AIB Mortgage Bank – Asset Covered Securities June 2007

1

AIB Mortgage Bank – Asset Covered Securities

June 2007

A number of statements we will be making in our presentation and in the accompanying slides will not be based on historical fact,but will be “forward-looking” statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward looking statements. Factors that could cause actual results to differ materially from those in the forward looking statements include, but are not limited to, global, national and regional economic conditions, levels of market interest rates, credit or other risks of lending and investment activities, competitive and regulatory factors and technology change. Any ‘forward-looking’ statements made by or on behalf of the Group speak only as of the date they are made.

2

Contents

Sections

1. AIB Mortgage Bank, Collateral Pool & Legislative Changes

2. Irish Housing Market

3. Performance of Irish Covered Bonds

4. AIB Group Funding Profile

Appendices

Irish Asset Covered Bond Legislation

AIB Group Overview

Republic of Ireland Economy

3

Section 1: AIB Mortgage Bank, Collateral Pool & Legislative Changes

4

Overview of AIB Mortgage Bank

Registered as a Designated Mortgage Credit Institution (DCI)

License granted by Regulator – Feb 2006

Non-guaranteed, Public Unlimited Company wholly owned by AIB plc

9 Directors, including 3 non-executive directors

Major activities outsourced to AIB (ROI) Division subject to terms of the Service

Level Agreement

Mortgage Assets Total €16bn+

Capital Exceeds 8.5%+ of RWA at €766m

€15bn EMTN programme launched in 2006

3 ACS Bond issues completed, total €5.5bn

5

AIB Group’s position in the Irish Mortgage Market

Total Irish mortgage market drawn balances are estimated at €100bn+

AIB Bank market share 16%+

AIB Bank presence in all major towns and cities via a network of 275 offices

35%+ of the banked public have a primary account relationship with AIB Bank

80%+ of branch sourced mortgages come from existing AIB Bank account

holders

Mortgages are originated by AIB Bank and sold by AIB Mortgage Bank

AIB MB does not book mortgages introduced through intermediaries and only

holds assets comprising residential mortgages

6

Credit Policy

AIB Bank’s marketing is focused on customer relationships – ‘we sell mortgages to customers we know’

Priority measure is ‘ability to repay’ and then ‘asset quality’

For owner occupied residential mortgages the Max Loan amount determined by Debt Service Ratio

(DSR) = the Proportion of Net Income that is prudent to allow for purposes of Mortgage Repayments

Buy to Let mortgages utilise cashflow assessment

DSR is stress tested to allow for increases in interest rates of 2%

Max LTV = 92%

Lenders have no sanctioning Targets/Quotas

Exceptions are approved by Senior Mortgage Lenders

Regular reporting to Regulator

7

Residential Mortgage Historic Data

Loan to Value Ratio*Dec 200

2

Dec 200

3

Dec 200

4

Dec 200

5

Dec 200

6

< 75% 66 67 67 70 66

> 75% < 90%26 25 24 17 21

> 90% 8 8 9 13** 13

Total100% 100% 100% 100% 100%

* % of drawdowns

** Policy raised to 92% 2005

Arrears Profile Dec 200

2

Dec 200

3

Dec 200

4

Dec 200

5

Dec 200

6

% of Total Mortgage Advances 0.8% 0.5% 0.5% 0.4% 0.4%

New Business LTV Percentages

8

Residential Mortgage Portfolio Data

Indexed LTV Ranges of Collateral Pool

Indexed LTV RangeOutstanding

Balance

< 25% 12%

25% - 50% 28%

50% - 75% 41%

75% - 100% 19%

Weighted average Indexed collateral LTV 54.4%

9


Origination by year Weighted Averaging seasoning of pool = 28.6months Average legal maturity is 20 years Expected average life estimated between 5 to 7 years Total aggregate indexed LTV = 38%

YearOutstanding

BalanceAggregate Indexed

LTV of Year

< 2003 10% -

2003 10% 36%

2004 17% 42%

2005 27% 46%

2006 31% 49%

2007 5% 51%

10


Geographic breakdown of Collateral Pool

RegionOutstanding

Balance

Dublin area 31%

Non-Dublin 69%

Occupancy Breakdown of Collateral Pool

TypeOutstanding

Balance

Own Residence 75%

Buy to Let (residential investment) 23%

Other (holiday home) 2%

Total 100%

11

ACS: AIBMB Collateral Pool

No commercial mortgages, no arrears > 3 months included in pool, minimal interest rate risk

