
Trading book
Interest rate swaps
Forward rate agreements
Currency swaps
Underlying
principal
amount
€m
Fair
value
€m
25,874.3
240.8
(241.1)
2,901.6
1.7
(1.5)
5,207.5
2,582.8
13.8
2,786.6
(14.7)
1,254.9
1,133.0
17,187.3
205.2
(187.6)
4,131.4
23.7
(11.1)
2.1
(0.3)
85
86
The following table represents the underlying principal amount, weighted average maturity and fair value by class of instrument
Underlying
Weighted
utilised in the trading activities of the Group at 30 September 2004.
Trading book
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
5 to 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 year or less
1 year or less
1 to 5 years
1 year or less
1 to 5 years
Currency swaps
5 to 10 years
principal
amount
€m
average
maturity
in years
Fair
value
€m
2,851.3
6,414.5
3,097.7
273.0
0.4
2.7
7.5
11.7
24.4
72.9
78.3
9.4
3,386.6
6,420.8
3,059.2
230.0
0.4
2.6
7.5
11.5
(30.8)
(72.6)
(72.7)
(7.5)
27.8
88.4
25.0
0.8
2.2
8.0
(0.8)
(0.3)
(0.6)
1,161.5
406.0
0.7
1.2
(0.5)
1.2
908.2
425.9
0.7
1.2
0.4
(0.9)
2,773.1
2,429.4
5.0
0.7
1.6
7.3
-
43.7
2,151.9
367.2
20.0
0.4
3.3
7.5
10.5
8.9
4.9
-
87.9
2,274.8
403.9
20.0
0.6
3.2
7.6
10.5
(9.1)
(5.6)
-
1,254.9
0.4
-
1,133.0
0.4
-
16,089.9
1,097.4
0.3
1.5
18.5
(0.9)
4,124.8
6.6
0.4
1.1
12.6
-
2.1
6.7
(0.3)
Non-trading derivatives
The operations of the Group are exposed to the risk of interest rate fluctuations to the extent that assets and liabilities mature
or reprice at different times or in differing amounts. Derivatives allow the Group to modify the repricing or maturity
characteristics of assets and liabilities in a cost efficient manner. This flexibility helps the Group to achieve liquidity and risk
management objectives.
Derivatives fluctuate in value as interest or exchange rates rise or fall just as on-balance sheet assets and liabilities fluctuate in
value. If the derivatives are purchased or sold as hedges of balance sheet items, the appreciation or depreciation of the
derivatives as interest or exchange rates change, will generally be offset by the unrealised appreciation or depreciation of the
hedged items. To achieve its risk management objectives the Group uses a combination of derivative financial instruments,
particularly interest rate and currency swaps, futures and options, as well as other contracts.
Unrecognised gains and losses on hedges
Gains and losses on instruments used for hedging are recognised in line with the underlying items which are being hedged.
Based on market rates prevailing at the close of business on 30 September 2005, the unrecognised net losses on instruments
used for hedging as at 30 September 2005 were €40.5m (2004: €10.9m). The net loss expected to be recognised in the year to
30 September 2006 is €17.5m (2004: €0.7m) and thereafter a net loss of €23.0m (2004: €10.2m) is expected.
The net loss recognised in the year to 30 September 2005 in respect of previous years was €0.7m (2004: €4.2m) and the net
loss arising in the year to 30 September 2005 which was not recognised in that year was €30.3m (2004: €28.3m).
Non-trading derivative deferred balances
Deferred balances relating to settled derivative transactions are released to the profit and loss account in the same periods as
the income and expense flows from the underlying transactions. The table below summarises the deferred gains and losses at
30 September 2005.
Deferred
gains
€m
As at I October 2004
Gains and losses arising in previous years
that were recognised this year
Gains and losses arising before I October 2004 that were
not recognised in the year ended 30 September 2005
Gains and losses arising in the year ended
30 September 2005 that were not recognised in that year
As at 30 September 2005
Of which:
Gains and losses expected to be recognised in
the year ended 30 September 2006
Deferred
losses
€m
Total net
deferred
gains/(losses)
€m
16.2
(17.8)
(1.6)
3.9
(4.7)
(0.8)
12.3
(13.1)
(0.8)
23.4
35.7
(24.9)
(38.0)
(1.5)
(2.3)
10.1
(10.2)
(0.1)
Anticipatory hedges
The Group entered into forward foreign exchange contracts to partly hedge against the exchange risk arising on the translation
into Euro of future net profits expected to be earned from activities conducted in foreign currencies. There were unrecognised
losses of €13.3m (2004: €5.6m gains) based on the fair value of these contracts at the year end.
87
88
The following table sets out details of all derivatives used in the Group’s non-trading activities at 30 September 2005.
Non-trading book
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
Equity contracts
Equity index-linked contracts
1 year or less
1 to 5 years
5 to 10 years
Underlying
principal
amount
€m
Weighted
average
maturity
in years
Fair
value
€m
1,846.3
2,726.7
1,286.3
837.9
0.3
2.3
7.7
12.8
33.6
44.0
41.1
18.6
74.2
359.1
246.6
93.1
0.5
2.4
6.8
17.4
(2.5)
(8.8)
(25.0)
(18.6)
4.3
848.1
20.0
600.0
0.1
2.1
8.0
29.0
(11.2)
(0.1)
(5.8)
-
-
-
-
-
-
164.3
322.2
600.0
2.0
6.2
29.0
(1.8)
(23.3)
3,810.8
302.7
0.1
1.6
5.7
(4.2)
19.9
89.4
136.4
1.0
3.6
5.7
5.6
23.0
8.2
The following table sets out details of all derivatives used in the Group’s non-trading activities at 30 September 2004.
Non-trading book
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
1 year or less
1 to 5 years
5 to 10 years
Over 10 years
1 year or less
1 to 5 years
Equity contracts
Equity index-linked contracts
1 year or less
1 to 5 years
5 to 10 years
Underlying
principal
amount
€m
Weighted
average
maturity
in years
Fair
value
€m
2,990.2
2,628.6
724.7
406.6
0.4
2.1
6.6
21.9
20.5
62.4
42.1
13.8
1,745.6
1,409.0
674.8
105.1
0.2
2.7
6.4
16.8
(19.9)
(36.7)
(56.3)
(14.8)
65.1
119.3
603.6
600.0
0.7
4.2
10.0
30.0
(2.5)
0.7
7.3
8.3
40.8
1.3
0.1
370.5
690.8
0.9
1.1
(0.9)
131.0
673.7
760.0
3.7
6.7
28.9
(1.3)
(22.0)
5,753.5
650.0
0.4
1.6
18.0
7.9
27.1
76.6
32.9
0.9
3.6
6.0
12.5
19.1
4.2
89
90
44. Fair value of financial assets and financial liabilities
The Group has estimated fair value wherever possible using market prices. In certain cases, however, including advances to
customers, there are no ready markets. Accordingly, the fair value has been calculated by discounting expected future cash flows
using market rates applicable at the year end. This method is based upon market conditions at that date which may not
necessarily be indicative of any subsequent fair value. As a result, readers of these financial statements are advised to use caution
when using this data to evaluate the Group’s financial position.
The concept of fair value assumes realisation of financial instruments by way of a sale. However, in many cases, particularly in
respect of lending to customers, the Group intends to realise assets through collection over time. As such, the fair value
calculated does not represent the value of the Group as a going concern at the year end.
The following table represents the carrying amount and the fair value of the Group’s financial assets and liabilities at the year end.
2005
Non-trading financial instruments
Financial assets
Securitised assets
Carrying
amount
€m
2004
Fair
value
€m
Carrying
amount
€m
Fair
value
€m
Debt securities
Equity shares
566.7
6,253.6
34,099.0
322.0
(307.0)
15.0
4,933.1
46.7
566.7
6,235.7
34,222.3
323.1
(308.3)
14.8
4,962.3
46.7
363.2
5,847.4
23,723.8
666.0
(634.8)
31.2
2,534.4
26.1
363.2
5,837.2
23,776.2
673.1
(635.3)
37.8
2,568.2
26.1
Financial liabilities
Deposits by banks
Customer accounts
Non-equity minority interests
Preference shares
7,150.7
25,159.7
9,405.1
1,181.7
661.1
688.9
431.6
7,148.3
25,219.6
9,400.7
1,190.1
801.0
635.2
445.2
2,605.9
19,546.0
6,944.5
1,133.3
656.2
841.6
-
2,606.3
19,583.4
6,944.1
1,151.3
772.4
864.3
-
13.4
7.8
13.4
7.8
(1.0)
29.9
(1.0)
29.9
Derivative financial instruments held for trading purposes
Derivative financial instruments utilised for non-trading activities
Equity contracts
40.2
1.5
36.8
0.8
25.9
35.8
The fair value of loans and advances to customers and securitised assets are calculated by discounting expected future cash flows
(excluding margin for credit risk) using market rates applicable at the year end. The fair value applied to the debt securities assets
and the subordinated liabilities, perpetual capital securities, non-equity minority interests and preference shares are the quoted
market values for these items at the year end. The fair value of the other financial assets and liabilities are calculated by discounting
expected future cash flows using market rates applicable at the year end. The fair value of customer accounts with equity trackers
includes the fair value of associated index-linked equity contracts. The derivatives are marked to market at the year end.