Collateral Pool Criterion

Minimum contractual over-collateralisation 5%

Actual over-collateralisation (excluding cash) 64%

Pool size by PMV €9.029bn

Aggregate Prudent LTV 38%

WA Indexed LTV 54%

Dublin / non-Dublin 31/69

No. of properties 55,756

BTL / Owner Occupier 23/77

Fixed rate 13%

Interest only 24%*

Prudent Market Discount 15%

WA Seasoning c.28 months

* Interest Only loans are primarily < 5 years then revert to annuity

12

AIB Mortgage Bank

Summary

AIB Mortgage Bank launched three bond issues in 2006 totalling €5.5bn

Mortgages are originated from the AIB Bank branch network in Ireland

Tight credit policies ensure credit quality

Portfolio data illustrates granularity, low LTVs, geographic diversity

‘Interest only’ loans are primarily granted for periods of less than 5 years

Annuity effect on the portfolio contributes to reducing the LTV

Expected average life is between 5 & 7 years

13

Asset Covered Securities (Amendment) Act 2007

The rationale for the amendments includes

Introduction of Capital Requirements Directive in 2007

Ensuring Irish ACS legislation remains fully CRD compliant ACS legislation requires Irish ACS issuers to be compliant with the CRD at all times resulting in transparency for

investors and a 10% Basel II Risk Weighting

Enhancing investor protection

Completing legislative framework for a 3rd asset type - commercial mortgages

Changes ensure that Irish ACS are CRD compliant in terms of the definition of a Covered

Bond, but the changes do not go as far as the CRD in terms of eligible assets ensuring that

credit quality within the pools is maintained

The three key changes are

Quality of Eligible Assets

Risk Control

Monitoring & Compliance

14

Asset Covered Securities Legislation

The Irish Government has clearly demonstrated commitment to the growth of covered bond issuance in Ireland by updating the ACS legislation

The amended legislation has ensured ACS bonds are CRD compliant

Every effort has been made to provide transparency to investors

The result allows investors to compare the Irish ACS framework with leading covered bond competitors from Germany and France

15

Section 2: Irish Housing Market

16

Period of Adjustment for Housing Market

Adjustment in the housing market underway Rate of price inflation falling Forward looking indicators point to lower supply

Market had been in danger of overheating Level of price rises was becoming unsustainable Output at very high levels

Factors driving adjustment High level of prices Rising interest rates - leading to deteriorating affordability

17

Many Factors Underpinning Strong Housing Demand

Continued strong inward migration

Favourable demographic trends

Untapped demand: low headship rates in Ireland

Continuing demand for second homes

Strong growth of economy and employment

Easier financing: longer term mortgages, interest rates still low in historical context

Fiscal policy: mortgage interest relief for FTB, tax relief on rental income for investors, easing in stamp duty for FTB

18

House Price Inflation is Falling Sharply

National House Price Inflation

-1.2

-0.8

-0.4

0.0

0.4

0.8

1.2

1.6

2.0

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

5

6

7

8

9

10

11

12

13

14

15

16

Month-on-Month : LHS Year-on-Year : RHS

% %

Source: permanent tsb

19

But This Should Help Stabilise Deterioration in Housing Affordability

New House Affordability % of disposable income required for mortgage repayments *

16

18

20

22

24

26

28

Q1 96 Q1 97 Q1 98 Q1 99 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07

* First Time Buyer, two income family : 35 Year Mortgage

Average since 1996

Forecast

AIB ERU Calulculations

20

House Completions Topping Out at High Level

Total House Completions 4 Quarter Cumulative Totals

50,000

60,000

70,000

80,000

90,000

Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08

Sources: DoEHLG, CSO, AIB ERU Forecasts

Forecast

21

Functional Demand for Additional Housing (Year to April)

17,40017,30017,300 12,550Indigenous Population

Growth

24,00027,50018,700 13,650Migration Flows

20,00020,0009,700 1,250Headship

10,00016,00019,600 10,800Second / Vacant Homes

9,600 9,2008,300 6,500Replacement of Obsolete

Units

81,00090,00073,600 44,750Completions

2008

(f)

2007

(e)