45. Currency information
The Group
The Company
2005
€m
2004
€m
2005
€m
2004
€m
Denominated in Euro
Denominated in other currencies
Total assets
22,760.2
25,503.4
48,263.6
16,671.0
17,668.8
34,339.8
21,955.0
23,096.5
45,051.5
15,303.8
16,149.7
31,453.5
Denominated in Euro
Denominated in other currencies
24,659.0
23,604.6
48,263.6
19,432.0
14,907.8
34,339.8
23,617.0
21,434.5
45,051.5
17,464.8
13,988.7
31,453.5
Due to off-balance sheet items the above analysis should not be considered to demonstrate foreign exchange risk exposures.
46. Report on Directors’ remuneration and interests
This report on Directors’ remuneration and interests has been prepared by the Remuneration Committee on behalf of the Board
of Directors in accordance with the requirements of the Irish Stock Exchange’s Combined Code on Corporate Governance.
Remuneration Committee
All members of the Remuneration Committee are Non-executive Directors. Its current members are Michael Jacob (Chairman),
Sean FitzPatrick and Ned Sullivan. This Committee is responsible for the formulation of the Group’s policy on remuneration in
relation to all Executive Directors and other senior executives. The remuneration of the Executive Directors is determined by
the Board of Directors on the recommendations of the Remuneration Committee. The recommendations of the Remuneration
Committee are considered and approved by the Board of Directors.
Remuneration policy
The remuneration policy adopted by the Group is to reward its Executive Directors competitively having regard to comparable
companies and the need to ensure that they are properly rewarded and motivated to perform in the best interests of
shareholders. The policy is based heavily on rewarding performance. The Group Chief Executive is fully consulted about
remuneration proposals in relation to other Directors. From time to time the Remuneration Committee takes advice from
external pay consultants. Included in the remuneration package for Executive Directors are basic salary, a performance related
bonus and an ability to participate in employee share incentive plans. They also participate in either a personal Revenue
approved defined contribution pension plan or the Group defined benefit pension scheme.
Remuneration for Non-executive Directors is a matter for the Chairman in consultation with the Group Chief Executive and the
Group Company Secretary. Neither the Chairman nor any Director is involved in decisions relating to his or her remuneration.
Performance bonus
The level of performance bonus is determined for each individual Executive Director. The level earned in any one year is paid
out of a defined pool and depends on the Remuneration Committee’s assessment of each individual’s performance against
predetermined targets for that year and also an assessment of the overall performance of the Group.
The performance bonus is split into two components. Part of the performance bonus is paid annually and is determined by
reference to the economic profit generated by the Group. The other element of the performance bonus is calculated by
reference to total shareholder return and compared to a peer group and the payment of this bonus is deferred to the earlier of
three years or the individual’s retirement date. Its cost is accrued immediately in the accounts.
91
92
46. Report on Directors’ remuneration and interests continued
Share incentive plans
It is Company policy to motivate its Executive Directors by granting them share options. These options have been granted
under the terms of the employee share incentive plans approved by shareholders. Further details in relation to these plans are
given in Note 31 to the financial statements. Non-executive Directors are not eligible to participate in the employee share
incentive plans.
Loans to Directors
Loans to Directors are made in the ordinary course of business on commercial terms in accordance with established policy. At
30 September 2005 the aggregate amount outstanding in loans to persons who at any time during the year were Directors was
€21.7m (2004: €10.2m) in respect of thirteen (2004: twelve) individuals.
Contracts
Other than in the normal course of business, there have not been any contracts or arrangements with the Company or any
subsidiary undertaking during the year in which a Director of the Company was materially interested and which were significant
in relation to the Group’s business. There are no service contracts in existence for any Director with the Company or any of its
subsidiary undertakings.
Pensions
Executive Directors participate in either a defined contribution scheme or the Group defined benefit scheme. All pension
benefits are determined solely in relation to basic salary. Fees paid to Non-executive Directors are not pensionable.
Directors’ remuneration – 2005
Salary
€000
Executive Directors
David Drumm
Sean FitzPatrick
(to 28 January 2005)
Tom Browne
William McAteer
Tiarnan O Mahoney (1)
John Rowan
Non-executive Directors
Sean FitzPatrick
(from 29 January 2005)
Peter Murray (2)
Lar Bradshaw (3)
Fintan Drury
Michael Jacob
Patricia Jamal
Gary McGann
Anton Stanzel (4)
Ned Sullivan
Patrick Wright
Former Directors
Total
Annual
Deferred
performance performance
Fees
bonus
bonus
€000
€000
€000
Pension
Benefits contribution
€000
€000
Former
Directors
€000
Total
€000
663
-
900
600
37
154
-
2,354
320
397
418
115
432
-
533
600
600
1,000
400
400
-
28
49
43
10
37
131
79
83
47
156
-
1,012
1,525
1,544
172
1,625
-
167
72
63
65
94
65
65
33
75
65
-
-
-
-
-
167
72
63
65
94
65
65
33
75
65
2,345
764
3,633
1,400
204
650
48
48
48
9,044
(1) Retired on 2 December 2004. In addition,Tiarnan O Mahoney received €3,650,000 on his retirement and €250,000 was
contributed to his personal pension scheme, in recognition of his substantial contribution to the Group.
(2) Retired as Chairman on 28 January 2005.
(3) Co-opted on 12 October 2004.
(4) Retired on 28 January 2005.
93
94
Directors’ remuneration – 2004
Executive Directors
Sean FitzPatrick
Tom Browne (1)
David Drumm (2)
Peter Killen (3)
William McAteer
Tiarnan O Mahoney
John Rowan
Salary
€000
Fees
€000
Annual
performance
bonus
€000
775
218
6
123
392
458
412
-
1,600
348
7
500
1,000
500
278
4
400
400
52
25
1
14
42
42
47
294
44
1
50
78
186
168
-
2,721
913
19
187
1,412
1,686
1,527
-
217
63
85
63
43
73
74
63
-
-
-
-
-
217
63
85
63
43
73
74
63
2,384
681
3,955
1,082
223
821
15
15
15
9,161
Non-executive Directors
Peter Murray
Fintan Drury
Michael Jacob
Patricia Jamal
Gary McGann (1)
Anton Stanzel
Ned Sullivan
Patrick Wright
Former Directors
Total
(1) Co-opted on 20 January 2004
(2) Co-opted on 22 September 2004
(3) Retired on 10 February 2004
Deferred
performance
bonus
€000
Benefits
€000
Pension
contribution
€000
Former
Directors
€000
Total
€000
Directors’ pension benefits
The Group makes payments to defined contribution pension plans for Tom Browne and William McAteer. All of the other
Executive Directors are members of the Group defined benefit pension scheme. Details are as follows:
Defined
Contribution
Defined Benefit
Sean FitzPatrick
David Drumm
Tom Browne
William McAteer
Tiarnan O Mahoney
John Rowan
Increase in
accrued annual
pension benefit
during year
€000
Total accrued
pension benefit
at year end
€000
Transfer value
of increase in
accrued benefit
€000
Group
contribution
€000
186
11
197
533
231
308
175
1,247
2,055
129
2,184
79
83
162
The increase in accrued annual pension benefit during the year excludes any increase for inflation. The total accrued pension
benefit at the year end is that which would be paid annually on normal retirement date, based on service to the year end.The
transfer value of the increase in accrued benefit has been calculated by an independent actuary.
Sean FitzPatrick retired as Chief Executive on 28 January 2005 with an entitlement to an annual pension of €0.533m.The
transfer value paid to his personal pension fund to extinguish his accrued pension benefit was €2.562m greater than the
actuarially calculated minimum transfer value of his accrued pension benefit at 30 September 2004.The transfer value paid was
approved by the pension fund trustee as being in the best interests of the pension fund as it represented a considerable cash
saving when compared with the potential cost of purchasing an annuity to honour the fund’s obligations.