Avg

2002 -

2006

Avg

1996 –

2002

22

Migration Now a Significant Component of Housing Demand

Estimated Housing Demand Due to Migration Trends

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 f 2008 f

0

5,000

10,000

15,000

20,000

25,000

30,000

Net Inward Migration : LHS

Estimated Housing Demand : RHS

Source: CSO, AIB ERU

23

Robust Employment Growth and Low Unemployment Support Housing Demand

Labour Force & Employment Growth

0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004 2005 2006

3.5

4.0

4.5

5.0

5.5

6.0

Increase in Employment ('000) : LHS Increase in Labour Force ('000) : LHS

Unemployment Rate : RHS

Source: CSO

('000) %

24

Risk Factors For Housing

Interest rates still have a bit to go

Deterioration in economic environment and labour market situation

Market falls further as urgency to purchase recedes with decline in house price inflation

Risk of undue pessimism … negative media reporting etc

25

Summary On Housing Market

Period of Adjustment Underway Both prices and output adjusting downward

Market remains well underpinned Good economic climate Rapid employment growth Untapped demand Large influx of migrants

Market still heading for soft landing

26

Section 3: Performance of Irish Covered Bonds

27

Covered Bond Trading

Irish ACS account for 13.3% of total MTS traded volume – reflecting demand for the ACS product

Irish ACS account for 11.6% of all outstanding covered bonds

Eligibility for EuroMTS - - issuer must be Dutch, French, German, Irish, Italian, Spanish or UK

- Collateral pool must be mortgage backed or public sector

- Issue size €2bn or greater

Euro Credit MTS / EUROMTS Q1 2007% Traded Volume

Listed Covered Bonds Q1 2007% Outstanding by Region

28

Performance of AIB MB Issues

Issue Date Mar 2006 Dec 2006

Maturity Apr 2009 Apr 2013 Jan 2010

Tenor 3 Years 7 Years 3 Years

Amount€2.5 bn €1 bn €2 bn

Coupon3.5% 3.75% 3.75%

Launch spread m/s-3 +1 -4

Current spread m/s-9.7 -2.9 -10

Market makers

Barc/DB/MS/C Barc/BNP/MS/UBS

DZ/HVB/LBBW/UBS CMZ/HSBC/HVB/WestLB

29

-14

-12

-10

-8

-6

-4

-2

0

Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Sp

rea

d v

s A

SW

(b

ps)

AIB 3.500% Apr-09 HYPINT 3.000% Feb-09


Source: UBS

AIB spread at launch MS-3

HYPINT spread at launch MS-4

AIB current spread MS-9.7

HYPINT current spread MS-11.8

30

Source: UBS

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Spr

ead

vs A

SW

(bp

s)

AIB 3.750% Apr-13 CIFEUR 3.625% Mar-13 LBBW 3.250% Feb-13


AIB spread at launch MS+1

LBBW spread at launch MS-1


CIFEUR current spread MS-3.9

LBBW current spread MS-6.8

CIFEUR spread at launch MS-1

31

-14

-12

-10

-8

-6

-4

-2

0

Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Spr

ead

vs A

SW

(bp

s)

AIB 3.750% Jan-10 CFF 3.750% Feb-10


Source: UBS

AIB spread at launch MS-4

CFF spread at launch MS-6.5

CFF current spread MS-9.2


32

Performance of Irish Covered Bonds

Summary

All benchmark issues from AIB MB are supported by active market

makers

EuroMTS records substantial volumes of Irish ACS trading

Investment bank research suggests spreads should tighten

Amended Irish ACS legislation will assist in Irish ACS spreads tightening

against German Pfandbrief and French mortgage bank issues

33

Section 4: AIB Group Funding Profile

34

AIB’s Funding Programmes

Short Term Instruments

OTC Certificates of Deposit , €, STG, US$, Can$, A$

US $10bn Commercial Paper Programme

US $10bn Yankee CD Programme

€ 5bn French Certificate of Deposit Programme

Can $3bn Maple Commercial Paper Programme*

Long Term Instruments

AIB plc ( Aa2 / A+(p) / AA-)

€ 30bn EMTN programme

$ 10bn US$ Extendible Note Programme

AIB Mortgage Bank (Aaa / AAA / AAA)

€ 15bn covered bond EMTN programme

35

AIB Debt Distribution: 31 March 2007

Security Type € (m)Asset Covered Securities 5,500Senior Debt - Private Placements 5,000Senior Debt - Benchmark Issues 7,890Tier (ii) 3,600Tier (i) 2,700Total 24,690

Moody's S&P FitchAaa AAA AAAAa2 A+(p) AA-Aa2 A+ (p) AA-Aa3 A(Lwr)/A-(Uppr) A+A1 A- A+

Note: Step-up issues – adjusted to earliest step-up date

AIB Debt Distribution AIB Debt Currency Mix

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2007 2008 2009 2010 2011 2012 2013 2015 2020 2025 Perp.