Fees paid to Non-executive Directors are not pensionable.
95
96
Directors’ and Company Secretary’s interests
The beneficial interests of the current Directors and Secretary and of their spouses and minor children in the shares of the
Company are included in the following table:
Interests in ordinary shares
Directors
Sean FitzPatrick
David Drumm
Lar Bradshaw
Tom Browne
Fintan Drury
Michael Jacob
Patricia Jamal
William McAteer
Gary McGann
John Rowan
Ned Sullivan
Patrick Wright
Secretary
Bernard Daly
30 September 2005
Ordinary
Share
Shares
Options
30 September 2004
Ordinary
Share
Shares
Options
4,446,132
177,989
50,331
892,892
52,816
746,766
30,471
2,388,376
100,630
698,851
422,607
381,570
1,527,596
1,608,330
1,477,696
1,491,058
-
3,775,852
75,214
*891,280
52,250
746,766
30,144
2,386,786
50,242
696,168
418,066
454,438
625,000
527,596
*1,608,330
1,477,696
1,491,058
-
31,830
308,100
62,186
308,100
* or date of appointment if later
There have been no changes in the Directors’ and Secretary’s shareholdings between 30 September 2005 and 22 November
2005. The Directors and Secretary and their spouses and minor children have no other interests in the shares of the Company
or its Group undertakings as at 30 September 2005. The comparative amounts have been adjusted to reflect the two-for-one
share split on 22 April 2005.
Share options granted to Directors
Options to subscribe for ordinary shares in the Company granted to and exercised by Directors during the year to
30 September 2005 are included in the following table:
Options at
1 October
2004
Number
Sean FitzPatrick 625,000
David Drumm
Tom Browne
Options granted
since
1 October 2004
Number
Price €
Options exercised
since
1 October 2004
Number
Price €
9.36
Options at 30 September 2005
Weighted
Date from
average
which
Expiry Exercise exercise
Number exercisable
date price € price €
-
625,000
124,900
200,000
200,000
- 500,000
- 500,000
2,696
527,596 1,000,000
-
124,900 #Sept 05 Sept 10
200,000 Sept 06 Sept 13
200,000 #Sept 08 Sept 13
500,000 Nov 07 Nov 14
500,000 #Nov 09 Nov 14
2,696 *Feb 07 Aug 07
1,527,596
1.18
4.68
4.68
7.97
7.97
4.51
7.97
7.97
1.18
Market
price at
exercise
date
Price €
-
6.55
300,000
300,000
500,000
500,000
8,330
1,608,330
-
-
300,000
Feb 05 Feb 12
300,000 #Feb 07 Feb 12
500,000 Sept 06 Sept 13
500,000 #Sept 08 Sept 13
8,330 *July 07 Jan 08
1,608,330
2.25
2.25
4.68
4.68
2.54
William McAteer 475,000
500,000
500,000
2,696
1,477,696
-
-
475,000 #Sept 05 Sept 10
500,000 Dec 06 Dec 13
500,000 #Dec 08 Dec 13
2,696 *Feb 07 Aug 07
1,477,696
1.18
6.30
6.30
4.51
John Rowan
-
-
475,000 #Sept 05 Sept 10
500,000 Dec 06 Dec 13
500,000 #Dec 08 Dec 13
16,058 *Sept 06 Mar 07
1,491,058
1.18
6.30
6.30
1.54
475,000
500,000
500,000
16,058
1,491,058
3.76
4.65
4.62
# Second tier options
* SAYE scheme options
Details of options outstanding at 30 September 2005 are shown in the Register of Directors’ and Secretary’s Interests, which
may be inspected at the Company’s registered office. The closing market price of the Company’s ordinary shares at
30 September 2005 was €11.33 (2004: €7.38) and the range during the year to 30 September 2005 was from €7.38 to €11.45.
All the figures have been adjusted to reflect the two-for-one share split on 22 April 2005.
97
98
47. Comparative figures
The comparative figures have been reclassified where necessary on a basis consistent with the current year.
48. International Financial Reporting Standards
All listed groups in the European Union (‘EU’) will be required to prepare their financial statements using International Financial
Reporting Standards (‘IFRS’) as endorsed by the EU for accounting periods commencing on or after 1 January 2005.
The Group’s first results prepared under IFRS will be published in its interim report for the six months to 31 March 2006. It is
intended that audited comparative data for 2005 will be filed with the Irish and London Stock Exchanges in March 2006.
In certain respects these new standards are significantly different from existing accounting standards that are generally accepted
in Ireland. The major differences identified between accounting policies currently adopted by the Group as set out in Note 1
and those expected under IFRS are set out below.
Under IFRS impairment provisions can only be made for losses that have already been incurred at the balance sheet date.
Impairment is based on objective evidence and the impairment provision is the difference between the present value of future
cash flows discounted at the asset’s original effective interest rate and the book value of the asset. The charge in the income
statement for impairment losses under IFRS is expected to be more cyclical in the future as provisions will reflect economic
conditions at each reporting date.
Derivatives and hedging
Under IFRS all derivatives are measured at fair value with changes in their value either going through the income statement or
being dealt with through reserves. Hedge accounting is permitted but the conditions that must be complied with under IFRS are
onerous compared with existing requirements making IFRS compliant hedge accounting more difficult to achieve.
The hedging strategies used by the Group have been reviewed with a view to designing and implementing IFRS compliant hedge
accounting strategies where practical. However, the primary objective is to continue to provide economic hedges against the
Group’s market risk exposures.
Effective interest rates and lending arrangement fees
IFRS requires most lending arrangement fees to be recognised as interest income over the expected life of the relevant loan
using the effective interest rate. The effective interest rate is the rate that discounts all estimated cash flows on the loan over its
expected life to its net carrying amount.
Debt securities
The majority of debt securities held for investment purposes will be designated as ‘available for sale’ under IFRS.‘Available for
sale’ assets are measured at fair value under IFRS with changes in fair value (unrealised gains and losses) being recorded as
movements in reserves.
Life assurance presentation
IFRS requires the line by line consolidation of the results and balance sheet of the life assurance subsidiary including those assets
and liabilities attributable to policyholders.
Securitised assets
IFRS does not permit the linked presentation treatment of the Group’s securitised assets. Instead the relevant assets and
liabilities will be included on a gross basis in the balance sheet.
Equity and liabilities presentation
Under IFRS capital instruments must be classified between equity and liabilities in the consolidated accounts in accordance with
the substance of the contractual arrangements.
Offset
Netting of derivative exposures by counterparty is not permitted by IFRS unless active netting is taking place. This means that
for certain counterparties assets and liabilities arising on foreign exchange and interest rate contracts will have to be grossed up
on both sides of the balance sheet under IFRS.
Goodwill
Goodwill arising on acquisitions since October 1998 is currently amortised to the profit and loss account over its estimated
useful economic life. Under IFRS goodwill will no longer be amortised but will be tested annually for impairment and written
down if necessary.
Pensions
Under IFRS defined benefit pension scheme liabilities are discounted to their present value using the market rate on high quality
corporate bonds. Any difference between pension scheme liabilities and the fair value of pension scheme assets is recorded on
the balance sheet. IFRS permits actuarial gains and losses to be recognised immediately through the statement of total
recognised income and expense.
Dividends
IFRS requires proposed dividends to be recorded in the accounting period in which they are authorised and approved rather
than in the period to which they relate.
Computer software
Currently external costs incurred on computer software development are capitalised within tangible fixed assets and after the
software has been brought into use it is depreciated over its estimated useful life of four years. Under IFRS computer software
has to be reclassified as an intangible asset. Both directly attributable internal costs and external costs incurred on computer
software development must be capitalised as intangible assets and amortised over its expected useful life.
Share options
Under IFRS the fair value of share options granted to employees will have to be expensed in the income statement over the
vesting period of the options. This new requirement will apply to all share options granted after 7 November 2002 that have not
vested before 1 January 2005.
The above analysis relates only to the major differences identified in accounting policies between those currently applied by the
Group and those expected under IFRS for the year ending 30 September 2006. The IFRS in effect for that year may differ due to
decisions that could be taken by the EU on endorsement, interpretative guidance that may be issued by the International
Accounting Standards Board and the International Financial Reporting Interpretations Committee and future changes in
company legislation.