ACS Snr-Priv.Place. Snr-Benchmk Tier (ii) Tier (i)

36

Funding Composition

52.0% 49.0%

24.1%22.0%

10.2%8.0%4.0%7.0%

10.0% 10.0%4.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2005 2006

Customer a/cs Deposits by banks CDs & CPs ACS Senior Debt Capital

37

Funding Profile

Summary

The Dublin based Global Treasury has suitable debt programmes available to

support the AIB Group’s funding strategy

AIB Group’s issuance of AAA/Aaa/AAA bonds is limited to issuance from AIB MB

AIB MB represents c. 11% of AIB Group’s total Balance Sheet

2007 forecast issuance includes c.€3b of ACS

AIB will continue to grow institutional investor base by focusing the majority of

new transactions on € benchmark issues

AIB is committed to ensuring AIB’s securities trade at a realistic market level, by

having a commercial approach to pricing, and by appointing experienced

intermediaries with proven market making skills

Commited to Debt Investor Relations

38

Contacts

AIB Web Site www.aib.ie/investor relations

Contains AIB & AIB Mortgage Bank programmes, listing particulars and presentations

AIB Group Investor Relations www.aibgroup.com/investorrelations

GM Group Finance Alan Kelly T: + 353-1-641-2160

Manager Rose O’DonovanT: +353-1-641-4191

AIB Global Treasury email: [email protected]

Treasurer Funding and Liquidity Gerry O’Connor T: +353-1-6417891

Chief Dealer, Capital and Debt IR Duncan Farquhar T :+353-1-6417811

Chief Dealer, Senior Debt & ACS Sean Cremen T: + 353-1-6417803

39

Appendix: Irish Covered Bond Legislation

40

Asset Covered Securities Act 2001

In Ireland the activity relating to asset covered securities is primarily governed by the legislation which delegates the operational regulation to the Irish Financial Services Regulatory Authority (IFSRA)

Specialist bank principle - ACS can only be issued by a ‘Designated Credit Institution’ (DCI)

A DCI must be approved by IFSRA be owned by an IFSRA regulated bank be separately capitalised have non-executive Board membership agree to be restricted to activities defined within the ACS legislation

Eligibility for asset classes to be held by a DCI The Act restricts the asset classes, and requires IFSRA to issue a Regulatory Notice

(RN) for each asset class RNs have been issued for 2 asset classes - Public Sector and Residential Mortgages RNs describe the procedures for valuing the collateral

41


Covered Asset Monitor (CAM) is an independent appointment, subject to approval by IFSRA. The CAM is responsible for monitoring the collateral pool

The DCI’s assets are divided between the pledged collateral pool and unpledged assets

The RN valuation methodology governs both pledged and unpledged assets, and requires

all mortgages to be indexed by reference to an IFSRA approved index, IL&P/ESRI Property Index

a Prudent Discount Factor (PDF) is used to discount upward movements of the index whilst all negative movements are taken in full, the result is the Prudent Market Value (PMV)

In the pledged collateral pool any one mortgage loan’s contribution to the collateral pool is limited to 75% of the PMV of the secured property

Loans may have high LTVs but the aggregate LTV of the entire mortgage loan portfolio of the DCI must not exceed 80% of the PMV of the properties

42


The combined effect of The Act and the RN ensures the quality of the residential mortgage collateral cannot be compromised by changes in property market prices; the restrictions extend to controlling both the aggregate collateral holding in the DCI and the actual collateral Pool

The ACS Bondholders are protected at all times, since

The Prudent Market Value of the Pool must be > the ACS principal outstanding

The interest receivable from the Pool must be > the interest payable on the ACS for any 12 month period

The weighted average maturity of the pool must be > the ACS maturity

43


Balance Sheet Interest rate sensitivity is subject to limits

Publication of statutory accounts, including report on collateral performance

In the Event of Default

National Treasury Management Agency (Govt. Agency) appointed

Pool exempt from bankruptcy proceedings

Bond holders prioritised

44


The rationale for the amendments includes

Introduction of Capital Requirements Directive in 2007

Ensuring Irish ACS legislation remains fully CRD compliant ACS legislation requires Irish ACS issuers to be compliant with the CRD at all times resulting in transparency for

investors and a 10% Basel II Risk Weighting

Enhancing investor protection

Completing legislative framework for a 3rd asset type - commercial mortgages

Changes ensure that Irish ACS are CRD compliant in terms of the definition of a Covered