The Group continues to evaluate the balance sheet and income statement effects of adopting IFRS and therefore the audit of
the impact of transition to IFRS has not been completed at the date of this report. Until this work has been completed, it is
possible that further IFRS transition issues not discussed above will be identified. Interim guidance on the expected impact of
IFRS transition was given in June 2005 and is available on the Company’s website at www.angloirishbank.com.
49. Approval of financial statements
The Group financial statements were approved by the Board of Directors on 22 November 2005.
99
100
Consolidated profit and loss account
USDm
GBPm
132.7
2,368.2
(1,633.9)
867.0
75.2
1,341.1
(925.3)
491.0
171.5
3,060.2
(2,111.3)
1,120.4
290.8
(26.9)
19.3
26.3
1,176.5
164.7
(15.2)
10.9
14.9
666.3
375.8
(34.7)
24.9
33.9
1,520.3
297.7
18.3
35.4
351.4
168.6
10.4
20.0
199.0
384.7
23.7
45.7
454.1
825.1
467.3
1,066.2
(168.8)
656.3
(95.6)
371.7
(218.1)
848.1
(55.1)
(9.9)
591.3
(31.3)
(5.6)
334.8
(71.3)
(12.8)
764.0
(110.1)
481.2
(62.3)
272.5
(142.2)
621.8
Basic earnings per €0.16 ordinary share
88.16c
49.93p
Chf 1.14
Diluted earnings per €0.16 ordinary share
86.39c
48.92p
Chf 1.12
Dividends per €0.16 ordinary share
16.30c
9.23p
Chf 0.21
Interest receivable and similar income
Interest receivable and similar income arising from
Debt securities and other fixed income securities
Other interest receivable and similar income
Interest payable and similar charges
Net interest income
Other income
Fees and commissions payable
Dealing profits
Total operating income
Operating expenses
Administrative expenses
Group profit on ordinary activities before taxation
Taxation on profit on ordinary activities
Group profit on ordinary activities after taxation
Minority interests
Dividends on preference shares
Dividends on €0.16 ordinary shares
Group profit retained for year
Exchange rates used at 30 September 2005
One Euro = USD 1.2042 / GBP 0.68195 / CHF 1.5561
CHFm
Consolidated balance sheet
A S AT 3 0 S E P T E M B E R 2 0 0 5
Assets
Securitised assets
Debt securities
Equity shares
Other assets
Life assurance assets attributable to policyholders
Total assets
Liabilities
Deposits by banks
Customer accounts
Other liabilities
Capital resources
Equity and non-equity minority interests
Other reserves
Life assurance liabilities attributable to policyholders
Exchange rates used at 30 September 2005
One Euro = USD 1.2042 / GBP 0.68195 / CHF 1.5561
USDm
GBPm
CHFm
682
7,531
41,062
388
(370)
18
5,941
56
79
107
935
571
56,982
1,137
58,119
386
4,264
23,254
219
(209)
10
3,364
32
45
61
530
323
32,269
644
32,913
882
9,731
53,062
501
(478)
23
7,676
73
102
138
1,209
738
73,634
1,469
75,103
8,611
30,297
11,326
73
522
551
6
51,386
4,876
17,157
6,414
42
295
312
4
29,100
11,127
39,151
14,635
95
674
712
8
66,402
1,423
796
834
3,053
131
723
3
1,686
2,543
5,596
56,982
1,137
58,119
806
451
472
1,729
74
409
2
955
1,440
3,169
32,269
644
32,913
1,839
1,029
1,077
3,945
169
934
4
2,180
3,287
7,232
73,634
1,469
75,103
101
102
Shareholder information
Substantial shareholdings
As at 22 November 2005 the following interests in the ordinary share capital had been notified to the Company.
UBS AG
Bank of Ireland Nominees Limited
Number
of shares
% of issued ordinary
share capital
38,990,286
24,539,364
5.7
3.6
The above shareholders have informed the Company that their holdings are not beneficially owned but are held on behalf of a
range of clients none of whom, so far as the Directors are aware, hold more than 3% of the issued ordinary share capital.