Bond, but the changes do not go as far as the CRD in terms of eligible assets ensuring that

credit quality within the pools is maintained

The three key changes are


Risk Control


45



Responds to investors and rating agencies desire to maintain high quality and well diversified Cover Pools. The changes have taken some of the CRD opportunities to enhance diversification but have maintained a focus on the eligibility of the highest quality credits

Residential Mortgages Securitised mortgage collateral becomes eligible for the pool, enhancing the credit quality and

most importantly the liquidity of the mortgage assets in the pool To facilitate diversification, mortgages from highly rated countries outside the EU are now eligible

(USA, Canada, Switzerland, Japan, New Zealand, Australia)

Commercial Mortgages Are now eligible provided a separate covered pool is established

Public Sector The 15% restriction on assets from the United States, Canada, Switzerland and Japan has been

removed In addition, New Zealand and Australia have become eligible countries (both AAA at S&P). Other

non-Aaa non-EU countries are not eligible Development Banks have now become eligible (only the EIB was eligible before)

46


Risk Control

Legislative Over-collateralisation

Currently, all Irish ACS issuers are contracted with the rating agencies to 5% over-

collateralisation

Now obligation to maintain 3% over-collateralisation by law for mortgage and public

sector pools

New mandatory 10% over-collateralisation for commercial mortgage ACS required by

law

The Regulator will continue to issue Regulatory Notices which govern the collateral

pool valuation procedures

Collateral pools will continue to be valued by reporting to CAM’s on a weekly or

monthly basis

47


Risk Control

Pool Hedge Collateral The amendment introduces a separate register of pool hedge collateral which will

clarify the rights of hedge counterparties making it easier for issuers to enter into ISDA and CSA agreements for the direct benefit of the cover pool and bond holders

The amendments will ensure the transparent management of pool hedge collateral Facilitates effective use of derivatives to manage interest rate and currency

exposures allowing issuers to improve the matching in the pool for the benefit of bondholders

Changes in the duration gap calculation Test has now been simplified to ensure transparency Will assess the weighted average time to maturity of the assets and liabilities in the

pool

Reduction in the volume of substitute assets Compliant with the CRD, the volume of substitute assets under these amendments

will go from 20% of pool assets to 15% of ACS issued

48



The ACS legislation is at the forefront of the market with regard to its monitoring and compliance

The weekly or monthly reporting (depending on the issuer) of the Cover Pools and DCI information and the real-time monitoring of that data by the Covered Asset Monitor mean that the ACS market retains the strongest oversight – hence very few amendments have been made here

The adjustments are limited to:

Ensuring the CAM has responsibility for monitoring the legislative over-

collateralisation requirement as well as the existing contractual over-collateralisation

requirements

Ensuring the CAM’s obligations to monitor ACS issuers now captures any

Commercial Mortgage issuers that enter the market

The role of the NTMA as the servicer of last resort has not been amended in the

legislation remaining a cornerstone of the ACS framework

49

Asset Covered Securities Legislation

Summary

The Irish Government has clearly demonstrated commitment to the growth of covered bond issuance in Ireland by updating the ACS legislation

The amended legislation has ensured ACS bonds are CRD compliant

Every effort has been made to provide transparency to investors

The result allows investors to compare the Irish ACS framework with leading covered bond competitors from Germany and France

50

Appendix: AIB Group Overview

51

Allied Irish Banks p.l.c.

Ireland’s largest quoted company & financial institution by

capitalisation € 19.5 billion (Apr ‘07) 15.2 % of Irish Stock Market Index

12th/43 DJ € Stoxx Bank Index

25rd/52 FTSE Eurotop Bank Index

Year End Dec-05 Dec-06

Total Assets € 133bn € 158bnGroup Pre-Tax Profit € 1,433m € 2,298mTier 1 Ratio 7.20% 8.20%Total Capital Ratio 11.10% 10.70%

52

Clear no. 1 Irish banking franchise operating in a high growth economy

Providing the full range of retail and commercial banking services

Significant market shares in key segments - clearing accounts, corporate lending, etc

Insurance joint venture with Aviva

17% Share of residential mortgage market

Mainland GB – AIB has a clearly defined marketing agenda

Focused on relationship banking with the mid-corporate business sector, professionals, and High Net Worth individuals

Significant corporate banking relationships

Northern Ireland -operation of full service clearing bank

Centralised business model in Dublin

Offices in London, Frankfurt, Paris, NY, Toronto & Sydney

Dominant business is corporate banking

Other units include treasury, stockbroker, corporate finance, asset management

In 2003, AIB acquired a holding in M&T Bank, which now totals 24.2%

AIB is represented on both the Board and Executive Committee

AIB Bank RoI AIB (GB & NI) Capital Markets M&T Bank

Allied Irish Banks plc

Represented by 70.5% holding of Bank Zachodni WBK

Poland’s 5th largest bank, provides a full range of retail and commercial banking services

400+ branch network, mainly focused on Western Poland

Poland

Op Profit - 43% 18% 9% 23% 7%

AIB Group Structure

53

AIB Bank RoI

Capital Markets

AIB Bank UK

Poland

M&T

AIB Bank RoI €942m 23%

Capital Markets €508m 29%

AIB Bank UK €378m 18%

Poland €201m 52%

M&T* €141m 4%

2006 operating profit by division

43%

23%

18%

9%

7%

* after tax contribution

AIB: Well Spread Growth

54

1920

9

22

16

0

5

10

15

20

25

Group AIB BankRoI

CapitalMarkets

AIB BankUK

Poland

%

Deposit Growth

26

22

32

36

17

8

19 19

23

26

Group AIB Bank RoI CapitalMarkets

AIB Bank UK Poland

Loan growth RWA growth

Loan and RWA Growth

2%

25%

6%8%

13% 13%

4%2%

8%

29%

3%

12%12%

5%

25%

Agriculture Construction &

Property

Residential

Mortgages

Manufacturing Personal Services Transport &

Distribution

Other

Dec-05 Dec-06

33%

% of Group Loan Portfolio

Group Growth & Overview of Loan Portfolio

55

55.2

48.747.5

51.3

65.7

60.3

45.945.9

49.6

53.5

Group AIB BankRoI

CapitalMarkets

AIB BankUK

Poland

2005

2006

%

Declining Cost: Income ratio across all divisions

56

Strong Asset Quality & Robust Capital

2004 2005 2006Impaired Loans 1.30% 1.00% 0.90%Gross New Impaired Loans 0.70% 0.40% 0.40%Total Provisions / Impaired Loans 73% 78% 76%Bad Debt Charge 20 bps 15 bps 12 bps

Tier 1 Capital Ratio 7.20% 8.20%Total Capital Ratio 10.70% 11.10%

57

Appendix: Republic of Ireland Economy

58

Irish and Eurozone Inflation HICP Y/Y % Change

1.0

1.5

2.0

2.5

3.0

3.5

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

%

Irish HICP Inflation

Eurozone HICP Inflation

Source: Thomson Datastream

Irish Economy Overview

Broad based economic growth: 6% in 2006,

5.5% in 2007

Relatively low inflation trend

Labour market strong across the board

Economy close to full employment

Housing demand underpinned by employment

and demographic trends

House prices moderating as supply and

demand converge

Slowdown in housing will be offset by private

non-residential construction and new national

development plan

Public finances in very good shape. Large

current surpluses financing capital programme

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

0

2

4

6

8

10

12

14

16

18

Total Employment ’00S (LHS)

Unemployment Rate % (RHS)

Transformation of the Labour Market

Low Inflation Coupled with Strong Growth

59

Republic of Ireland Economic Trends

1995 2000 2005 2006 (e) 2007 (f)

Population (‘000) 3,601 3,789 4,1314,235 4,340

Employment (‘000) 1,282 1,671 1,9292,017 2,090

Unemployment (‘000)177 75 86 91 95

Unemployment (%) 12.2 4.3 4.4

4.3 4.3

Inflation (%)2.5 5.6 2.5 4.0 4.5

Exchequer + / (-) as (% GNP) (1.7) 3.6 (0.4) 1.5 0

GNP per capita (€)12,936 23,460

32,946 35,300 37,550

GNP growth rate8.9% 9.2% 5.4% 7.0% 6.0%

60

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0-14 15-24 25-44 45-54 55-64 65+

1996 Census 2002 Census 2006 Census

Source: DOE and ESRI

Republic of Ireland Population Growth

Ireland Population Age Estimates

Documents

AIB Mortgage Bank – Asset Covered Securities June 2007