Size analysis of shareholdings at 30 September 2005
Shareholdings
1 - 5,000
5,001 - 10,000
10,001 - 25,000
25,001 - 50,000
50,001 - 100,000
100,001 - 500,000
Over 500,000
Shares
Number
%
Number
%
11,414
1,627
1,309
471
232
232
146
15,431
74.0
10.5
8.5
3.1
1.5
1.5
0.9
100.0
15,717,825
11,592,807
20,740,561
16,588,338
16,458,224
49,016,797
548,015,996
678,130,548
2.3
1.7
3.1
2.5
2.4
7.2
80.8
100.0
Financial calendar
Publication of results
Half year to 31 March 2005
4 May 2005
Dividend (ordinary shares)
Interim dividend paid
18 July 2005
Publication of results
Year to 30 September 2005
23 November 2005
Share transfer books closed
2 December 2005
Accounts posted to shareholders
19 December 2005
Annual General Meeting
27 January 2006
Dividend (ordinary shares)
Proposed final dividend payment
13 February 2006
103
Anglo Irish Bank
locations
104
Anglo Irish Bank locations
Dublin
Waterford
Isle of Man
Head Office
Stephen Court
18/21 St. Stephen’s Green
Dublin 2
Tel: +353 1 616 2000
Fax: +353 1 616 2411
Anglo Irish Bank House
Maritana Gate
Canada Street
Waterford
Tel: +353 51 849 300
Fax: +353 51 849 398
Jubilee Buildings
Victoria Street
Douglas
Isle of Man IM1 2SH
Tel: +44 1624 698 000
Fax: +44 1624 698 001
London
Geneva
10 Old Jewry
London EC2R 8DN
Tel: +44 207 710 7000
Fax: +44 207 710 7050
7 Rue des Alpes
P.O. Box 1380
1211 Geneva 1
Tel: +41 22 716 3636
Fax: +41 22 716 3618
Registrar Correspondence
Computershare Investor
Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Tel: +353 1 216 3100
Freephone: 1800 225 125
(Shareholder enquiries)
www.computershare.com
Banbury
Town Centre House
Southam Road
Banbury
Oxon OX16 2EN
Tel: +44 1295 755 500
Fax: +44 1295 755 510
Private Banking
61 Fitzwilliam Square
Dublin 2
Tel: +353 1 631 0000
Fax: +353 1 631 0098
Prague
Wenceslas Square 19
11000 Prague 1
Tel: +420 234 656 127
Fax: +420 234 656 138
Vienna
Belfast
14/18 Great Victoria Street
Belfast BT2 7BA
Tel: +44 2890 333 100
Fax: +44 2890 269 090
Rathausstrasse 20
P.O. Box 306
A-1011 Vienna
Tel: +43 1 406 6161
Fax: +43 1 405 8142
11 Anglesea Street
Cork
Tel: +353 21 453 7300
Fax: +353 21 453 7399
Birmingham
Boston
1 Colmore Square
Birmingham B4 6AJ
Tel: +44 121 232 0800
Fax: +44 121 232 0808
(Representative Office)
265 Franklin Street
Boston MA 02110
Tel: +1 617 720 2577
Fax: +1 617 720 6099
Galway
Glasgow
Forster Street
Galway
Tel: +353 91 536 900
Fax: +353 91 536 931
180 St.Vincent Street
Glasgow G2 5SG
Tel: +44 141 204 7270
Fax: +44 141 204 7299
Cork
Manchester
Limerick
98 Henry Street
Limerick
Tel: +353 61 461 800
Fax: +353 61 461 899
1 Marsden Street
Manchester M2 1HW
Tel: +44 161 214 3020
Fax: +44 161 214 3030
For further information, please email: enquiries@ angloirishbank.ie
New York
222 East 41st Street
New York NY 10017
Tel: +1 212 503 3000
Fax: +1 212 503 3033
Dubai
P.O. Box 119691
Emaar Business Park
Building No. 4
Office 611
Sheikh Zayed Road
Dubai
Tel: +971 4361 9046
Fax: +971 4361 9036
COVER ARTWORK_l
12/9/05
9:44 AM
Page 1
EXPERIENCE THE DIFFERENCE
Dublin
Cork
Galway
Limerick
Waterford
London
Banbury
Birmingham
Glasgow
Manchester
Isle of Man
Geneva
Prague
Belfast
2005
Twenty years of uninterrupted profit growth
Vienna
Boston
New York
Dubai
Anglo Irish Bank
Business Lending
Treasur y
Wealth Management

ANNUAL REPORT `05_3e

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